Once again, the Group of Eight industrialized economies invited African leaders to their meeting. Will they again let them down at the next one?
In 2005, the club of rich nations promised an additional $25 billion per year in aid to Africa by 2010. They are far from fulfilling their commitment – though they have increased aid.
But Africa today is in a better position to weather such disappointment. A new study by the McKinsey Global Institute, funded by the McKinsey consulting firm, takes a remarkably upbeat view of the collective African economy, as do other recent studies.
The report, “Lions on the Move,” says promisingly that “Africa’s long-term economic prospects are quite strong.” It adds: “Global businesses cannot afford to ignore this potential.”
Those words don’t fit the stereotype of a continent studded with despots and perpetually battling war, hunger, corruption, and disease. Those challenges still exist, of course, and some countries are much worse off than others, but overall, the McKinsey findings paint a dramatically improving picture.
From 2000 to 2008, the continent’s economy grew about 5 percent per year – more than twice the pace of the previous two decades. The telecom, banking, and retail sectors are humming as more Africans move to cities.
Foreign capital investments have surged, from $15 billion in 2000 to $87 billion seven years later. Africans spent more in 2008 than Indians – with roughly the same population, 1 billion in Africa, 1.2 billion in India. And the number of Africans who have signed up for cellphone service in the last decade surpasses the population of the United States.
Particularly encouraging is that Africa’s economic growth is not just the result of rising oil or mineral prices, as in the past. Economies grew in resource-rich and resource-poor countries.
More important than a resources boom, says the McKinsey report, has been direct government action to reduce the number of serious conflicts (about half what they were in the 1990s) and to improve economic conditions, such as lowering inflation, trimming foreign debt, and reducing budget deficits.
Governments privatized state-owned enterprises, strengthened legal systems, and are getting many more children to school, according to the report. These kinds of changes bode well for sustained economic growth.
What this means for the G8 is that it’s time to think of Africa as an investment (as China does), and not just a charity case. Indeed, private investment in Africa ($53 billion in 2007) now surpasses foreign aid ($50 billion), according to the World Bank.
The G8 has evolved in its thinking about aid, tying it to reforms. Two sectors particularly need support in order for Africa’s economies to keep growing – infrastructure and agriculture, which could be greatly helped by opening up foreign markets to African food products.
It’s embarrassing that the G8 fell short of its Africa promise when it has thrown so much money at banks. (Indeed, it pledged less on Friday toward global maternal and child care than expected.) The world could certainly do with another region booming right now, and the G8 should be doing all it can to encourage this one.
But even if budget deficits or attitudes hold back the G8, it looks like many African nations know what they need: less fighting, more rule of law, more educating of children. That has taken Africa this far. It can take it further.