Where will you find the fastest growing economies in the world this year? Among the newly industrialised states of South-East Asia, with their turbo-charged export industries? Among the oil-rich statelets of the Gulf? Or the liberalised, free market economies of Eastern Europe? Actually, it is none of those. The really rapid expansion right now is in Africa, and in sub-Saharan Africa in particular.
Countries such as Mozambique and Ghana are now notching up the kind of 7.5pc-plus annual growth rates that until recently only China could manage.
Plenty of people are quick to dismiss the African growth miracle as nothing more than a short-term boost from foreign aid, or at best from rising commodity prices. They still complain that the great capitalist powers are keeping Africa down, and the old colonial powers are being replaced by newer ones as China takes ever bigger stakes in the continent.
But none of that is really true. What is powering African growth are the same crucial factors that powered growth in Europe 150 years ago, North America 120 years ago and much of Asia in the decades after the Second World War. Industrialisation and free markets.
True, Africa still has plenty of problems and its development is still fragile but, if it can keep going the way it is right now, there is no reason why it can’t be the great growth story of the first half of this century.
Economists specialising in the region refer to what they call the ‘BBC syndrome’ to explain why African growth remains one of the under-appreciated factors in the global economy. Mainstream news broadcasters spend so much time focusing on regional wars and famines they miss out on most of what is happening in what is, after all, a very big continent. It is rather like concentrating on the conflict in the Ukraine to describe the whole of Europe. There is a lot of other stuff going on.
In reality, Africa is developing very fast. An analysis of World Bank projections of global growth for the years 2013-15 showed that, of the 20 fastest growing economies in the world, 11 were in Africa. Sierra Leone, on 25pc growth, was probably an outlier — its economy was so bombed out, just returning to normal meant a big bounce back — but the rest are countries chalking up high, consistent growth rates.
Mozambique will average 8.3 pc growth over those three years; Ghana 8.15 pc and Angola 8 pc. Those are the kind of growth rates that lift countries out of poverty very quickly.
As the Renaissance Capital chief economist Charles Robertson pointed out in a recent TED lecture, real incomes in Africa have doubled since 2000 whereas, if you take out debt, they have hardly grown at all in the UK. A year is being added to average life expectancy every three years. “Africa is going to go from a $2 trillion economy today to a $29 trillion economy by 2050,” he argued. “That’s bigger than Europe and America put together in today’s money. Life expectancy is going to go up by 13 years. The population’s going to double from 1 bn to 2 bn, so household incomes are going to go up sevenfold in the next 35 years.”
That is not an exaggeration. When Nigeria re-based its GDP earlier this year to get a more accurate measure of its output, it overtook South Africa as the continent’s largest economy. It is now the world’s 24th, ahead of Argentina and Austria and on a par with Poland and Belgium. Many other African countries will soon be moving into the same category.
It is easy to dismiss that as just the result of higher commodity prices. True, Africa produces a lot of minerals and raw materials, which have generated a lot of extra wealth, which in turn has made it easier for home-grown industries to develop.
Plenty more will dismiss it as just the result of debt forgiveness and aid programmes. It isn’t so. Industrialisation and liberalised markets are driving African growth. A recent paper by Margaret McMillan of Tufts University in the US – ‘What Is Driving the African Growth Miracle?’ — identifies at least half its recent growth as resulting from workers moving from low-productivity agricultural work to high productivity factories and offices. Farm workers produce relatively little, so as people move off the land their output expands dramatically. That is what drove the industrial revolutions in the rest of the world and the same process is now under way in Africa.
Studying 19 African countries between 2000 and 2010, McMillan found that the share of the population working in agriculture fell by 10 percentage points, a huge shift only matched in recent times by China. The share working in manufacturing rose by two points and in services by eight points.
At the same time Africa now has relatively low state spending and debt. Taxes only amount to 14 pc of GDP in Nigeria (admittedly because the government is not very good at collecting them) and the average across sub-Saharan Africa is only 26 pc. Public debt is only 10.5 pc in Nigeria, a laughably low number by European standards. Over the whole of sub-Saharan Africa it is about 40 pc of GDP, while private sector debt is running at about 30 pc of GDP, compared with 200 pc or more in most of the developed world.
Africa still faces massive obstacles. Many governments are corrupt, infrastructure is poor, and there are still places where conflict is endemic. Then again, most poor countries are corrupt and as a general rule they become more honest and more open as they get richer — which Africa already is. It has rising levels of education and workforces are still growing.
By the 2020s, much of the developed world will have shrinking populations. So will China. Africa will be the only continent with lots of young people still entering the workforce, with a population that is set to double. So long as it keeps industrialising and opening up markets, it can keep growing. Very few countries have grown strongly with falling populations — and equally few have failed to grow with rising ones.
Over the next two decades Africa should join the developed world. And it will have done it the same way as the rest of the world — by encouraging industrialisation, respecting property rights and allowing free markets to gradually lift countries out of poverty.