TRALAC - Trade Law Centre

Good Morning, Africa

Tuesday, 26 September 2006

Source: CNN Money

Out of Africa, the headline news is usually related to the legendary four horsemen of the Apocalypse - pestilence, war, famine and death. No question, these horsemen run rampant on the continent; but there is another story worth hearing too.

Take, for example, the recent World Bank report, "Doing Business," an annual survey of the countries it is easiest to do business in (Singapore is first, the United States is third). As a whole, sub-Saharan Africa does poorly. South Africa, the highest rated country, is 29th; eight of the bottom 10 countries are African. But again, scratch the surface, and things begin to look a little interesting. According to the World Bank, sub-Saharan Africa ranked third of the seven world regions in making business-friendly reforms.

Rwanda, for example, set up specialized commercial courts and cut the time needed to register a new business (albeit to a still unwieldy 16 days).

Mali's reforms in the construction sector cut costs and speeded operations.

Lesotho computerized its tax system. More than half a dozen countries made it easier to transfer title on real estate. As a whole, says the Bank, two-thirds of sub-Saharan African countries made at least one useful change in 2005-06, with Tanzania and Ghana among the top 10 of the 175 countries surveyed.

But wait, there's more: Every year since 2002, the continent has grown at least four percent - not Asian tiger status, but as the African Development Bank notes, the last time that happened even two years in a row was in the 1980s. Inflation is also at levels not seen in a generation. Exports are rising.

Nigeria, the continent's most populous country (and the second-largest economy, after South Africa) has stabilized its macro situation to an extent that would have seemed implausible five years ago. Inflation is down to about 13 percent; its credit rating is up; growth is strong; and reserves have reached $36 billion. Sure, higher oil prices helped, but the real difference is that this time Nigeria's leaders did not blow it all on palaces and Swiss banks accounts.

What's behind this modest renaissance? Besides high commodity prices, for which Africans can take no credit, there are some interesting things going on - like the humble cell phone.

Mobile phone use is growing faster in Africa than in any other region - more than 5,000 percent in a five-year period. Mobile networks are positively associated with more economic activity - chiefly in the form of small businesses. Thus, the more phones, the better.

It's a small thing that's a big one; the phone could help fill in what some economists call the "missing middle" - the vast space in Africa between multinationals and the scrappy informal sector.

There has also been some useful assistance from outside the continent. Debt relief has helped to a certain degree; the G-8 promised to forgive $37 billion, much of it to African nations, helping to stabilize government finances. The African Growth and Opportunity Act (AGOA), which provides duty-free access to the U.S. market for a number of African-made goods, has also worked, amazingly enough, pretty much as intended, with Africa's AGOA exports rising more than 40 percent.

Finally, whether a link exists between democracy and economic health is hotly disputed; what is not is that political instability is bad for the economy. And as a whole, reports the OECD Development Centre, political repression has lightened in Africa, as more governments have begun to tend to things like the rule of law. That's important to building confidence (why start a business if you think the government might later confiscate it?) which is probably why intra-African investment is growing.

Perhaps, too, the power of example is kicking in. It wasn't that long ago that China and India were in many ways comparable economically to Africa; it has not escaped Africans' notice that this is no longer the case. The four African countries that are easiest to do business in - South Africa, Mauritius, Namibia and Botswana - are also among the four richest countries; the four most difficult - the two Congos, Chad and Guinea-Bissau - are among the poorest. This is not coincidence, and African policy makers have taken due notice.

Taking off the rose-colored glasses, it is surely true that any continent that is home to Sudan (and the Darfur tragedy); Zimbabwe (1,200 percent inflation and the infamous Mugabe); and Congo (whose civil war cost 4 million lives, more than in any conflict since World War II) has its problems. Perhaps a quarter of Africans are hungry this minute; the toll of AIDS is heavy. So no, a couple of years of modestly good economic news are hardly the beginning of the end for Africa's problems. It is not even the end of the beginning.

But it is, perhaps, the beginning of a beginning.