Sub-Saharan Africa to See Prosperity At Last?

Economic growth and stock markets are up while government debts and poverty are down.

Aerial view of Abidjan, Côte d'Ivoire, April 1, 2011
Aerial view of Abidjan, Côte d’Ivoire, April 1, 2011 (UN/Basile Zoma)

Africa tends to provoke imagines of civil war, despots and starving children in the West. Are these images still applicable, if they ever were, to such a vast continent?

While Europe is still dealing with the effects of a sovereign debt crisis and China is trying to to keep its economy under control, Africa has grown at an annual rate of 4.8 percent over the last five years, a period that included the trauma of the global financial crisis. That means it has outperformed other developing regions — like Latin America, for example, at 3.3 percent. Five of the ten fastest growing economies in the world last year were African — Burkina Faso, Côte d’Ivoire, Ethiopia, Niger and Sierra Leone.

So do the images that we are used to seeing on our television screens still represent the whole of Africa? In many ways, yes, they are and likely will for some time. A religious war looms in Nigeria, South Africa is struggling with internal strife, Somalia, once the poster child of state failure, while making gains, is still not functioning. In North Africa, countries from Egypt to Libya are coping with the aftermaths of “Arab Spring” uprisings that destabilized and toppled governments.

At the same time, as Africa wrestles with these challenges, poverty is declining. Since 1996, the average poverty rate in sub-Saharan Africa has fallen by about 1 percentage point per year. Between 2005 and 2008, the portion of Africans in the region living on less than $1.25 a day fell for the first time, from 52 to 48 percent.

There are other indicators that point to improvement. Nigeria’s stock market is up nearly 20 percent, Ghana’s is up 24 percent and mobile phone uptake is booming. Africa’s stock markets are the last that remain uncorrelated with the major global exchanges. So when the Dow Jones rises or falls, so will the German Dax and the Hong Kong exchange, but not Africa’s. They still have their own lives, so to speak, and aren’t directly affected by global financial shocks and trends. Although as prosperity on the continent rises, so will the correlation between its stock markets and the rest of the world’s.

Further indications that Africa’s time has perhaps finally arrived lie in many governments’ falling debts and increasingly diverse sources of economic growth.

In sub-Saharan Africa, between 2004 and 2011, government debt as a percentage of gross domestic product fell from 55 to 33 percent, showing that the countries there are slowly getting their houses in order.

It also shows that they’ve recognized that a sustainable economy cannot be built on the export of perhaps one or two natural resources. An expanding set of small- and medium-sized businesses is bringing real economic diversification. According to World Bank statistics, these firms add some 20 percent to the continent’s economy and account for about half of all jobs created south of the Sahara desert. These successful enterprises are giving rise to internationally competitive companies.

While the rise of Africa could still be offset by problems that remain endemic, such as poor public services and institutions, the possibility of corruption in government, poor and patchy infrastructure and, especially in North and Saharan Africa, the threat of Islamic militancy, the continent is starting to overcome these problems. Its newfound economic dynamism is a sign of that.