It’s become quite popular in the last few years to declare that Africa will be the next great economic success story. Two years after an Economist cover story declared that Africa is rising, the continent’s still putting up strong growth. The IMF expects sub-Saharan Africa to grow at 6.1% this year, the second-highest growth rate of any major region in the world. As Brookings’ Amadou Sy says, "there is a consensus in African policy circles that we are witnessing Africa’s moment.”
Dani Rodrik, however, isn’t so sure. Africa’s growth may not be sustainable, he writes, because it hasn’t made enough progress in creating the type of manufacturing jobs that can transform the continent's economies:
Fewer than 10% of African workers find jobs in manufacturing, and among those only a tiny fraction – as low as one-tenth – are employed in modern, formal firms with adequate technology. Distressingly, there has been very little improvement in this regard, despite high growth rates. In fact, Sub-Saharan Africa is less industrialized today than it was in the 1980s.
The Economist agrees: “buoyed by commodity income,” it says, Africa’s governments “have neglected industry’s needs, especially for roads and electricity”, thereby depressing the manufacturing sector. Ntsakisi Maswanganyi spells out the consequences for South Africa in particular.
African firms have another problem, according to a new paper by Leonardo Iacovone and Vijaya Ramachandran: they have trouble growing. African companies are roughly 20% smaller than their counterparties in other nations, and they don’t necessarily get more productive as they grow larger. The culprit could be the difficulty of dealing with African governments.
In July, Max Fisher broke down Africa’s coming population boom. The continent’s population is expected to grow by a factor of 5 over the next 100 years; Nigeria, its most populous nation, could see its population grow by a factor of eight. The country, the size of Texas, could have a population rivaling China’s by 2100.
With its youth population soaring, Africa may very well be nearing a “demographic dividend” that could push its growth even higher. That theory, says Francisco Toro, underlies the approach to development favored by the Bill and Melinda Gates Foundation. Last month, in his foundation’s annual letter, Bill Gates predicted that by 2035 there will be almost no poor countries left in the world. Chris Blattman thinks that is a tad optimistic. To catch China’s levels of per capita income by 2035, he writes, Kenya and Ethiopia will “have to grow as fast and unfettered as some of the fastest-growing nations in human history. Impossible? No. Likely? Almost certainly not.” -- Ryan McCarthy
On to today’s links:
Beer
How many hours of minimum wage does it take to buy a beer across the world? Roberto Ferdman and Ritchie King
Keeping score
Winners and losers from the farm bill, which the President is due to sign today - NYT
Bitcoin
The fall of Mt Gox - Rob Wile
Why bitcoin won’t disrupt digital transactions - Felix
Ouch
SAC's Mathew Martoma found guilty of insider trading - Reuters
Primary Sources
The economy added 113,000 new jobs in January, below the forecasted 185,000 - BLS
Jobs
Today's jobs report shows local schools are losing a lot of staff - CBPP
Food
How the California drought will affect food prices across the US - Modern Farmer
Defenestrations
Well that was fast: Blythe Masters quits the CFTC after one day - Bloomberg
EU Mess
Spain's nun-bankers are hurting in the bad economy - WSJ
Equals
The St. Louis Fed on the "mancession" and the "hecovery" - St. Louis Fed
Politicking
We’ve reached the debt ceiling AGAIN - Dept. of Treasury
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