Despite the severe pessimism about the global economy following the extraordinary meltdown of the Western financial system (see this month’s cover story), the outlook for Africa remains very bright. It is not so much that the continent has been growing at a healthy 6% per annum, but rather the manner of its growth. While high oil and commodity prices have certainly helped, the real growth has been organic, in that it has been locally generated.
Africa no longer sees itself merely as a supply source for the economies of Asia and Europe, but as a strong emerging market in its own right. Some will quibble about the definition of Africa as an emerging market, but remember we are talking of a continent here, not single countries like India or Brazil and, on a continental average, Africa is the 10th-largest economy in the world. The point is that Africa has now entered a new, natural phase of its development whereby local people and companies are getting on with the business of life. They are making and selling products that they want in a manner that is most appropriate for each market. They are taking ownership of their own economic destiny. This is the first step towards wealth creation and, therefore, poverty alleviation. All advanced regions have gone through the same processes at different stages of history – although the transition from rural-based subsistence to urban industrialisation has been far quicker in Africa than everywhere else.
As in all other countries that have passed through the same cycles, it is the private sector, specifically the SMEs, that have led the way. The early stages of the enterprise spirit in the US bear remarkable resemblances to the current stage in many African countries. Of course, there are fundamental differences – the US was a nation of migrants who arrived in the New World with a long history of social, political and economic organisation behind them. African nations have had to cope with far greater transitions over a small time span and they found themselves in a historic period that in many ways was hostile to their quick development. Nevertheless, both societies have shown an outstanding ability to adapt to their environments and conditions, and tremendous innovations. Both also share an incredible amount of optimism and a sense of “manifest destiny”. A BBC poll revealed that the majority of Africans believe they are better off today than they were yesterday and are optimistic for tomorrow. They are now making that better tomorrow happen through their own efforts. The African marketplace is full of wonderful inventions and adaptations; if the very poor can just find a few pence to rub together, they will find a product they can afford.
From a marketing perspective, Africa's population is a consumer pyramid divided into three tiers according to disposable income. Tier 1 is the upper-class market with 50m to 150m people; tier 2 is the middle classes who number 150m to 300m; and tier 3 is the 300m+ who form the pyramid's base. Researchers have noticed that the movement of people from the bottom tier to the second tier, and upward mobility within tier 2, is accelerating – irrespective of the level of literacy involved. In short, people are pulling themselves up by their bootstraps and they are convinced that anything is possible. The fact that large numbers of people from tier three have made a success of their lives in business, politics and sports is proof positive that social mobility in Africa is not frozen.
Less government, not more
This movement will accelerate for three main reasons – one, the expansion of banking, which is already formalising hitherto informal enterprises; two, the ease of over-border trade as regional economic blocks gradually reduce barriers to movement and commerce; and, finally, because of the mobile phone. This last device could have been invented specially for Africa. It makes nonsense of geographical limitations and has become the main conduit of information in a region that is still largely illiterate. It has opened up vast horizons of activities and Africans have been very quick to test its entire scope.
Most of the growth has come not because of government intervention or aid or the activity of NGOs, but often despite them. As in the early stages of the US, local entrepreneurs want less government, not more. They want governments to provide common goods such as roads, power, security, reliable legal systems and regulatory mechanisms, and then let them get on with it. The best government is an invisible government. As Africa’s middle classes grow, and as their taxes form larger tranches of government coffers, there is a corresponding increase in demands made on government services. This is how it should be. The government role is to provide a good environment in which business and entrepreneurship can take place. The era of big, all-powerful and unaccountable governments is gone – and thank God for that. Government is elected to serve the public, not the other way round as some of our governments seem to think.