By Carolyn Campbell, Special to CNN
Editor’s note: Carolyn Campbell is a partner at Emerging Capital Partners, a pan-African private equity investor headquartered in Washington DC. The views expressed are her own.
Thirteen years ago this month, The Economist was so discouraged by Africa’s lack of progress that it was moved to write a cover story entitled “The hopeless continent.”
“The new millennium has brought more disaster than hope to Africa,” the editorial ran. “Worse, the few candles of hope are flickering weakly.”
How times have changed. Over the last decade, real income per person across the continent has increased by more than a third, even as it has fallen in rich countries including the United States. Meanwhile, fueled in part by a quadrupling of foreign direct investment in the decade through 2012, African GDP has been forecast to rise by an average of 6 percent a year for the next ten years.
Indeed, just this month, the IMF noted that “Sub-Saharan Africa is now the second fastest growing region in the world, trailing only emerging Asia.”
“The near-term outlook for the region is broadly positive because most factors lending support to economic activity in the last few years remain in place – namely strong investment, favorable commodity prices, and generally prudent macroeconomic management,” it noted in its latest regional outlook.
Such progress comes on the back not just of vast increases in exports, the discovery of new oil reserves and debt-reduction programs initiated by the West that are enabling governments to adopt pro-growth policies, but also the spread of new communications technologies.
Yet there is more to Africa’s gains than just the boon of infrastructure advances and strong commodity prices – the continent is also reaping the benefits of simply becoming more attractive to its diaspora. Many Africans are returning to establish their careers on the continent, bringing with them knowledge and expertise collected from the four corners of the globe, creating a virtuous circle of human capital.
This is not, of course, to forget the very real challenges still facing the continent. The broadly upbeat IMF report also notes that growth patterns on the continent vary by region, and that economic activity in oil-exporting and low-income countries compensates “for a significant slowdown in middle-income countries” that largely reflects “problems in the euro area, but also local factors in a number of cases,” including civil unrest.
Such disparities are hardly surprising in a region as vast as Africa. Many forget the sheer scale of this continent of 54 diverse countries – Africa is actually larger than China, Europe, India and the United States combined, meaning business and economic prospects will inevitably vary from one region and sector to another.
But although Africa’s transformation into a major global economic player is far from complete, and although political turmoil is still to be expected, skeptics are wrong to lazily dismiss the continent as too corrupt to do business in, and too poorly governed to expect world class companies. Indeed, despite having been written off before, and despite the instability they have faced, many businesses in Africa are thriving.
This is a remarkable achievement and testament to the perseverance of African firms, which through even the toughest of times have followed a business as usual mantra.
Take Cote d’Ivoire, where incumbent President Laurent Gbagbo refused to cede power to the election winner and current President Alassane Ouattara. The resulting political chaos made international headlines, and businesses were adversely affected by the political maneuverings. One of our own investments, in the electricity utility Compagnie Ivoirienne d’Electricité, for example, was hit as Gbagbo ordered power to be cut in the north, from where Ouattara drew the bulk of his support. Yet despite the setback to stability, GDP was by last year growing by 8.7 percent. The country accelerates along the path to more economic and political freedom which will be a positive for long-term investors.
Meanwhile, to help reduce the potential impact of political unrest, African insurers and reinsurers are increasingly offering financial products that can help mitigate risk, including to many smaller businesses. Building this kind of resilience bodes well for Africa’s long term prospects.
It’s true that Africa faces challenges on the road to prosperity. But demographics and a growing sense that African business is laying the foundations to weather political storms suggests that the continent is far from a hopeless case.