Lessons for SA in growth elsewhere in Africa
IT IS no secret that African manufacturing output has roughly doubled in the past 10 years and that Africa could be on the brink of an economic takeoff, much like China was 30 years ago, according to the World Bank. The bigotry of low expectations is fading away and a new expectation of African creativity and technical prowess is gaining hold across the world.
What’s less well known is the effect innovation and development in other African economies are having on SA’s entrepreneurs, workers and policy makers. I am constantly travelling across Africa, meeting everyone from factory workers to CEs, and what is remarkable is how much we South Africans can learn from them. For too long we have held a bigotry of our own: we have looked to Asia and the West for the best ideas and viewed them as our natural competitors, as opposed to our African neighbours.
Nothing could be further from the truth: moving across the continent, I am struck by the creativity, vigour and sheer ambition of Africa’s growing middle class.
Ethiopia is the perfect example. Its economy is expanding by 7.5% a year and it is not just traditional industries such as farming and mining that are growing, but also manufacturing. Just outside the capital, Chinese shoe maker Huajian has built a factory employing about 500 workers. An economist at the World Bank who recently wrote a report on light manufacturing in Africa cites this as an example of how Africa could overtake Asia to potentially become the world’s next manufacturing hub.
Low labour costs, readily available natural resources and preferential (duty-free and quota-free) access to the US and European Union markets are among the advantages of operating in Africa.
Africa’s demographic trends are also extremely positive. By 2035, its labour force will be bigger than any individual country in the world. Nigeria and Ethiopia will add a total of 30-million workers by 2020, while SA is expected to add 2-million. As opposed to western economies, which are struggling with an ageing population, a younger population gives Africa a huge boost, especially in the form of reduced entitlement spending.
A more developed manufacturing base is also likely to reduce the costs of some products that are currently cheaper to import from China than Africa. The boom is waiting to happen: Africans already spend more each on goods and services than Indians, according to some reports.
However, it’s not just manufacturing at which Africa is excelling and challenging SA. The Economist recently named Nairobi an "African tech hub" because of hundreds of start-ups in the past few years — quite an achievement given that the magazine labelled Africa "the hopeless continent" a decade ago. Kenya’s exports of technology-related services have risen from $16m in 2002 to $360m in 2010. It is also a world leader in mobile payments — far ahead of China and India.
Although mobile payments are used widely in other developed countries, Kenya has — to its credit — "leapfrogged" the traditional stages of economic development to get there. This readiness and ability to implement new technologies is encouraging and it is this attitude of ambition that we can learn from our African neighbours. Within a few years, Kenya could emerge as a world leader in mobile payments and export the technology to countries across the world.
SA can also learn a lot from some of Africa’s creative industries, such as the Nigerian movie industry, which has overtaken SA’s to become the strongest in Africa. The Nigerian movie industry — known as "Nollywood" — is now worth $500m and produces more films than Hollywood every year. The films may not be international blockbusters, but they have huge appeal across Nigeria and the rest of Africa and prove that Africans have the creativity to compete in nontraditional industries.
This innovation across Africa is having an effect on SA in two ways. Most obviously, it’s an opportunity for us to export our products and knowledge and generally expand trade with other African nations, which in turn will generate jobs for the youth of our country.
SA has some great assets — its infrastructure, a well-developed services sector, the JSE — that give us the opportunity to provide a range of goods and services to help grow our own economy, but we can work harder to maximise these advantages.
The second effect is psychological. The reality is that countries such as Ethiopia, Kenya and Nigeria are tearing ahead and emerging as serious competitors for foreign capital. In short, this is forcing our government and business leaders to look more closely at their policies and approach to business and consider an extra dimension in their policy making. If SA is to retain its position as the leading economy in Africa, it can’t for a minute rest on its laurels.
We are not in competition with the rest of Africa, but we can learn from each other, which is why it is essential that we share technologies and collaborate to build strong regional industries that bolster intra-African trade. In the past I have called for the creation of a pan-African Brics as a way of achieving greater collaboration and working towards our collective economic interests.
Despite the growing confidence of our neighbours, SA is still an economic leader, coming up with ground-breaking ideas that challenge conventional thinking. But we mustn’t get complacent, which is why learning from our African neighbours, and adopting a more mature concept of the competition we will face from them, will ultimately enable SA to remain the economic leader.
• Ichikowitz is the executive chairman of defence and aerospace company Paramount Group and founder of the Ichikowitz Family Foundation.