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Opinion: Africa, The Continent Of Economic Misunderstanding

Africa seems to be the only continent today that is regularly referred to as a country. It annoys me every time I hear it said. It’s reminiscent of Ronald Reagan’s chatter with the press aboard Air Force One in late 1982 on his way back to the US from a Presidential visit to Latin America:


“I learned a lot down there…You’d be surprised, because, you know, they’re all individual countries.” As a relatively freshly minted PhD in international business economics at the time, I thought a statement like that coming from the President of the United States was more than odd. Just as such an utterance was, of course, grossly naïve, if not insulting, to Latin Americans, so too is the expression of the same sort to Africans.

Critically, from a business perspective, Africa is not a monolith, African countries are not homogeneous, and focusing on “Africa” as a unit of analysis is, simply put, not terribly meaningful.

By painting Africa with a broad brush, perceptions about the real market opportunities and risks are extraordinarily distorted. In many cases–though not all the perceived risks are either understated or overstated, and the same goes for the perceived returns.

Based on the United Nations’ nomenclature of a ‘sovereign state’, Africa is currently comprised of 54 countries, 48 of which constitute sub-Saharan Africa. Needless to say, Africa’s countries all differ from one another many starkly so among a variety of dimensions, whether in terms of location, size, topography, resource endowment, ethnic composition, religion, language, colonial heritage, political make-up, and so on.

And, of course, each county’s economy has a unique character, making it wholly a misnomer to refer to the “African economy.”

I think it is fair to say that the commonly held view is that the vast majority, if not all, African markets are seen as utterly fraught with excessive risk, while exhibiting comparatively few substantial opportunities.

To be sure, there are appreciable risks of doing business in many African countries, and I am not playing them down at all. But so is it the case in most emerging markets around the globe, whether in Latin America; in the Middle East; in the former Soviet Union, Central and Eastern Europe, and the Balkans; in South Asia, including India, and in East Asia, including China.

Indeed, when I hear sweeping references made about one emerging market in the world as being more or less risky, or being a better investment opportunity than another, I have to chuckle and frankly not in a good way.

Regrettably that is commonplace, even among some of the most astute and well-known corporate leaders, investors and bankers in the advanced countries. Ultimately to paraphrase former Speaker Tip O’Neill’s quip about politics: ‘all investment risks and opportunities are local.’
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Sure, global, regional and national factors influence the opportunity-risk tradeoffs of any particular commercial transaction or investment project. And, assessing such tradeoffs in an emerging market is usually a very tricky enterprise.

But reliance on qualitative perceptions, especially at the aggregate level is a very poor substitute for data-driven, field-level analysis. So much so that I’ve seen many colossal investment mistakes made in Africa whether on the upside or the downside.

So what are some of the most critical economic misperceptions about Africa? Here are three.

Growth in Africa is an Illusion. From an historical perspective, the economic performance of the bulk of Africa the 48 countries comprising sub-Saharan Africa have been far stronger than popularly believed.

Over the past decade and a half from 2000 through 2015 the average annual growth rate of ‘real’ GDP (that is, GDP adjusted for inflation) was 5.5% for sub-Saharan Africa as a whole.

Over the same period, average annual real GDP for all emerging markets taken together (including the globe’s fastest growing countries, such as China and India, among others) grew at only a slightly higher rate: 5.9%.

By comparison, the corresponding average growth rate over the same period among the world’s advanced countries was just 1.8%–about one-third as fast as sub-Saharan Africa.

By Robert Muriisa.

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