Over the past 15 years, most African countries have sustained an economic growth with some places reporting an annual growth rate of more than 5% per annum. Service sector is blooming but Africa is still one of the poorest countries of the world. So how will it become the next China? Let’s find out.
It is said that a strong industrial sector is what will ensure that Africa is able to produce jobs for its population and eradicate poverty from the country. Export-led manufacturing will be the key for the country’s success, just as it transformed the fortunes of Asian countries, especially China. Today the manufacturing sector contributes just 9% to Africa’s gross domestic product, against 17% for the agricultural sector. But these dynamics are expected to change.
Africa has become the fastest urbanizing region of the world, with rural people moving into the cities. This rapid transition has its own challenges but also comes with great advantages. The country is ready to risk billions to construct the necessary infrastructure. By 2050, Africa’s 1.1 billion person population is slated to double, with 80% of this growth happening in cities, bringing the continent’s urban headcount up to more than 1.3 billion. The population of Lagos alone is growing by 77 people per hour. According to McKinsey, by 2025 more than 100 cities in Africa will contain over a million people.
With this breakneck pace of urbanization comes many unprecedented economic opportunities. The IMF recently declared Africa as the world’s second-fastest growing region, and many are predicting that it is well on its way to becoming a $5 trillion economy, as household consumption is expected to increase at a 3.8% yearly clip to $2.1 trillion by 2025. The attention of the world is now drifting towards Africa, with comparisons to 1990s-era China no longer coming off as radical projections. The African Union has put the assembling area at the core of its “Plan 2063“, a key structure for the financial change of the mainland throughout the coming 50 years, which has the understanding and full help of every one of the 55 nations. It is a plan that, in its own words, has been driven by the “voices of the African individuals demonstrating the Africa they need”. By the way, make sure you read our blog on Capitalism, Socialism and Communism for some insightful information.
Also, the launch of the African Continental Free Trade Area two years ago accommodates a solitary market for merchandise and ventures. It permits African-possessed organizations to enter new markets, extending their client bases and, possibly, item runs. Many foresee it will likewise go about as an impulse for interest in much-required cross-outskirt framework, making work and creating nearby involvement with building ventures.
The possibility of bigger commercial centres will lead to spike in various ventures. In any case, African governments must assume their job: new approaches are important to help construct the capacities of residential firms and cultivate modern bunches. (For instance, Asian governments offered tax cuts, endowments and bespoke agreements to top-performing organizations.)
OPPOSING VIEWS ON THE TOPIC
Manufacturing is only one sector. Urbanisation creates more demand for local services. There may be a lot more manufacturing going on than official statistics suggest, since only a small fraction of African workers tend to be employed in the formal sector.
A 2015 paper by Harvard economist Dani Rodrik makes the case that premature deindustrialization is already hitting the developing world, declaring that “countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers.”
Stiglitz and the Brookings researchers both suggest that African countries look elsewhere for growth. Their suggestions include tourism, agriculture, natural resource exports, and information technology services — basically, everything but manufacturing. Yet most of these suggestions offer little reason for enthusiasm. Agriculture tends to automate even faster than industry. Natural resource exports are linked to political dysfunction and trap a country at the low end of the value chain. Tourism is fine, but doesn’t lead to the kind of learning-driven productivity enhancements that manufacturing is known for. Therefore the debate about Africa being the new China is still, but it is clear that Africa definitely has a lot of potential.