The African middle class is rising as the continent is integrating with the global economy. Likely to foster global connectivity is the large number of Africans in diaspora – estimated at 30 million or more, and a possible source of investment.
The main influence of this diverse community has so far been through the money its members send home, which is estimated at $38 billion annually. Unrecorded transfers could make that remittance total closer to $60 billion. These flows, of which a large proportion supports emigrants’ families back home, significantly dwarf the $25 billion in official development assistance Africa receives yearly.
But the African diaspora is increasingly an important source of the investment capital that supports the growth of the middle class.
Africans in diaspora are helping build a new generation of universities that not only increase competence but foster the growth of the middle class. One example is Ashesi University College in Ghana, started by Patrick Awuah, a former Microsoft employee and graduate of the Haas School of Business at the University of California, Berkeley. The college aims to train “a new generation of ethical, entrepreneurial business leaders in Africa and to nurture excellence in scholarship, leadership and citizenship.”
There are similar developments in even poorer parts of Africa. For example, Northern Somaliland, which declared independence after the fall of Somali military dictator Siad Barre in 1991, has relied significantly on its diaspora to build institutions of higher learning. It started by building the University of Hargeisa, followed by the establishment of Burao University, Amoud University, Somaliland University of Technology, and Gollis University.
The growing contribution of African diasporas to the rise of the middle class is reinforced by greater connectivity and mobility. Direct flights between the United States and west Africa, for example, ease investment flows into the region. Ghanaians working in the pharmaceutical industry in the New Jersey area are starting to invest in health care in their home country. Similar investment flows and trade linkages will help foster the growth of the middle class in West Africa.
Building entrepreneurial competence
Universities and other institutions of higher learning play a key role in providing the local knowledge needed by entrepreneurs. For historical reasons, African universities tend to focus more on traditional education functions than on technical and entrepreneurial skills. First-generation African universities were designed to train postcolonial civil servants; departing colonial administrators had little interest in training Africans to be agents of economic change. This traditional approach became the model for new universities, even though economic demands called for greater emphasis on technology and business.
But as Africa invests in new and updated infrastructure, the associated projects offer an opportunity to build up the region’s capabilities in project design, execution, and maintenance. And regional energy, transportation, irrigation, and telecommunications projects in turn will provide the basis for technical training.
Such specialised universities can combine theoretical training with practical work through experiential learning, which will help diversify approaches to higher education without the need to reform existing universities, some of which might voluntarily adopt the new models.
There are already such universities in Africa and elsewhere – for example, Egypt, Ghana, and Kenya have schools dedicated to the telecommunications sector. Moreover, Africa’s varied exports, such as minerals and agricultural commodities, are associated with long value chains that provide a rich basis for curriculum development and pedagogical innovation, in diverse locations.
Coffee, chocolate, tea, flower, copper, and diamond production curriculums are just waiting to be developed. Pittsburgh’s Carnegie Mellon University has established a branch in Rwanda for graduate training in technology and entrepreneurship, which will position the country as a technology hub and serve surrounding countries as well.
Urban hubs of growth
The rise of the middle class brings growing urbanisation – centres of population that can drive growth and creativity.
Lagos, the former capital of Nigeria, was once left for dead after federal leaders retreated to found a new seat of government in the hinterland. Today it is a bustling symbol of economic renewal, thanks in part to the city’s dynamic leadership but largely because of Lagosians’ entrepreneurial spirit and the rise of the middle class as an economic force.
Nearly 20% of Lagosians are now members of Nigeria’s growing middle class. The recent survey by Renaissance Capital predicts that the Nigerian middle class in Lagos will significantly boost local and international demand for manufactured goods.
One way to tap into the urban potential is to reposition cities as innovation hubs. Lagos, for example, recently set up the Innovation Advisory Council, aimed at supporting government efforts to upgrade its technological and entrepreneurial dynamism. The council is chaired by the state minister for science and technology, whose functions are changing from the traditional role of supporting research to a new focus on fostering innovation.
This shift will go a long way toward enhancing the role of the middle class as an economic force in the region.
Room for an agricultural revolution
But new technology sectors and urban-based vision are not the only sources of growth. There is also vast untapped potential for African agriculture, which has actually regressed. World food production has increased by 145% since 1960, but sub-Saharan African food production is 10% lower today than it was 50 years ago, largely as a result of underinvestment in agriculture.
For example, fertiliser use is strikingly low – only 13 kilograms a hectare in sub-Saharan Africa compared with 71 kilograms in northern Africa. Only 24% of cereal production uses improved seeds compared with 85% in eastern Asia.
The lack of nutrient input has led to a dramatic depletion of soil quality; 75% of farmland in sub-Saharan Africa has been degraded by overuse. Only about 4% of Africa’s crops are irrigated, compared with about 40% in south Asia, which leaves sub-Saharan Africa vulnerable to fluctuations in world food prices.
New knowledge and technologies combined with flexible local techniques, resources, and experience will kick-start the development of new local products and services, harness technological innovation, encourage entrepreneurship, increase agricultural output, create markets, and improve infrastructure. Improved food processing and storage can help stabilise agricultural markets and promote rural innovation.
The rise in food prices has stimulated outside interest in investing in African agriculture. In early 2011, Saudi Star Agricultural Development, a food company owned by billionaire Sheikh Mohammed al-Amoudi, announced plans to invest $2.5 billion in Ethiopia by 2020 to produce rice. Ethiopia-based firms will farm idle arable land in the lowlands of the country as part of Ethiopia’s plan to lease 3 million hectares to private investors over the next four years. Ethiopia has more than 74 million hectares of cultivable land, of which only 15 million is being farmed. Bringing the remaining land into cultivation is an initial step toward fostering rural development and expanding the middle class.
Branching out with new opportunities
The forces of globalisation – trade interdependence, connectivity, and mobility – offer Africa new opportunities for growth and open up the potential for trade with the rest of the world.
Political and economic policy changes begun more than a decade ago are stirring optimism. Combined investment in infrastructure and technical training will support technology-based companies with the dynamism needed to propel economic prosperity. The emergence of such firms will in turn stimulate innovation in the financial sector, leading to growth in domestic venture funding activities.
As Africa’s middle class grows, policymakers should place a premium on regional economic integration and the associated investment in infrastructure, technical training, and support of entrepreneurs. Investing in consumers will bring prosperity to Africa – and not just for the middle class.
- Calestous Juma is Professor of the Practice of International Development and Director of the Science, Technology and Globalization Project at Harvard Kennedy School. He is author of The New Harvest: Agricultural Innovation in Africa (Oxford and New York: Oxford University Press, 2011). This article was first published in Finance & Development, a quarterly magazine of the IMF.