Three key things have changed that suggest sub-Saharan Africa will start to industrialize at a faster pace.
- First, labor costs are rising in China, thanks to its shrinking young labor force (the number of 15-24 year olds will fall 20-30 percent this decade). Per capita GDP was similar to sub-Saharan Africa in 2000, but is now three to five times higher.
- Second, education levels in sub-Saharan Africa are now (2005 data) on par with Turkey and Mexico in 1975, suggesting that sub-Saharan Africa in the coming decades can emulate the industrialization of Turkey and Mexico in the 1980s and 1990s. This began with textiles and light manufacturing, and got heavier and more value-added as time progressed.
- Third, African governments are prioritizing business-friendly policies. The World Bank Ease of Doing Business reforms show steady progress among sub-Saharan African countries, as they do in Transparency International's Corruption Perceptions Index.
This is not to say that Rowden is all wrong. The focus on industrialization may not be necessary for the next 20 years. But it would be useful. Justin Lin's book emphasizes that governments should adopt industrial policies. We richly agree, and we have counseled officials in Africa whenever we have an opportunity to do just that.
In Kenya, which will soon be the largest of Africa's economies, officials have such a plan. Called, Vision 2030, it spells out an industrial policy that will take effect after a major infrastructure investment and construction program is completed.
Kenya is not unique -- many governments now have 10-20 year development plans -- and we agree that nothing in them guarantees they will be effectively implemented, or implemented at all. We'd like to see more targeted policies, which aim to capture the textile and light manufacturing business which China is losing as its wages rise. We argue that education and demographics both suggest Africa is well placed to capture this over the next 10-20 years.
But the fact is, sub-Saharan Africa's leaders are conscious of the precedents and acutely aware they are walking two to three decades behind in the same footsteps as emerging market powers like Malaysia, Indonesia, India, South Korea and Brazil.
Discounting the chances of an entire continent under such circumstances strikes us as foolish, at best. We, after all, are an investment bank, and we approach this topic not only in the hope that a continent so ill-served by recent history will finally break through, but as an opportunity to share in its growing prosperity. If we're right, and we believe the case we make is very convincing, then we have indentified an important inflection point in global economic history as sub-Saharan Africa finally begins to shake off the problems that led the Economist, only a decade ago, to label it "The Hopeless Continent." That august magazine's recent proclamation that Africa was rising should not, as Rowden suggests, be seen as a misguided and shallow provocation aimed at selling magazines. Indeed, it is a corrective -- one long overdue, in our minds -- and one only the hidebound can now abide.
And when push comes to shove, who among you would not be willing to risk a few dollars to own a bit of Hyundai or Kia at 1978 prices? That's precisely where sub-Saharan Africa is today.