OPINION:Africa is seeing the emergence of an urban consumer class with massive buying power, writes MALCOLM QUIGLEY
WE ARE into the second decade of the new millennium. In the first decade, we saw enormous changes that bore witness to the rise of a new world order. Like much of the developed world, we experienced a boom and a bust. But we also saw a remarkable turnaround in the fortunes of African economies.
Between 2000 and 2008, Africa’s economies grew by an average of 4.9 per cent each year. Although this growth has slowed more recently, it is predicted to pick up, and new estimates from the International Monetary Fund suggest that the continent’s economies will experience growth of 4.8 per cent this year and next.
Unlike earlier African booms, this growth has not been driven primarily by natural resources. Instead, in the last five years, two-thirds of Africa’s economic growth has resulted from increasing demand for goods and services, especially in sectors such as retail, real estate, telecommunications and banking. For the first time, Africa is seeing the emergence of an urban consumer class with massive buying power. In 2008, African households spent $860 billion (€658 billion).
This is the sort of growth we have come to associate with the Bric economies – Brazil, Russia, India and China – but African economies are beginning to match them in a number of areas. Today, Africa has more middle-class households than India, and a recent report by management consultants McKinsey predicted that the number of African households with discretionary income will reach 128 million in the next 10 years – an increase of 50 per cent. On a per capita basis, Africans are wealthier than Indians, and 12 African states have higher gross income per capita than China.
This growth has resulted, in large part, from an unprecedented period of political stability and a shift in the economic policies. These have included a proactive approach to ending conflicts; reductions in inflation, taxation and budget deficits; lowered trade barriers; and the deregulation of industries. Many of these reforms were undertaken as a way of attracting foreign investment, which increased from $9 billion in 2000 to $62 billion in 2008.
Much of this came from China, the first major economy to exploit opportunities presented by Africa’s growth. Irish businesses should also see Africa’s growth as an opportunity to develop trade relationships with African economies and to invest in African business. Crucially, as we work ourselves out of recession by means of exports, Irish businesses should see emerging African economies as potential markets for goods and services.
Ireland has the benefit of a long and positive history of involvement in Africa; the public goodwill that comes with it; and healthy relationships with the governments of African states. A number of Irish businesses are making encouraging progress in these markets and the announcement by Minister for Foreign Affairs Micheál Martin in August that Irish embassies will take a more active role in building links between Irish and African businesses is a positive start.
For this to succeed, the Department of Foreign Affairs and the Department of Enterprise, Trade and Innovation need to develop a policy on the future of Irish trade with Africa.
Such a policy could work alongside – though it need not be tied to – existing development assistance, which seeks to strengthen the systems required for business to flourish.
Such a policy would mark the beginning of a new relationship between Ireland and Africa, a relationship that can recognise and further the economic progress that African economies have made in recent years, while contributing to Ireland’s economic recovery.
Malcolm Quigley is executive director of VSO Ireland, which places skilled volunteers in 44 developing countries