A story of growth

Monday, 01 July 2013
Richard Howarth and Olivier Zucker discuss Africa’s potential.

At a time when the developed world is struggling out of recession, average growth across Africa has held up well, and fell below 5 per cent only once between 2003 and 2010. Some of the successes will not surprise you. Two of the top three performers in 2006–2010 were Angola and Equatorial Guinea; both economies fuelled by crude oil. In the same period, Ethiopia, with chiefly agricultural economy, grew an average of 10.9 per cent per year, albeit from a low base.1 Better economic management, a lower debt burden, targeted aid and outside investment all point to a continuation of African growth.


The population of Africa has quadrupled in the past 50 years. Today it is just over one billion and it will double again in 35 years’ time. By then, if current trends continue, one in every three children in the world will be born in sub-Saharan Africa.2 By 2050, one in every four people of working age will reside in Africa, compared with one in eight in China.3 Such growth presents Africa with an incredible opportunity, but also an immense challenge. The mushrooming workforce must find productive employment, otherwise the implications for civil society are unthinkable.4 Manufacturing and agriculture have the potential to provide the needed jobs, but this needs proper planning, political leadership, improved management and investment. Infrastructure in general and power generation in particular must improve if Africa is to compete on the world manufacturing stage. Currently 60 per cent of the world’s unused land with agricultural potential is in Africa, but training, fertiliser, equipment and irrigation are necessary to exploit this. Equally important is a distribution network to ensure harvested crops get to consumers in time.


Urbanisation in Africa is a further positive for growth and economic development.5 Concentrated pools of labour support industrial and commercial expansion and can aid the provision of education and medical services. Urban population centres can also improve agricultural efficiency. Africa is already nearly as urbanised as China and has as many cities with a population of over one million as Western Europe.6 However, it is not all good news. The up-and-coming mega cities of Africa – 17 million people in Lagos today and growth of 8 per cent per year,7  plus a 2025 projected population of 15 million in Kinshasa8 – are crying out for mass transport systems that would cost billions of dollars and take years to implement. Urban planning and low-cost housing are needed  to ensure orderly expansion and avoid creating slums and no-go areas. If Africa’s growth so far has been fuelled largely by commodities, there are signs that future growth will have a broader base. More African states are achieving middle-income status, and consumer spending can be a powerful growth accelerator. Yet inequalities remain. Equatorial Guinea has the highest per capita GDP in Africa, but three-quarters of its population live in poverty.9 If home ownership is an important spur to middle-class aspirations, much needs to be done across the continent to improve the legal framework around property and develop a long-term mortgage market.


While hotspots remain, the democratic situation across Africa has improved in the past decade. Recent elections in Kenya have created an upbeat environment in contrast to the dark days after the 2007–2008 election. The democratic dividend is real. Ghana, a paragon of democratic virtue on the continent, has not only received support from the international donor community but is also seen as a key location for international companies targeting West Africa, which value its stability.

Where does this become relevant to STEP and its members? In a recent article, Tony Elumelu, former CEO of the Nigerian bank UBA, says the answer is ‘Africapitalism’. Two parts of this are the development of management skills and investors willing to take a long-term, equity-based view of Africa.10 You have the skills. Find a way to invest them in Africa and the results can be amazing.

  • 1. African Statistical Yearbook 2012; African Development Bank Group, African union Commission, Economic Commission for Africa.
  • 2. ‘Africa’s Population Boom’, World Review, www.worldreview.info/content/africas-population-boom.
  • 3. ‘The five trends powering Africa’s enduring allure. Trend 1: a larger, younger, and more affluent population,’ Africa Macro – Insight and Strategy, Standard Bank, 2011.
  • 4. Africa’s Youthful Population: Risk or Opportunity?, Lori S Ashford, Population Reference Bureau, June 2007.
  • 5. Briefing Notes for AfDB’s Long-Term Strategy, Briefing Note 4: Africa’s Demographic Trends, African Development Bank Group, March 2012.
  • 6. Lions on the move: the progress and potential  of African economies, McKinsey Global Institute, 2010.
  • 7. Lagos State Government, www.lagosstate.gov.ng.
  • 8. World Population Prospects: The 2010 Revision and World Urbanization Prospects: The 2011 Revision, united Nations Department of Economic and Social Affairs.
  • 9. The World Bank, World Development Indicators, data.worldbank.org/country/equatorial-guinea.
  • 10. ‘Africapitalism,’ Tony O Elumelu, Founder of the Tony Elumelu Foundation, April 2013.
Author block
Richard Howarth and Olivier Zucker

Richard Howarth is the Founder of African Private Office and and Olivier Zucker is the Founder of Zucker & Co, Investment Advisors.

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