Redefining Africa's Investment Potential

My good friend, Anne Griffin sent me a link to this interesting article from the Wall Street Journal - A Continent of New Consumers Beckons. She wanted my opinion on the article and if I felt it was an accurate depiction of the continent. I'll start with a caveat - any article that generalizes the experiences of individual African countries and regions for the sake of expediency or due to ignorance of the many fissures (geographic, tribal and social) within the African continent is suspect. However, since that's the context in which the article was written, I crave the reader's indulgence in the generality of my response and analysis of the article. It's a good article, and factual. There's no doubt that the middle class of Africa (as a whole) is beginning to "take off" and exert some influence in the global market, especially where it concerns consumer goods. I believe the mobile phone market in Africa is bigger than that of the Indian subcontinent, for example - or very comparable. Considering where the continent was 10 years ago, that's nothing short of a miracle. Highlighting this surprising statistic is that the poorest of the poor in India or Pakistan hardly posseses a mobile phone, while his/her counterpart in subSaharan Africa has at least one...ironic, but we'll get to that. In addition, there's a high demand for personal totems of status - cars, designer clothing, latest handheld devices, etc as material possessions are often seen as the only indicator of wealth in traditional African societies. The article also highlights some of the issues that can/will prevent explosive growth - corruption, lack of social services, poor (albeit improved from before) government, etc. Therein lies my problem with the otherwise well-documented piece - not enough attention was paid to this non-consumeric aspect. I'm of the school that believes that the African middle-class, despite what African governments and economists would have us believe, is nothing but a phantom idea. There can be no sustainable middle class, nor can it become a major player in the global economy, until some of those base (read, social) issues are addressed. Across the continent (and certainly in Kenya, Nigeria and Ghana), there are many people who would rather have enough credit to finance their phone bill than eat 3 square meals a day. This is where the gray area comes in to play - how many people know that the fancy clothes, fancy phone and fancy car are masking someone who can only afford to eat 1 or 2 square meals daily? In the eyes of the world, and because this individual partakes in economic activities, s/he is middle class. It's more complex than that. In basic economics, a middle class inidividual/family is defined as one that after paying for all their needs, has some extra money to take care of a few wants. In terms of disposable income, there isn't much - even among African professionals who are gainfully employed.

The article also seems focused on the urban centers of the countries it mentions, not realizing that the continent only has a 30% (at most) urban population. In addition, even in major cities, only a very small percentage of the population (about 5% in Nigeria; slightly more in countries like Ghana and Kenya; less in Francophone Africa) has a relatively high quality of life (i.e. one that could qualify at least as "lower middle class" in Western countries). Who is measuring the economic indices of the 70% who don't have any functional means of livelihood, given that the main economic thrusts of rural areas - farming, herding, fishing and resource exploitation - are either in decline or don't provide many benefits for their host population? Of course, economies like those of Botswana and South Africa are some exceptions to the rule - and again we run into the problem of generalizing African problems and successes, but even these countries aren't anywhere close to the BRIC nations.

Lastly, the article doesn't mention the gross lack of basic infrastructure, the dying - or dead - manufacturing/agricultural base, the increasingly worse security situation (likely liked to high unemployment) and the over-dependence on diminishing natural resources (with a resultant lack of economic diversification). In other words, the very things that could curb the future growth they are projecting. That being said, it's hard to go against the article seeing as it is a WSJ piece. From the standpoint of attracting investors to the continent and exposing the potential for consumer-based growth, it is on point. I just worry that this sort of focus could result in another spate of unsustainable growth without any solid, conservative foundations to fall back on in lean times (social security, taxation, infrastructure development, healthcare, etc) and let's face it, investors only care about those things when they aren't making money - at which point they split town! The type of investors African countries need are those who are willing to be social, not just financial entrepreneurs. Investors who are willing to refuse giving a bribe at the risk of losing a contract, because they know that they are laying a foundation for the total growth of their countries of interest, not just boosting the foreign exchange kitty for local, state and federal governments to share among themselves. It's why I've often advocated for investors to have historical or direct links to the continent, because only then can true ownership be implemented. If anything, I feel this article is a wake-up call to African and diasporic Africans (both those who left the continent willingly within the last few decades and those who were forced to leave a few centuries ago) to invest in the continent and take ownership of OUR opportunities. Otherwise, the vultures will come in to feed (as they have in the past and as they continue to do) and we'll be singing the same old song when this new - and potentially great - economic wave has passed.