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How are African markets taking the recession?
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The global recession has been heavily affecting North American, European, and even Asian markets. But how have African markets been enduring the recession? The answer is, pretty well, as I just recently read in the July/August issue of Foreign Affairs, in the article “Africa’s Capitalist Revolution” by Ethan B. Kapstein.
I have been interested in Africa for a few years now. It’s something I picked up in college. I find Africa interesting because it has everything: From snow-topped Mt. Kilimanjaro in Tanzania to the sun-blasted Sahara desert to the deep, dark Congolese jungles. I find the antics of some African leaders amusing, although the “antics” of others I of course find deplorable. Africa’s underlying tribal structure provides an interesting, yet troublesome foundation on which to superimpose Western forms of government.
Once upon a time it was popular to completely write off the future of the African continent. This was highly popular in the 1990s. Africa’s Cold War strategic value had disappeared, and it was now seen only as a continent beset by hunger, constant warfare, corrupt governments, and fearsome diseases. Could genuine, successful free-market economies emerge from Africa that would help modernize and democratize the continent? What a crazy suggestion. Not from the place that brought us Rwanda, Somalia, Idi Amin, and other African buzzwords.
However, African markets have been growing. A true African business class is emerging. Part of the traditional economic difficulties for Africa have stemmed from corrupt governments—governments that enshrine patronage of one’s own tribe or kin, or governments that are just plain kleptocracies—i.e. the famous “criminalization of the state”. Because of rampant misgovernment, investors did not see stable opportunities in African markets. Oftentimes foreign businessmen, such as miners and loggers, would come to get in, strip whatever resources they could, and get out. The thought of long-term investment in such a troubled area was ludicrous.
Now, democratic movements and reforms are gaining strength. Anti-corruption commissions are springing up. Africans are beginning to see the cost of maintaining patrimonial systems in government. Some multi-national corporations are finally feeling comfortable hiring local workers and managers, and using local raw materials and crops, instead of importing all of it. This helps local economies tremendously.
The biggest reason African markets have endured the recession so much better than other regions of the world are is that African markets are still largely domestic. African countries do not rely on exports the way many other countries do. This helps insulate them from protectionist trade policies some countries are already implementing.
Urbanization is another reason African markets are progressing. Oftentimes the local tribal chiefs call the economic shots. However, with more Africans moving to big cities, it forces them to do business and enter business partnerships with people from other tribes. This is an important step for Africans in creating lasting economic structures.
The recession has had a negative effect on African markets, not a positive one. However, the effect has been much smaller in comparison to other regions. Could it be that Africa is finally creating a lasting liberal economy in which the entire continent (with the exception of the baddies) could take part? Let’s hope so. Africa may enter a new age where it is no longer the problem continent of the world. And hey, I think it would be cool to go there someday.
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