Monday, February 6, 2012

Africa can remind the world of the capitalist way

by Dambisa Moyo

Financial Times

February 6, 2012

Take a walk in downtown Lagos and you’ll see bustling shopping malls and streets populated not just by domestic restaurant chains but increasingly by global brands like KFC, which will soon have 20 restaurants in Nigeria, and Walmart, which is expected to soon open two flagship stores. At Lagos airport you’ll see planes owned by more than 20 international airlines, from countries such as China, Qatar and Turkey. You will also see many of Nigeria’s nearly 90m mobile phone subscribers who together sustain four major telecommunications companies.

Capitalism is alive and well in Africa. Some observers will worry about the recent violence arising from the removal of fuel subsidies. The truth is that today’s Nigeria is strong enough to avoid a protracted crisis. This is down to the growing power of the African consumer. A decade or two ago, the rash subsidies decision taken by President Goodluck Jonathan could have brought the country near to a full political meltdown. But in 2012, Nigerian consumers want to buy their groceries and get back to work; they have too much vested in the economy. It’s a pattern mirrored across the continent.

Africa is quietly catching up after a period of isolation from the rest of the world between the late 1990s through to 2008. Policymaking has justifiably been criticised for its multi-decade approach of ring-fencing Africa. This created an “us-versus-them” culture, which hinged on one set of development policies – trade, foreign direct investment, capital market access – for certain countries like China, India, Brazil, but prescribed an aid-centric policy for other (mainly African) countries.

This catalogue of policies prompted the economist Paul Collier to caution that many African countries were “shearing off” from the rest of the world. In part, as a consequence, although Africa is home to nearly 1bn people, the continent’s share of world trade hovers around 2 per cent. Meanwhile, of roughly $1.12tn worth of total global foreign direct investment in 2010, sub-Saharan Africa received a paltry 3 per cent. However, this is about to dramatically change.