Choose SA ­– bananas or bonanza?

Africa might have its fair share of problems. However, with Europe and the US fighting to survive their debt crises, Africa showing strong post-recession recovery, and the world scrambling for a share of Africa’s abundant natural resources, the not-so-dark continent is, by all accounts, poised for something of a boom.

However, North Africa, with its current social upheavals, is not part of that picture. And, South Africa, as the continent’s biggest economy, should ask itself why it has also not been invited to the party.

In June the World Bank, releasing its latest Global Economic Prospects report, noted that the financial crisis for most developing countries is over. It said efforts must now focus on tackling country-specific challenges such as achieving balanced growth through structural reforms, coping with inflationary pressures, and dealing with high commodity prices. On Africa, more specifically, it had this to say:

“Growth in Sub-Saharan Africa rebounded sharply in 2010. Supported by the global economic recovery and developments on the domestic front, GDP in Sub-Saharan Africa grew by 4.8% in 2010—up from the 2% advance of 2009 and just shy of the region’s 5% pre-crisis average growth.”

“Excluding South Africa, the largest economy in the region, Sub-Sahara Africa grew by 6.0%, one of the fastest growth rates among developing regions.”

“African export revenues, which had fallen to some 51% off their pre-crisis August 2008 levels by January 2009, had almost recovered by November 2010, reaching 93% of earlier peaks. Much of the increase was due to the surge in commodity prices as in volume terms, exports increased by a moderate 7.5% in 2010.”

“Among the biggest winners from the terms of trade changes were the oil exporters in the region, with incomes gains of upwards of 10 percent of GDP in Angola, Congo, and Gabon.”

Indeed, these oil exporters probably also stood to cash in on the lost oil production of Libya as the Nato-driven insurrection there continues with no sign yet that the West’s superior fire power is going to unseat the wily rogue of the desert, Muammar Gaddafi, any time soon.

The World Bank predicts that global GDP should grow 3.2 percent in 2011 before edging up to 3.6% in 2012, which is only about half of the growth Sub-Sahara Africa – excluding South Africa – already achieved in 2010.

The report notes that, based on the limited recent data available for industrial production in the Middle-East and North Africa, the political turmoil in the region has had a notable impact on activity. For example, in Tunisia production dropped 18.8% between December 201o and February 2011, but has, however, picked up 8% percent in March.

The World Bank says that thanks to recovery in the global economy, as well as “an increasing recognition by investors of the opportunities presented in a rapidly growing developing region, net private capital inflows to Sub-Saharan Africa increased from $35.8bn in 2009 to an estimated $41.1bn in 2010 and are projected to rise to $48.6bn in 2011”.

“The leading destination of foreign direct investment (FDI) inflows, in value terms, is to the capital-intensive mining sector. Indeed, higher commodity prices and the global competition to secure supplies of commodities have spurred investments globally in the natural-resource sector. Sub-Saharan Africa, a region with a high proportion of known mineral resources with great potential for further development is benefiting from this trend,” says the World Bank.

Again recent studies and reports have unanimously indicated that South Africa missed out on this bonanza. South Africa should ask itself why. Perhaps it is high time to reconsider growth-restricting labour laws, tackle the skewed black economic empowerment impacts, end the investor-spooking talk of asset nationalisation and land seizure, bring down the high cost of doing business, generally clean up the country’s political act which is taking an economic toll, and raise its sagging competitiveness...as has been indicated in various recent reports and performance surveys by entities such as the World Bank, United Nations Conference on Trade and Development and the World Economic Forum.

South Africa and North Africa aside, it is especially the sausage in the middle that gets the mouth watering. Countries across the continent have picked up the pace to achieve greater economies of scale, increased investment and become more competitive. But what is behind this African growth and how long can its momentum be maintained?

These are questions Mutsa Chironga of McKinsey & Company’s Johannesburg office recently tried to answer when he spoke at the University of Stellenbosch Business School (USB) on the McKinsey research paper entitled Lion’s on the Move: the progress and potential of African economies. Chironga displayed his confidence in the continent when he urged the executives and prominent business leaders who attended not to ignore the continent’s immense investment potential.

He backed his optimism with facts and figures, showing that Africa’s collective GDP growth accelerated over the past decade, reaching 1.6 trillion in 2008 - a level similar to Brazil or Russia. Research had shown four main forces were driving the economic development of the continent: Africa’s growth acceleration over the past decade; increasing productivity and innovation; widespread, pro-business reforms; and stable macro-economic and political environments.

Elements in all of the latter three categories seem to exclude current South Africa...a wake-up call for Albert Luthuli House and the Union Buildings perhaps? And what happens after the resources scramble is over and the Chinese have run off with most of the natural goodies?

Well, Chironga is confident that, looking at the figures, it is more than just a resource boom and that the source of the growth cannot be purely attributed to commodities when both oil exporting countries and non-oil exporting countries have contributed to growth figures, for example. At the same time he says Africa will continue to profit from rising global demands for oil, natural gas, minerals, arable land and other natural resources. As it is, raw materials account for approximately half of Africa’s trade.

Chironga says there are important factors for investors to monitor going forward, primarily commodities. “While Africa’s cost position for extracting resources is favourable, infrastructure and political stability do still pose some challenges. However, our findings indicate that these factors are becoming less threatening and overall, I would say that Africa is well positioned to take advantage of the global race for commodities.”

Another important factor is access to capital. Banking assets in Africa have more than doubled since 2000 and there is growing supply of foreign investment, he says. According to the research, total capital flows to the continent, including foreign direct investments, bank lending and investor purchases of equity and debt security from African issuers increased from just $15 billion in 2000 to a peak of $87 billion in 2007.

“This bodes well for the continent’s growth as foreign companies supply not just capital, but also new management skills and technology, as well as increased competition in the local market.”

And finally, while we are all aware of the ticking time-bomb of our uneducated, unskilled, unemployed and unemployable youth – a global phenomenon – harvesting the youth potential in a positive way could have immense benefits.

“If recent trends continue, Africa is sure to play a crucial role in the world economy. By 2040, one-fifth of the world’s younger generation will live in Africa and the continent will have the world’s largest working-age population. Global and local investors alike would be ill-advised to ignore this potential,” concludes Chironga.

Way to go.

Stef Terblanche