Africa: Ethiopia Among Three African States That Are Doing It Right September 11, 2014 By: Christian Putsch John Kerry had some friendly words to say at the U.S.-Africa Leaders Summit held in Washington last month. The U.S. Secretary of State flattered participants by noting that the discussions were very different from those a decade ago when the continent’s crises had pushed Economist magazine to characterize Africa as the “hopeless continent.” In the late 1990s, the region had suffered another economic crisis. Then a senator from Massachusetts, Kerry spearheaded legislation to supply Africa with medicine to combat the HIV-AIDS epidemic, which had become something of a symbol for the continent’s woes. At this summit, it was another virus that captured attention: Western Africa needs help in the fight against Ebola that has killed more than 1,500 people in only a few months. The politicians also discussed the threat from the Boko Haram terrorist organization. Nevertheless, the main message was that Africa now stands for economic opportunity. To check China’s influence on the continent, the U.S. wants investments and credits in the area of 30 billion euros. Africa’s balance sheet over the last 10 years makes impressive reading. Economic growth was 5% on average, which is the longest period of economic growth since the 1960s. Inflation-adjusted salaries rose over 30% after sinking in the two previous decades by nearly 10%. Still, we should be sure to limit optimism to certain individual countries, rather than the continent as a whole. Often, the boom in raw materials makes balance sheets look good while most of the population rarely benefits. It’s important to mention the number of wars on the “continent of opportunity,” as management consulting company McKinsey has characerized it: Eleven of the 20 wars currently ongoing around the globe are in Africa. Investors and economists have long learned to differentiate. In the sustainable sense, very few of Africa’s 54 nations make a positive impression. But there are some countries that can — with reservations — be seen as model states. Botswana When the British gave up their protectorate in 1966, the country had just 12 kilometers of paved road, and just 22 university graduates. On a land surface as large as France, it had only two secondary schools. The country, which has no direct sea access, may have started its independence under unfavorable conditions, but thanks mainly to its diamonds, today Botswana is considered an economic wonderland. With 15 million carats mined annually, every third diamond in the world now comes from Botswana. But diamonds provide only a partial explanation for occasional two-figure growth rates and success accross nearly all socio-economic indicators, since crisis countries such as Congo and Sudan are also rich in raw materials. In Botswana, however, the boon is handled responsibly. Since the 1970s, when African mining companies paid laughably low fees, over half the profits have been going to the state. There is an economy-friendly investment climate, and hardly any other African countries have so little corruption. Botswana is praised for its restrictive fiscal policy: Inflation rarely exceeds 10%. Its institutions are stable — and that’s crucial. Historians attribute that to modest levels of colonization, which meant that traditional features of self-determination could develop. Hundreds of years ago in the Tswana culture, people already had more rights than any other Bantu tribe. Diamond reserves should last for another 50 years or more. President Ian Khama is, however, already working to diversify the economy. Bureaucracy for imports and exports was significantly reduced recently, and the country is building new infrastructure in the manufacturing industries and services sector. Rwanda Diversity is something that Rwanda, which in any case never belonged to the classic commodities countries, achieved long ago. Over the last decade, it has averaged 8% economic growth. During that time, child mortality rates have been cut in half, and the number of children attending primary school has tripled. Government bonds sold in April 2013 have yielded over 9% since the beginning of this year, which has earned Rwanda the nickname “Africa’s Singapore.” Development aid, which was frozen two years ago because of President Paul Kagame’s support of M23 rebels in eastern Congo, is flowing once again. It is said that few countries use aid with comparatively high effectiveness. With the exception of Mauritius, business proceeds more smoothly in Rwanda than in any other African country. Since 2006, there are many fewer obstacles facing entrepreneurs, which has led to an impressive service sector, particularly in tourism. Productivity in the agricultural industry has grown too. Parallel to that, Kagame has moved systematically against corruption and other crime. Though criticism for human rights abuses has been on the rise, the nation’s progress — it’s only been 20 years since one of the worst genocides in the history of mankind — is nevertheless impressive. Ethiopia Some say that Botswana and Rwanda benefit from having relatively small populations. A look at countries such as Congo, Sudan or Nigeria suggests that countries with large populations tend to suffer lasting crises. Yet Ethiopia, whose 94 million inhabitants makes it the second most populated country in sub-Saharan Africa (after Nigeria), tends to disprove this theory. The nation not only has one of the world’s oldest civilizations but also one of the fastest-growing economies. In the last decade, it grew by 10%, double the continental average. In Addis Ababa — Photo: David Stanley Like Rwanda, the east African nation is not a classic commodities country. So it owes its success to the positive development mainly of agricultural productivity, political reforms, and the downsizing of bureaucracy. The average per capita income of $500 a year is significantly lower than the regional average, a fact that the government uses when plugging Ethiopia to potential investors. In the capital Addis Ababa, ever more risk capital partners are looking for entrepreneurs. Within a few years, Ethiopia went from being one of the world’s poorest countries to joining the group of “middle-income countries,” as the UN calls countries with a minimum per capita income of $1,026. Some of the most ambitious projects on the continent are taking place in Ethiopia, among them Africa’s largest hydroelectric power station due to be constructed here, as well as a rail system nearly 5,000 kilometers long that will help the country industrialize. The government was recently criticized for electoral irregularities and suppressing the opposition, but it invested heavily in education and health. The number of Ethiopians living in extreme poverty is shrinking by 2% per year. The development of these countries seems all the more spectacular because of where they started. Yet all African countries together accounted for only 3% of worldwide gross domestic product. So Africa urgently needs more model states, and then headlines from the continent of crises will start to report more good news.
Posted on: Thu, 11 Sep 2014 09:27:09 +0000
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