For the past two weeks, I have been beating the drums for Africa, arguing that the continent’s prospects look very good - provided it quickly does the right things. Those things involve big investments in knowledge and connectivity.
Let me wrap up the topic with a closer look at the phenomenon of emerging markets.
I have been listening to the BBC World Service on radio ever since I was a child. Lately, I note something interesting: often, when the clock sounds on the hour and the news begins, we hear two voices: one from London, as always; but also a second one, from Delhi. Listen also to the range of voices and accents on offer on the service throughout the day: once, the BBC was the exclusive domain of the ‘proper’ Home Counties English voice: these days, it contains the full range of global accents in spoken English.
The Economist ran a recent survey on the growing prominence of emerging markets in the world economy, and it made for gripping, almost surreal, reading. Consider these various facts. The emerging world made up 45 per cent of global GDP in 2008; it is expected to tip into more than 50 per cent very soon. Emerging-market consumers now outspend Americans: they account for 34 per cent of global consumption compared to America’s 27 per cent.
Multinationals expect about 70 per cent of the world’s growth over the next few years to come from emerging markets, with 40 per cent coming from just two countries, China and India. Indeed, week after week I listen to renowned multinationals from Audi to Moet & Chandon to Penguin saying that India is their biggest growth market now. This is not surprising, since India and China will add hundreds of millions of people into their middle classes in the years to come.
What to do
But having the population is one thing; knowing what to do with it quite another. Consider Infosys, the Indian computing giant. As The Economist pointed out, “Infosys’s 335-acre campus...houses one of the world’s largest corporate universities. It has a permanent faculty of 250, trains some 10,000 new “Infosysians” a year and provides advanced instruction for thousands of existing employees. It is awash with swimming pools, gyms, tennis and badminton courts, a multiplex cinema, a cricket pitch, an enormous laundry and 5,000 bicycles.
Everything about the campus is designed to underline the company’s claim that it is world-class, not just an Indian company that happens to have had a good run. Its mantra is “No caste, no creed, only merit”.”
How did this happen? Well, way back in the 1990s Infosys realised it had no chance of taking on the world’s best computing companies like IBM if it did not attract the world’s best talent. It went public in 1993 to raise money to build this world-beating campus. It is now a $35 billion company with over 100,000 employees.
The clear vision of Asian corporate leaders is often shared in the political offices of the continent. China and India are indeed doing things with their massive populations - they are educating them. China produces five million graduates every year, India three million. The two bestow higher degrees in engineering or computer science on 135,000 young talents every year.
So is Africa left out of this party? Not necessarily. The McKinsey Quarterly provides some figures in its current issue. Africa’s GDP growth has doubled this decade on average compared to the previous one. And this not just a resources-and-commodities story any more: much of Africa’s boom is coming from trade, transportation and communications, manufacturing and financial intermediation.
It is also a consumption story. Did you know that there will soon be 100 million African households with more than $5,000 in annual income (on purchasing-power-parity terms), and that they will spend half this amount on non-food items? Or that there are already more middle-class households (with income exceeding $20,000) in Africa today than in India?
For all of that, Africa’s current GDP is tiny; at $1.6 trillion, it is only the size of a Brazil. Yet the future could be astonishing - if Africa does the right things. Africa’s success in the past decade has come because it has made great strides in dismantling dictatorships, opening up markets, getting the state out of business, strengthening legal regimes, installing social and physical infrastructure.
Africa’s long-term growth, however, will come from just one thing. Productivity growth is the only thing that leads to rising incomes and standards of living. Africa’s productivity has gone up lately: by 2.7 per cent annually since 2000. But in the long run, only one thing drives productivity: knowledge. Africa will rise and take its place on the world stage if it produces enough graduates with diverse skill sets. It will rise if its population becomes more resourceful, more ingenious, more enterprising, more skilled, more discerning, more aspirational and more aware.
Which takes me back to where I started two weeks ago: it’s the education, stupid.