Why Africa won’t be the next Bric | beyondbrics | FT.com

Why Africa won’t be the next Bric

August 27, 2010 5:26pm

Prompted by this week’s application from South Africa for Bric “membership”, the man who coined the acronym – Jim O’Neill of Goldman Sachs – asks in today’s FT whether Africa as a whole could become the next Bric.
On several measures he says the continent has a reasonably strong case, but he notes that its biggest economies would still need to raise their games on many fronts – and he misses some more profound weaknesses in the Africa-as-a-Bric idea.
O’Neill created the Bric acronym in 2001 as a neat way of grouping together four countries that shared the potential for generating rapid growth, attracting foreign investment, and reshaping the global economy.
Ngozi Okonjo-Iweala, managing director at the World Bank, latched onto the idea of Africa joining the group in a speech earlier this year in which she sold it as a “trillion dollar economy”.

It’s high time Africa saw and presented itself as the fifth Bric, an attractive destination for investment, not just aid. This is realistic and within reach. As Nelson Mandela said, “It always seems impossible until it’s done”.

But before you can decide where to squeeze an “a” into the acronym, old Africa hands will jump in to say that it’s nonsense to compare it to a single country: not only is Africa a continent, it’s arguably the most diverse on the planet in terms of economics, politics, culture and the environment.
What’s more, 20 African countries have populations of less than 5m people. O’Neill is alive to that and focuses his discussion on the biggest African economies.

If you … look at the potential of the 11 largest African economies for the next 40 years (by studying their likely demographics, the resulting changes in their working population and their productivity) their combined GDP by 2050 would reach more than $13,000bn, making them bigger than either Brazil or Russia, although not China or India.

But even those 11 are highly diverse – including two of the biggest, Egypt and Nigeria. And due to Africa’s lamentable roads and railways, as well as its internal border restrictions, many of them function as isolated economic islands.
Afro-optimists would say regional trading blocs are changing that, but the reality is that only about 10 to 12 per cent of African trade takes place with other African countries, according to a study from the UN Economic Commission for Africa and others.
For those reasons, it doesn’t make a lot of sense to suppose that Africa’s biggest economies will follow the same development trajectories over the next few years, let alone the next few decades.
Yet it’s worth remembering that the Bric grouping initially attracted flak for not having any coherence either, but its runaway popularity with western businesses and investors has given the four countries more in common than they had before.
Funnily enough, one thing they share is a growing hunger for mineral resources from Africa (notably Nigeria, Angola, the Democratic Republic of Congo, and Sudan).
But it’s doubtful whether any country other than South Africa has the right mix of factors to make it an attractive destination for serious western investment, across a broader range of sectors, which could rival that going to the Brics.
Earlier this year Shanta Devarajan, the World Bank’s chief economist for Africa, responded with a dose of scepticism to Okonjo-Iweala’s call:

The distinguishing feature of the Brics is that they are both middle-income and large. So it’s not clear how any individual African country can aspire to being a Bric. Countries such as Malaysia or Chile may be more appropriate models for most African countries.

To achieve their “2050 potential”, O’Neill says African countries need more macroeconomic stability, less external debt, a stronger rule of law, better education, (even) more mobile telephones, and a purge of corruption.
But it’s worth paying more attention to the parallel trends of population growth (seen as a good thing by many investors in India and Brazil) and job creation (a difficult task that most African governments are failing to manage).
Each of the Bric countries have their own pockets of poverty, and in some parts of Africa poverty is actually falling. But too many countries are producing more people than they can employ. And not only does that limit their potential as new consumer markets. It has ugly consequences in terms of crime, conflict and social unrest that can strangle economic growth.
Related reading:
Building Brics, FT
Is Russia the best Bric after all? beyondbrics
Why Africa won’t be the next Bric | beyondbrics | FT.com

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