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Why does Africa's development and progress come across as so paradoxical? How come we are witnessing unparalleled GDP growth figures paired with seemingly unchanging GDP per capita figures? Why do we see companies of all sizes booming but yet slums persisting to exist? Why do some allegedly booming economies still “look” poor?

The answer is as simple as it is complicated.

The simple part of the answer is that, yes, growth is occurring. The complicated part is that it is occurring unevenly and, most importantly, beneath the radar.

The informal economy contributes to hiding (and hampering) growth in many African countries. Yet as it can employ over half of a country’s working force, its impact cannot be neglected. The informal economy silently sustains millions of households all across Africa. Millions of people run unregistered businesses and save money in unregistered, trust-based, banks. Long before microloans became a buzz word, people were helping each other finance housing, school fees and business investments. They still are today. The difference is, today we expect to find information about these people online. We expect to find graphs illustrating how much more Patience and Yonas are saving 2010 compared to 2006. When we don’t, and we have images of slums, riots and inflated bellies fresh in mind, we assume nothing is happening.

This brings us to the second sense in which African markets operate beneath the radar. Africa’s progress cannot be revealed and understood by using a search engine. It will not disclose itself to you through the measures of finger taps on a key board. In the West, we are used to being able to look up information alone, discretely, and in the comfort in our homes or offices. We have grown accustomed to the notion that if something exists, it’s on the internet. In short, we assume full transparency. Lack of transparency does not necessarily equal a corrupt state of matters (even though it offers suitable breeding grounds). It just means that whatever’s going on – you’re not going to find out if you don’t abandon your laptop. It won’t matter a great deal if you are looking at plastics manufacturers in Ghana or TV-show preferences in Ethiopia – you need to be where it’s happening. There are two lessons to be learned here. The first is that Africa indeed holds large potential for those investors who don’t fall for the temptation of underestimation, and instead learn to ask the right questions in the right places. The second is that Africans who are contributing to growth need to begin making their success stories more readily available using company websites and social media.

We’ll round off this post with an anecdote. Birru is a 33-year old Ethiopian running a small transport service business in Addis Ababa. He has after years of diligent work recently upgraded to a larger and newer vehicle. In order to do this, he needed a loan. But his loan to value ratio (LVR) was 50% and he saves money every month to pay off his debt and build a foundation for a future family. Today he rents a one-room flat, which he spends little time in due to work. Birru is by Western measures not rich. But, with the recent financial meltdown in mind, why is an American with a LVR 115% home loan still a more attractive customer than he is?

 


Comments

Peder
02/21/2011 01:25

Many thanks for an interesting and well-informed take on the Arican "growth paradox". Best wishes for 2011!

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