New Africa emerging to defy the odds

A Spanish clothing store opened its first boutique in Johannesburg this month AFP

Africa has experienced sustained growth for more than ten years, along with the emergence of a middle and entrepreneurial class.

But the continent’s development still essentially depends on the raw materials sector.

“Sub-Saharan Afica is continuing to resist the financial crisis thanks to its previous sound macro-economic policies. Growth in some countries is back to where it was before the crisis bit,” writes Switzerland’s State Secretariat for Economic Affairs (Seco). 

The rate of growth has fluctuated between five and six per cent for at least the past 12 years. As a result, African countries are witnessing the emergence of a middle class, which currently accounts for a third of the African population, according to a report by the African Development Bank.

Published in April 2011, the study gives a figure of 313 million people, or 34.3 per cent of the African population, as belonging to the middle class, against 111 million (26.2 per cent) in 1980.

Taking into account the cost of living in Africa, the regional equivalent of the World Bank considers someone middle class if they spend $2-20 (SFr1.86-18.60) per day.

It is a promising market and one capable of giving a boost to the anaemic western economies. A whole series of publications exists for investors tempted by the prospect of a vast number of potential consumers.

Impact of crisis

But Seco remains cautious. “The sub-Saharan African economies will not be spared should the crisis now affecting the rich countries persist,” it said in a written response to questions from swissinfo.ch.

“If the economies of Europe and the United States don’t pick up quickly, the prospects of the African countries in terms of exports, flows of private capital, official aid and transfer of funds will be bleak.”

“For want of other options, European businesses, including Swiss banks, will turn to Africa, and in particular to petrol-producing countries. These countries have middle classes which aspire increasingly to the goods and lifestyle enjoyed in developed countries.”

According to Nicolas Imboden, head of the Swiss-African chamber of commerce, growth in Africa is still dependent on raw materials, especially due to rising prices.

“It is this sector and infrastructure which attract most investors,” he explained to swissinfo.ch. “The growth rates can deceive, given the reality of the development of African countries.”

The former Swiss trade negotiator added: “There is no region or country in Africa whose economy is strong enough to carry weaker ones. In Southeast Asia, in contrast, a poor country like Laos is swept along by the regional dynamic, regardless of its economic or government policies.”

Continuing problems

Three times the size of Europe, Africa with its one billion inhabitants presents a great variety of country types. It is the form of leadership inherited from former colonial powers which is the determining factor.

This at least is the opinion of André Soumah, a French-Ivorian businessman based in Geneva.

“The English-speaking zone in Africa could take off economically. In those countries, including Nigeria, it takes no more than a week to open an office. If you want to set up a business in West Africa it will take you nine to 12 months and your capital will be swallowed up by the heavy government and administrative charges,” said the president of the ACE group, which has just won the contract to certify Ivorian cocoa.

Soumah recalls the persistant problems that continue to plague most African countries. “Africa is still the continent of explorers, those people who come and go. There is a lack of confidence. For investors, Africa is a lottery since there are no lasting institutions, unlike in the first decades after independence.

“Nowadays, ministers and heads of department are always changing. Knowing that they will not stay long, they tend to take advantage of their position by lining their own pockets,” Soumah said.

“The African economy is taking time to diversify. And given there is no gain to be made in agriculture or the services sector, Africa will not experience any sustained development,” added Imboden.

Investing in people

According to Catherine Morand, a former correspondent in Ivory Coast “the interest shown by foreign investors in the African continent and its raw materials does not mean that jobs will be created or that the people there will see conditions or their economic environment improve”.

“These investors are like a swarm of locusts. They attack a region and a sector that promises quick and good results, and then they head off somewhere else,” said Morand, summarising her observations from missions on behalf of the Swiss development NGO Swissaid.

“We need to invest in people and train individuals who can then start businesses,” stressed Soumah.

Imboden says there is no shortage of candidates. “Ten or 20 years ago, talented young Africans wanted to enter government to take advantage of the salary. Nowadays, that is no longer the case. We are witnessing the emergence of a new class of entrepreneur staking all on their own abilities. That is a very significant change even if it affects the import-export business more than locally produced goods.”

Switzerland’s main partners

South Africa: imports – SFr760.5 million, exports – SFr760 million (accounts for 52% of trade with sub-Saharan Africa)

Nigeria: imports – SFr257.5 million, exports – SFr268.9 million (18% of trade)

Ghana: imports – SFr112.9 million, exports – SFr21.7 million (5%)

Mauritius: imports – SFr50.1 million, exports – SFr43.5 million (3%)

Kenya : imports – SFr29.2 million, exports – SFr52.6 million (3%)

Source : Seco, 2010

History of Trade

From the 1920s manufacturing firms are implanted by the major Swiss industrial groups, including Nestlé, Sulzer, Alusuisse and Schindler.

These investments are mainly in South Africa, where industrialisation takes off between the two world wars, but also Egypt and Belgian Congo.

Switzerland signs its first investment protection and promotion accords with African countries from 1962.

Following Tunisia, Niger and Guinea, similar accords are concluded with other countries.

From the start of development aid, Africa is the key recipient. Several countries are chosen as “focus countries” of Swiss aid.

From 1982, Switzerland takes part in the African Development Bank, which it helps to reorganise from 1993.

Source: Historical Dictionary of Switzerland

(Translated from French by Morven McLean)