With the stoicism demanded of all who hope to make money in Africa, Beauty Chama sits in her empty hair salon in a leafy town in northern Zambia’s Copper Belt and looks forward to better times.
“We are waiting patiently until the miners start making their money,” she said, fingering the heavy gold chain around her neck that testifies to past fat years. “Then we shall start making our money. It’s only a matter of time.”
Africa for the investor is like that: a story of boom and bust. But after the implosion of such supposedly sophisticated institutions as Lehman Brothers or Dubai World, the confidence of the Zambian hairdresser is finding echoes as far away as London, New York and Beijing.
The International Monetary Fund believes growth in sub-Saharan Africa will be one per cent above the global average, and puts eight African countries in its top 20 fastest-expanding economies in 2010. Oil-rich Angola and Congo Republic will lead the charge with growth rates of more than nine and 12 per cent respectively, both beating China, according to the IMF’s most recent projections. “Africa,” said Tara O’Connor of Africa Risk Consulting, “is the continent of the long game. It’s not perfect, but the overarching trend is one towards entrenching political stability, which then allows businesses to operate much more consistently.”
For some African countries, particularly those helped by Chinese investment and its thirst for energy and minerals, another boom may be approaching.
Investors with cheap cash needing to spice up returns in more obscure parts of the globe are asking whether Africa can shift from final investment frontier into the emerging market mainstream. Reflecting this interest, Africa gets top billing at the annual meeting of the rich and powerful in Davos this week.
“Not investing in Africa is like missing out on Japan and Germany in the 1950s, Southeast Asia in the 1980s and emerging markets in the 1990s,” said Francis Beddington, head of research at emerging market investment house Insparo Capital.
He believes that in the long term, Africa has the potential to be home to a sizeable chunk of the factories and warehouses of tomorrow’s world. The Africa of old — aid-dependent, and with large tracts of the economy controlled by corrupt and capricious governments — has not disappeared. But for all the previous false dawns, there is a growing belief that the continent — home to 53 countries, a rapidly urbanising young population of a billion people and as much as a third of the world’s natural resources — is changing. That is not to say it will be a smooth ride. Eric Chirwa, a 40-year-old miner, can tell you what a tough year it’s been in Luanshya: its century-old copper mine was mothballed in the depths of the global slump, leaving 1,700 miners out of work and at the mercy of the banks with whom they had racked up huge debts in the boom years.
He’s been tracking world copper prices on a daily basis, and has seen them rebound: “In the past, we never used to know the copper price,” he said. “Now I’m checking the price every day in the internet cafe.”
Internet access is one aspect of the technology driving changes in Africa that go far beyond letting a miner anticipate fluctuations in copper prices. In central Africa, Rwanda — a republic more widely known for the genocide of 800,000 Tutsis and moderate Hutus -- has invested heavily in broadband and is promoting itself as a business services hub.
Far more visible, of course, is the cell phone. One person in three has one: in 2007 Africa had 270 million of them, according to industry association GSMA, up from 50 million in 2003. The uptake shows little sign of slowing as five years of annual growth above 5 percent swell the middle classes. Mobile money transfer systems such as M-pesa from Kenya’s Safaricom have allowed people with no bank accounts -- still the vast majority -- to ping money to each other for a fraction of the cost of transfers or a bus ride to deliver cash.
The system has evolved to incorporate an array of payments from taxi fares to food, drinks and movie tickets, making it possible to spend a whole day in Nairobi without carrying cash. Cities, towns and villages are cluttered with billboards advertising the latest cell phone service or gimmick.
The macroeconomic effect is huge. A World Bank study released in November suggested half the five per cent growth Africa enjoyed from 2003-08 was due to improvements in infrastructure, mainly telecommunications.
“Cell phones have already transformed many economies in Africa,” said Arthur
Goldstuck, head of Johannesburg-based technology research firm World Wide Worx. “But the cell phone will become far more important than it is now.” Researchers of M-PESA’s impact on Kenya say it is boosting rural incomes by as much as 30 percent, allowing small farmers to diversify out of subsistence agriculture.
As browser-enabled “smart” cell phones go mainstream in the next 5-10 years, Africans will gain access to the internet-based services and information that have driven huge productivity gains in the rich world.
The determination with which India’s Bharti Airtel unsuccessfully pursued an alliance with South Africa’s MTN the continent’s dominant cell phone operator, shows the perceived value in the world’s last major mobile growth market.
Back in Zambia, where a rumbling procession of trucks laden with high explosives and earth-movers is bringing the Copper Belt back to life, the government has sold some of the closed mines to foreign buyers: Luanshya’s new owners are, predictably, Chinese, in step with another major shift in the continent. China Non-Ferrous Metals Corporation took over in the middle of 2009 and officially started production in December with around 2,500 staff on its books — more than at the height of the recent boom.
Massive Chinese investment, in return for resources to fuel its own economic boom, has helped drag the awful roads in many parts of Africa into the 21st century. Trade with China now tops $100 billion a year, and China has overtaken the United States as Africa’s main partner.
In giving the countries where the resources lie an economic boost, China’s need for oil and raw materials has transformed them into an investment proxy for the Asian giant’s growth, and handed the continent as a whole unprecedented negotiating clout.
China last year promised $10 billion in infrastructure funding over three years, amid talk by Chinese officials that Africa can experience a boom like the one in their country. But the challenges— or opportunities — are still vast.
“In most African countries, particularly the lower-income countries, infrastructure emerges as a major constraint on doing business, depressing firm productivity by about 40 percent,” the World Bank says. It estimates sub-Saharan countries need to spend $93 billion a year, or 15 percent of regional output, to upgrade their electricity grids, roads, railways and sewers.
Only half of that is being spent at the moment. The lion’s share is coming from the African taxpayer, and even with efficiency gains outlined by the Bank, the continent faces a funding shortfall of $31 billion a year. Besides making China’s contribution look small, the sums — which far exceed the continent’s domestic or international borrowing capacity — suggest economies rich in hydrocarbon or other mineral resources have the greatest chance of success.
Nigeria, with its vast oil reserves and population forecast to grow to 290 million by 2050, is always top of the list for potential, despite its chaotic politics. “Nigeria to Africa is like China to the world in many respects. It’s too big to ignore,” said Russell Loubser, head of the Johannesburg Stock Exchange.
“Are there problems in Nigeria? Absolutely. Are there problems in China? Obviously. Are the problems too big to force you to not look at either Nigeria or China? No ways. The problems are there, but the opportunities outweigh the problems.”
Coming from the head of the continent’s biggest bourse, his comments in themselves reflect another change. Gone are the days when it was Nelson Mandela’s post-apartheid South Africa that hogged the African limelight.
Today, interest is broad. Angola is pushing Nigeria hard for the crown of Africa’s biggest oil producer. Ghana is due to start pumping crude this year, while Uganda is aiming for production of 150,000 barrels a day by 2015, following the discovery of oil near Lake Albert.
As Africa’s top copper producer, Zambia also looks well placed: “The dollars come from the copper the miners produce,” reflects the miner, Chirwa.