SA has failed to keep pace with rest of Africa's growth
Posted on June 30, 2011
The world is obsessed with China's rise and the apparent decline of the US. While China's economy has grown consistently by 8% - 10% a year for the past two decades, the lacklustre economic performance of the US has failed to curb rising unemployment and widespread social concerns. Consumerism — once the lifeblood of the thriving US economy — is down. One need only visit towns stretching across the southern belt from Memphis to Amarillo in the Texas panhandle to witness the deflated "spirit of America" and the soft underbelly of a nation with an everweakening middle class. Retail champions such as Walmart are aggressively pursuing new dynamic markets as returns abroad show signs of outstripping those in the US in the near future. Already, more than 25% of Walmart's returns are outside the US. Recent forecasts suggest that the Chinese economy, currently $8-trillion, is expected to overtake the US's ($15-trillion) and become the largest economy in the world within the next 10 years. But China will take far longer to reach the personal affluence of the US. Economic might with immense foreign reserves (that now exceed $3-trillion) will not translate overnight into advanced levels of per capita income and global political power. Here in Africa, we have a similar scenario. SA, the largest and most advanced economy on the continent, has only managed to achieve pedestrian growth of 3% - 4% a year over the past 15 years. Such levels have failed to erode unemployment or address mounting socioeconomic inequalities. This is despite having some of the richest mineral endowments in the world during a commodity boom said to be the largest in history. With one of the most sophisticated financial sectors in the world, coupled with capital markets superior to those in dynamic markets of a similar size, SA has failed to keep pace with African growth. Posting a continental growth average of more than 6% since 2008, it is hard to think of SA as the "locomotive of growth" and many contest its appeal as a "gateway to Africa". Meanwhile, Nigeria is charging ahead. Its economy has doubled in size in the past 15 years and growth is expected to exceed 8% this year. Nigeria is expected to overtake SA as the largest economy in Africa by about 2020. With a population of more than 150- million (20% of Africa's total) Nigeria's impressive economic growth trajectory has earned it wide acclaim among investment banks such as Goldman Sachs, which included Nigeria (and not SA) in the "Next 11" list of growth economies and on the cusp of a new category of "Growth Markets" — just behind the Bric — Brazil, Russia, India and China — economies. But it is no secret that politics and corruption have stifled economic progress in Nigeria for decades. The numbers are mind-boggling. Corruption is said to have cost the country more than $250bn, while per capita income hovers around $1 500 a year and 80% of the population still lives on less than $2 a day. Oil and growing markets are yet to translate into real economic gains for Nigerians. This will hopefully change after one of the most successful democratic elections in Nigerian history earlier this year. One can't help but compare the economic rise of Nigeria in Africa with that of China on the global stage. In gross economic terms, these two countries are set to take the helm far sooner than expected. Both face enormous socioeconomic challenges and levels of basic requirements that call for more than just economic growth, size differentials and favourable demographics. Politics, policy and broad-based governance are sure to play a big part in their rise to the fore, and these are less easily measured than economic trajectories. Meanwhile, SA carries the traits of a mature market: higher levels of sophistication but sluggish rates of growth and development, while retaining daunting - socioeconomic challenges. This among a field of dynamic African markets bursting for growth and prosperity. Like the US, SA needs to reinvent itself to ensure it remains relevant and competitive all over the globe. Dr Lyal White is the director of the Centre for Dynamic Markets at the Gordon Institute of Business Science.
Virtual Campus
Get Social With Us
Download the UP Mobile App