Why South Africa should take the rest of the continent seriously

  

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The growth of other African economies can teach South Africa a thing or two, says Ivor Ichikowitz

It’s no secret that African manufacturing output roughly doubled over the last ten years and that Africa could be on the brink of an economic take-off, much like China was 30 years ago, according to the World Bank.

The bigotry of low expectations is gradually fading away and a new anticipation of African creativity and technical prowess is gaining hold across the world.

What’s less well known is the impact innovation and development in other African economies is having on South Africa’s entrepreneurs, workers and policy makers.

As the founder of Paramount Group, a privately owned defence and aerospace company, I am constantly travelling across the continent meeting with everyone from factory workers to chief executives, and what is remarkable to me is how much we South Africans can learn from them.

As much as we hate to admit it, 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 a perfect example of this. Their economy is expanding at 7.5% annually and it’s not just traditional industries such as agriculture and mining that are growing, but also manufacturing. Just outside the capital Chinese shoe maker Huajian has built a factory employing around 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, a ready availability of natural resources, and preferential access (duty-free and quota-free access) to the US and EU markets are all some of the advantages of operating in Africa.

Africa’s demographic trends are also extremely positive. By 2035, the continent’s labour force will be bigger than any individual country in the world, including India or China. Nigeria and Ethiopia will add a total of 30 million workers by 2020 while South Africa is expected to add 2 million.

As opposed to Western economies which are struggling with an aging 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 which are currently cheaper to import from China than the continent. The boom is waiting to happen: Africans already spend more per head than Indians on goods and services, according to some reports.

However, it’s not just manufacturing that Africa is excelling in and challenging South Africa. The Economist recently (August 2012) named Nairobi an “African tech hub” because of the hundreds of start-ups that have sprung up in the last few years – quite an achievement given they 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 the adoption of mobile payments technology – and is 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.

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