It is 7 a.m. and traffic on Los Angeles Boulevard in Lusaka, Zambia’s bustling capital, has already slowed to a crawl. As motorists merge from side streets into the snake of traffic on the boulevard, it is difficult to overlook the many high-end SUVs inching along, their exhausts ejecting small plumes of steam into the crisp morning air.
Less than two years ago, the 5 km trek to Levy Mall via this thoroughfare required less patience, as traffic congestion was virtually unknown at any time of day. What’s more, people no longer wonder aloud how such an upmarket mall will fill its 2,800 parking bays.
Now a beehive of activity, this US $200 million ultra-modern facility, financed by the country’s National Pension Scheme Authority, is a magnet for the country’s ballooning middle class. Its 30,000-square-meter retail space consists almost entirely of domestic and regional corporate retailers, something that seems to evoke pride in many of its patrons.
“It’s Africa’s time now. We are tired of holding out our begging hats!” a prominent Lusaka attorney candidly tells me as we ride the escalator to the second floor. “This is just a start. We will do better. . . . Everything we need is right here in Africa.”
More Optimism in the Long March to Prosperity
She has reason to be optimistic. Africa, once known as the “dark continent,” is increasingly looking shinier than ever. Across its capitals, evidence of the sprint towards development is unmasked in the explosion in demand for cars, electronic items, clothing and jewellery by a rapidly emerging middle class. Fancy new malls like the Levy Mall are going up at an unprecedented rate to cater to this new wave of consumerism.
As developed countries of the Euro zone and North America register muted or even negative growth in the aftermath of the global financial crisis, the economies of many African countries continue to prance along, opening up unprecedented opportunities for their rapidly growing populations. Indeed, a recently released IMF report suggests that the world’s fastest-growing economies are largely concentrated in sub-Saharan Africa, with some even registering double-digit growth.
For many, such as Angola and Liberia, their economic progress previously blighted by decades of civil conflict, a new era of prosperity beckons. Recent oil and gas discoveries are boosting government coffers and allowing governments to channel more resources into badly needed public services, particularly in the health and education sectors.
Encouraged by rising mineral prices and a dive in public debt to more sustainable levels, others such as Nigeria and Zambia have debuted sovereign bonds, securing rates that are the envy of some developed counterparts in Europe. Such resources are being ploughed into infrastructure development, with the hope of transforming dusty footpaths into highways and replacing kerosene lamps with light bulbs.
From Luanda to Dar es Salaam, city skylines are now dotted with construction cranes as high-rise hotels and office buildings emerge to compete for standing room with more familiar landmarks, many dating back to the colonial era.
For a region seemingly unable to unshackle itself from entrenched stereotypes of poverty and hopelessness, this march to prosperity could not have come at a better time. As austerity measures in the rich world restrain traditional aid budgets, African countries have no doubt felt the pinch. According to the OECD, bilateral aid to the African continent fell by almost 10% in 2012 when compared with a year earlier. And, specifically for sub-Saharan Africa, this decline was in the region of 8% for the same period.
China Comes Calling
But even as the rich world breaks for the exit holding aid baskets, China has been banging on the doors of many African countries with its checkbook in hand. Endowed with deep pockets and a deeper thirst for natural resources to fuel its explosive growth, China has been investing heavily in extractive industries in Zambia, Nigeria, Sudan, Chad, and Zimbabwe, among other African countries.
While these investments are particularly geared towards guaranteeing its long-term energy security, Chinese largesse in the form of grants and low-interest loans is also being used to build stadiums, re-establish rail routes or completely build new infrastructure, such as seaports.
Known as “the factory of the world,” China is also betting that a wealthier African continent will catalyze demand for more consumer goods and boost bilateral trade. This, it is felt, will in turn keep factories open at home and help assuage seething domestic tensions concomitant with its slowing growth rates in recent years.
It is for this reason that it has largely ignored Western ruminations about accountability and the pursuit of a foreign policy that tags economic assistance to democratic reforms in host countries.
Instead, it has chosen to signal its long-term commitment to the continent by building cultural centres in many capitals and has even funded a brand new US $200 million, state-of-the-art headquarters for the African Union, which opened in early 2012.
The economic benefits for African countries have been anything but negligible. As the African Development Bank points out, China currently satisfies one-third of its crude demand via imports from Africa’s oilfields. And in the decade to 2011, trade with the continent has exploded from a mere US $9 billion to a stratospheric US $160 billion.
The latter statistic is particularly welcome news to a region where the demand for cheap consumer items to meet the growing purchasing power of a rapidly emerging middle class would not have been otherwise satisfied by premium products manufactured in the rich world.
Follow the Money
A series of fortuitous events and shifting geopolitical dynamics is also reshaping the region’s future — for the better. For one, austerity measures and extremely low returns in the rich world over the past five years have forced investors to rethink their risk appetite. Many are now actively seeking out the higher returns of “frontier investments” to offset portfolio losses arising from the lingering effects of the financial crisis.
With Africa deemed to have the largest number of “frontier markets” of any region, this new thrust for higher returns has no doubt boosted FDI inflows to many of the more stable economies on the continent.
Even better, FDI from these sources are being invested in sectors other than traditional natural-resource extraction. In fact, in its 2013 report, the United Nations Conference on Trade and Development estimates that the proportion of greenfield investments into Africa’s consumer-oriented industries increased steadily from 7% in 2008 (the height of the financial crisis) to 23% last year.
Such multi-sectoral FDI inflows will undoubtedly have a positive impact on employment figures, enhance economic diversification and make the region more resilient to economic shocks, even as it pushes to unhinge itself from aid dependence.
In the end, while the region remains largely hamstrung by raft of ills, a decade of falling debt levels, a pivot towards private markets in championing growth, rising incomes, and a new thrust to exploit its endowment of natural resources to better the lives of its people is still much to cheer about.