Here's What Stands in the Way Of Africa Becoming an Economic Success

Here's What Stands in the Way Of Africa Becoming an Economic Success

Recent statistics compiled by the Economist's Intelligence Unit forecast economic growth in sub-Saharan Africa – specifically South Africa, Angola, Kenya, and Nigeria – to increase from 3.7% to 6% percent within the next five years. Indeed, there are many reasons to be optimistic about the continent’s growth trajectory: improved fiscal management, sustained crude oil prices, and the high start-up costs for mining ventures mean that the slow shift from export-led to consumer-led growth that occurred in China will not devastate African economies. Others have cited rapid urbanization and a demographic shift as further reasons to expect big things in upcoming years.

But much of the optimism surrounding future African growth rests on weak assumptions. There's no guarantee that an influx of young workers will provide cheap labor to sub-Saharan Africa, for example. African economies already suffer from a severe shortage of adequate skills in the labor force, and while countries have made strides in increasing access to basic education, the quality of the instruction that students receive in the classroom remains poor. As the UN's 2013 Human Development Report highlights, high fertility rates in Africa were likely a direct consequence of expenditure cuts in education. If Africans are not given a proper education, fertility rates will remain high and the demographic shift will become a youth burden.

The belief that rapid urbanization will yield rapid development is also suspect. While it may be true that “large urban centers allow for innovation and increase economies of scale,” as Wolfgang Fengler of the World Bank claims, African urbanization has been ad hoc and chaotic. Governments and donors across the continent have been unable to provide growing urban populations with basic services, let alone viable employment, and as a result many of the poor are stuck in slums. Khayelitsha in South Africa and Kibera in Kenya are just two examples of these struggling cities.

The purported rise of the African “middle class” also warrants clarification: The African Development Bank deems as “middle class” anyone earning between $2 and $20 a day, 60% of whom fall into the “floating” middle class made up of those who earn between $2 and $4 a day. These people could easily slip back in to poverty. Others such as Citigroup’s David Cowan cite high levels of inequality, which force businesses to cater either to the emerging wealthy elite or the consuming poor, as creating little room for a middle class.

American giants such as IBMWalMart, and General Electric are making inroads into African markets, to say nothing of Chinese investors. While these movements might be harbingers of growth to come, the danger of assuming big growth figures lies in the possibility for complacency. Demographic trends will not yield dividends, nor will large urban centers yield attractive economies of scale, if governments and donors do not step up to solve Africa’s problems of human and physical development.

Africa is well positioned for a grand economic takeoff, but transforming deeply agrarian economies into global manufacturers will entail transforming large urban and youth populations into productive assets. This will require greater and more innovative investments in infrastructure, energy, education, and social services.