Some optimism for African economies

A consulting firm is telling global investors that Africa is a good place to invest in, despite what the popular image may be. The gross domestic product of Africa increased 4.9 percent since the year 2000, that is a higher increase than developed economies. The growth is largely because of rising commodity prices, but the consulting firm sees some other good things happening in Africa.

From the Wall Street Journal, writer Celia Dugger details the report for us.

In a report released Thursday, McKinsey & Company, the consulting firm, presented a bullish message to companies, arguing that “global businesses cannot afford to ignore the potential.”

“The growth we’ve seen in Africa recently is much more widespread than is generally recognized,” said Arend van Wamelen, an author of the report based in Johannesburg for McKinsey, which advises domestic and international companies investing in Africa. “There are a lot of underlying good things going on in the economies.”

The report, titled “Lions on the Move,” includes an array of arresting facts from the firm’s business and economics research arm, the McKinsey Global Institute. Since 2000, 316 million people on the continent have signed up for cellphone service, more than the entire population of the United States; Africa’s billion people spent $860 billion in 2008, more than India’s population of 1.2 billion.

From 2000 to 2008, African economies grew at twice the pace that they did in the 1980s and 1990s. Moreover, Africa was one of only two regions — Asia was the other — where the collective economy rose through the global recession of 2009, by 1.4 percent.

In a clear sign of the reorientation of the economic landscape in Africa, China has provided more financing for roads, power, railways and other infrastructure in recent years than the World Bank.

And in a sign of increasing security, the number of serious conflicts in which more than 1,000 people died annually declined to an average of 2.6 a year in the 2000s from 4.8 in the 1990s, the report said.
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Some of the demographic trends praised in the report could turn out to be double-edged swords. By 2040, McKinsey projects, Africa will have 1.1 billion working-age people, more than in China or India. But even now, South Africa, one of the continent’s most dynamic economies, is not growing fast enough to absorb all the young people entering the job market — or providing them with educations that would equip them for the workplace.

Indeed, the report notes that Africa has been getting many more children into school but that it needs to do far better at giving them a quality education.