The African Miracle

How the world's charity case became its best investment opportunity.

Not so long ago, the world lamented its broken continent. "The state of Africa is a scar on the conscience of the world," declared British Prime Minister Tony Blair in 2001 -- and his was a common refrain. Civil war, economic stagnation, and a high disease burden seemed irreversible, condemning the region to perpetual poverty.

A decade later, however, Africa has outgrown the gloom and doom. Far from the misery-stricken place so often portrayed, Africa today is alive with rising urban centers, a growing consumer class, and sizzling business deals. It's a land of opportunity.

Africa, in fact, is now one of the world's fastest-growing economic regions. Between 2000 and 2008, the continent's collective GDP grew at 4.9 percent per year -- twice as fast as in the preceding two decades. By 2008, that put Africa's economic output at $1.6 trillion, roughly on par with Russia and Brazil. Africa was one of only two regions -- Asia being the other -- where GDP rose during 2009's global recession. And revenues from natural resources, the old foundation of Africa's economy, directly accounted for just 24 percent of growth during the last decade; the rest came from other booming sectors, such as finance, retail, agriculture, and telecommunications. Not every country in Africa is resource rich, yet GDP growth accelerated almost everywhere.

Government reforms, greater political stability, improved macroeconomics, and a healthier business environment are now taking hold in a region long dismissed as hopeless. Inflation fell to an average of 8 percent in the 2000s after a decade during which it hovered at 22 percent. African countries have lowered trade barriers, cut taxes, privatized companies, and liberalized many sectors, including banking. Africa now boasts more than 100 domestic companies with revenue greater than $1 billion. And capital flows to the continent increased from just $15 billion in 2000 to $87 billion in 2007. With good reason: Africa offers the highest rate of return on investment of any region in the world.

Pockets of great risk and instability certainly remain, but the long-term trends look good. Global demand for commodities is rising, and Africa is well positioned to profit. The fastest-growing demand for these raw inputs comes from the world's emerging economies, with which sub-Saharan Africa now conducts half its trade. Africa's production of oil, gas, minerals, and other resources is projected to grow at 2 to 4 percent per year for the next 10 years. At current prices, this will raise the value of resource production to $540 billion by 2020 -- and possibly much higher depending on how commodity prices rise.

An even bigger source of growth will be the rise of the urban African consumer. In 1980, just 28 percent of Africans lived in cities. Today, 40 percent of the continent's 1 billion do, a portion close to China's, larger than India's, and likely to keep growing in the coming years. The number of households with discretionary income is projected to grow 50 percent over the next 10 years to 128 million. Already, Africa's household spending tops $860 billion a year, more than that of India or Russia. And consumer spending in Africa is growing two to three times faster than in the wealthy developed countries and could be worth $1.4 trillion in annual revenue within a decade.

Nothing spawns growth like growth, and Africa's urbanization is also increasing demand for new roads, rail systems, clean water, power generation, and other infrastructure. Even agriculture, in which Africa has long lagged, is poised for takeoff. The continent is home to 60 percent of the world's uncultivated arable land. So if farmers brought more of it into use, raised the yields on key crops to 80 percent of the world average, and shifted cultivation to higher-value crops, the continent's famers could increase the value of their annual agricultural output from $280 billion today to around $500 billion by 2020.

Multinational companies have already shifted their mindsets, even if the political world is still used to thinking of Africa as a charity case. Telecom firms have signed up 316 million new African subscribers since 2000, more than the population of the United States. Walmart recently bid $4.6 billion for one of the region's largest retailers, confirmation that global businesses think Africa holds commercial potential on a scale not seen since China opened up more than 20 years ago. Those prospects will only grow as Africa urbanizes; already, the continent is home to 52 cities with populations of at least 1 million, as many as in Western Europe today.

While challenges remain, Africa has a bright future -- you can bet on it, as countless businesses are doing every day.

Alexander Joe/AFP/Getty Images


Russia's Not-So-Odd Couple

Politicians and pundits won't stop telling us that Medvedev and Putin are at odds. Keep dreaming.

Joe Biden has got it all figured out. In a round-table discussion last week with a handful of reporters and columnists, the U.S. vice president suggested that the Obama administration's nuclear arms reduction treaty, New START, and its broader aim of "resetting" relations with Russia could be a means of strengthening Russian President Dmitry Medvedev at the expense of Prime Minister Vladimir Putin. "The centerpiece of where Medvedev is, is this reset," Biden said. "And [START] is the crown jewel inside that reset because it wasn't Putin pushing this -- it was Medvedev."

Well, good luck with that. Two big problems with this approach present themselves. First, if the past 20 years has shown us anything, it's that issuing Washington brownie points to a Russian politician is a great way of ensuring that person's ultimate marginalization and irrelevance. If you're Medvedev, getting yourself publicly identified as the man pushing a pro-Western agenda is going to be a huge hindrance, not a help. Does Biden think that Russians don't read the papers?

Second, Biden's remarks assume that Medvedev and Putin are participants in a power struggle, each maneuvering at the expense of the other. I can see why the vice president might think that Russia's leaders are engaged in full-fledged rivalry; so many people seem to be taking that as a given these days. But I just don't think it's true.

The notion of antagonism within Russia's leadership tandem has become a staple of the media coverage of late. "Russian politics is in the midst of a tug-of-war between Medvedev and Prime Minister Vladimir Putin in the long lead-up to the 2012 presidential election," wrote Japan's Yomiuri Shimbun recently. "Medvedev may edge out Putin as Russia's top leader," ran the headline in Newsweek. That story hyped the idea, without citing much in the way of specifics, that "the Russian elite has lined up behind the new president, Dmitry Medvedev, rather than the old one, Vladimir Putin." I should note, though, that even some Russian media have been getting into the act. "Aides Noting 'Growth of Confrontation' Between Medvedev and Putin," was the title of one story earlier this month in the weekly Argumenty Nedeli.

The claims in these stories build on a handful of recent Kremlinological plot twists. The most notable is the recent fall from grace of Moscow Mayor Yuri Luzhkov, who was targeted by Medvedev-friendly news media before being removed from office on Sept. 28. The removal or appointment of regional leaders is the prerogative of the Russian president, so it's understandable why the move was seen by many analysts as a demonstration of Medvedev's power over a figure long regarded as virtually unassailable within his own fiefdom. Russia may be the world's biggest country, but economic and political power are still disproportionately concentrated in its capital, so controlling Moscow is undoubtedly a requirement if you want to win a power struggle. Putin, by contrast, evidently didn't see Luzhkov as much of a challenge and accordingly didn't go to the trouble to clip his wings.

For believers in the theory of a full-blown rivalry within the ruling duumvirate, this was merely the culmination of a series of similar incidents. A few days before sacking Luzhkov, Medvedev killed the sale of the S-300 anti-aircraft system to Iran, underlining his insistence that Russia should go along with U.N. sanctions imposed on Tehran. That now-dead deal is said to have enjoyed the backing of some of Putin's most powerful friends in the Russian military-industrial complex. As Biden's remarks suggest, Medvedev's performance at this weekend's NATO summit, where he agreed to consider cooperating with the transatlantic alliance over missile defense, is bound to inspire comparisons with Putin's stance on the issue. One need only recall Putin's contentious performance at the previous NATO summit in Bucharest in 2008.

In August, Medvedev vetoed plans to build a superhighway through a nature preserve near the Moscow suburb of Khimki after the project became the focus of an increasingly vocal protest by environmentalists and regime critics. The main businessman behind the controversial development was, once again, a Putin ally. The rumors of cross-town feuding between the Kremlin (the office of the president) and the White House (the prime minister's headquarters) also draw sustenance from the provocative remarks fired off by people associated with the various camps. One of the best-known snipers is Igor Yurgens, an outspoken Medvedev supporter and the director of a prominent Moscow think tank. He recently called on Putin to quit in 2012.

So far, so good for the Kremlinologists. But what we're still missing amid all this talk is any sort of reliable insight into the two men's political intentions -- not that you ever really know that kind of thing in Russia. "We don't really have one very important piece of information," says Nikolai Zlobin of the Center for Defense Information in Washington. "We don't know what they agreed in 2008. I'm sure Medvedev wants to be president again. So he's trying to build up his background as a successful president -- but he's a successful president insofar as Putin allows him to be successful."

An excellent point -- and one that goes straight to the heart of the matter. Take a look at the actual constellation of forces in Moscow, and you can't escape the conclusion that Medvedev remains very much the junior partner in the tandem. Indeed, one of the most striking things about this whole discussion is that almost no one operates under the assumption that Medvedev is more powerful than Putin even though that's how it would be if the rules laid out by the Russian Constitution actually applied. And there's a reason for that. On paper Medvedev is the king. But in reality he's a leader with strikingly few heavyweight allies in the upper reaches of the power elite. And it's the power elite that counts in today's Russia -- not public opinion, and certainly not the good wishes of the West.

"Medvedev has not succeeded in putting his own supporters in his own administration," points out Vladimir Pribylovsky, director of the Panorama think tank in Moscow. Pribylovsky even goes so far as to describe the president as the "third man in the state" after Igor Sechin, a Putin confidant whose official rank is that of a mere deputy prime minister. That's because ex-KGB-officer Sechin -- along with fellow former spook Sergei Ivanov -- is a leading member of the siloviki, the coterie of security-establishment bigwigs who dominate today's Russian government, their official functions often overlapping with their interests in the business world. (Sechin also happens to be chairman of the board of Rosneft, Russia's biggest state-owned oil company.)

When you take a look at the tug-of-war rumors in this light, things start to look a bit different. Yes, Medvedev fired the Moscow mayor -- but the man who replaced Luzhkov was none other than Sergei Sobyanin, Putin's former chief of staff. Yes, Medvedev nixed the missile sale -- but relations between Tehran and Moscow have actually been deteriorating for some time, with the two countries at loggerheads over issues ranging from Caspian Sea demarcation talks to Russia's warming relations with Israel. And yes, Medvedev stopped the Khimki project -- but the stop is actually a suspension, suggesting that a compromise between various competing interests is probably still being thrashed out behind the scenes.

Russia's cozying up to NATO is another good example. Medvedev's rhetoric may be notably calmer than Putin's, but in terms of substance Russia's current president hasn't given away anything that the previous one didn't. Rhetoric counts, for sure. Yet earlier this year Medvedev signed off on Russia's official military doctrine, which declares NATO to be the No. 1 "military danger" to the Russian Federation. Nor have we seen Medvedev back down on Russia's stationing of military forces on Georgian territory. So I'm not sure there's quite as much daylight between the president and prime minister on foreign policy as many people are assuming.

Now, it's certainly true that Medvedev has been taking the lead over the past year or so in talking about the need for economic modernization and has also expressed some admirable ideas on the need to fight corruption and allow for some form of political liberalization (though this is where everything tends to get conspicuously fuzzy). And I don't doubt that there are many Russians -- especially younger ones -- who yearn for reforms in this direction. Indeed, recent opinion polls, insofar as they're to be trusted, suggest that Medvedev's popularity ratings have been catching up to Putin's as a result of some of this talk.

Under the terms of Russia's "managed democracy" though, ratings don't reflect one's level of actual political capital. And most of what Medvedev has proposed remains either small in scale or measly in impact, leading some of my colleagues at Radio Free Europe, for example, to conclude that Medvedev is actually pursuing a controlled exercise in tactical reform, with Putin's express approval. As Zlobin points out, Medvedev's use of iPad and Twitter make Russia's leadership look cosmopolitan and up-to-date, which is certainly no threat to Putin. To the contrary, in fact. A genuine drive against corruption, on the other hand, would be a totally different story -- a potential threat to the vested business interests not only of Sechin but perhaps even of Putin himself. But nothing like that has happened yet.

None of this excludes the future possibility, of course, of some sort of genuine political competition within the tandem. There are indeed some persistent signs of friction, even though it appears most likely that, as Pribylovsky puts it, "there's a struggle between the two men's teams -- just not between the two men themselves." Sechin and his allies, says Pribylovsky, want Putin to assume the presidency again in 2012 when his term as prime minister runs out; Medvedev's people, by contrast, would like him to stay on for a second term.

And what about Medvedev himself? He's now had two years to enjoy the fruits of office, and by all accounts he likes being where he is. And he's not entirely without allies of his own -- first and foremost the shrewd Alexander Voloshin, the publicity-shy political operative and business tycoon who once worked as consigliere to Boris Yeltsin and who gave Medvedev his first staff job in the Kremlin in 1999. The question remains, though, whether Medvedev can build a power base of his own by appealing to members of the political elite who are discontented with the status quo -- or whether he even wants to in the first place.

We'll have to see. I suspect, though, that Russia's leaders will resort to the easy solution when 2012 finally rolls around -- and that both Putin and Medvedev will stay right where they are.