This can have a multiplier effect on long-term productivity of both labor and capital. As we've seen in Brazil and Mexico -- and now in Ghana and Kenya -- it slows brain drain by providing greater opportunities at home; it encourages nationals to migrate back home; and it engages the diaspora in enhancing the flow of capital and opening up new cross-border interactions. The ultimate benefit of all this, of course, is the promise of sustaining and nurturing wider prosperity.
This business boom is not just an isolated development limited to a few outlier countries. If these dynamics accelerate and attain critical mass in several major African economies, as I believe they will, the regional and global effects could be consequential. But there's still a lot to be done.
Right now, it is still cheaper (and easier) to export something to another African country via Europe or Dubai than directly. Clearly, regional trade suffers as a result. And though capital flows to Africa have picked up, they continue to be well below what economists would expect given principles of comparative advantage, consumption and production patterns, and, of course, per capita income.
There are other pressing needs too. Africa can't hope to really compete on the global economic front lines until it has broader electrification and a better transportation system. Unlike in decades past, however, the major driver needs to be the private sector, not some politician at a regional summit offering grandiose and unreasonable plans, or a celebrity do-gooder organizing a concert.
For the developed world, Africa's rise is not about charity or even just improving the livelihoods of the millions who live on the margins of subsistence. A growing, more prosperous Africa would assist the much-sought-after global rebalancing, helping the world find a less volatile economic equilibrium. A rising Africa eventually would provide a long-term source of global aggregate demand and a destination to engage foreign capital that is now overheating a smaller set of developing economies.
All this sounds very appealing, and it is. It is also far from automatic. Africa's rise can still be derailed by internal obstacles, especially the lack of adequate institutions in the public sector. Badly managed ministries and funding processes can contaminate development, especially if, rather than responding to people's needs, they allow for a concentration of power that not only enables corruption but raises the incentive for the existing political order to block any changes to the system, no matter how beneficial for the common good. It's no surprise then that African countries, on average, score in the bottom third of Transparency International's Corruption Perceptions Index.
It is the responsibility of Africans to recognize and address these risks. Yet the rest of the world can play a role in ensuring that this time, Africa's rise will be real and sustainable. The continent needs infrastructure projects, it needs risk mitigation, and it needs public-private partnerships that help build small and midsize businesses. What it doesn't need is a mindset that eternally treats Africa as an aid recipient. But most importantly, the West needs to get its own house in order to prevent currency wars or another recession that could imperil global capital flows.
Count me among the growing number of people excited and hopeful about what's happening on the ground in Africa. Markets are booming, and this time it's not just gold mines and oil rigs; it's a new generation of workers and entrepreneurs. Still a cynic? Don't take my word for it -- just follow the money.
Data: IMF
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