http://www.foreignpolicy.com/articles/2012/11/26/africa_s_human_capital?page=full
Africa’s Human Capital
By: Daniel Altman
Sub-Saharan Africa is booming. Average purchasing power in the region once
denigrated as the heart of "the hopeless continent" has risen by a third in
the past decade, and foreign investment is gushing in. Yet it's easy to
miss the enormous differences between these 48 countries. Some, like the
Democratic Republic of Congo, are still stuck with conflict and poor
governance, but others -- even countries that investors have neglected,
such as Burundi -- are laying the groundwork for the next stage of growth
by investing in their people.
The problem with Sub-Saharan Africa begins with the term itself, whose
meaning has become more than geographic. Increasingly, it signifies a
region that does not include South Africa, considered a fairly developed,
middle-income country where the average purchasing power is about the same
as in Serbia or Peru. By that measure, however, Mauritius should be dropped
as well. Some other groupings leave out oil-rich Nigeria, too, despite its
continued struggles with poverty.
No single aggregate makes sense in such a diverse area. Yet most global
corporations and government agencies inevitably slice and dice the world
into regions, thus putting sub-Saharan countries in competition with each
other for the attention of the world's big investors and policymakers.
Lately, that competition has become especially stiff.
The leaders in the region are not always the obvious ones. There are, of
course, some established darlings that are simple to spot. For the ease of
doing business as measured by the World Bank, Rwanda, Botswana, and Ghana
all look better than several countries in the European Union. Rwanda and
Ghana also score highly for protection of property rights -- crucial for
attracting foreign investors.
Look below the surface, though, and many other contenders are worthy of
investors' attention. The progress in these countries is not so much about
the business climate today, or even the level of security or quality of
governance. It's more about the economic potential being built for
tomorrow. This potential is best measured not by the experiences of
corporate managers and consultants who respond to global surveys, but
rather the development of human capacity in the next generation of workers
and consumers.
In terms of human capacity, there are some striking trends for companies
looking to get into sub-Saharan markets on the ground floor. For example,
in overall human development as judged by the United Nations Development
Program (UNDP), Madagascar now sits where the Republic of Korea did in
1980, on the cusp of its export boom. And a closer look at the data reveals
many more examples of progress.
In the past three decades, the biggest improvement in education has come in
Burundi. In 1980, children under seven there could expect an average of
only 1.7 years of schooling, according to UNDP. Today, they will receive
11, and so the next generation of Burundian workers will be unrecognizable
compared to the last. Uganda, Mali, Guinea-Bissau, Ethiopia, Guinea, and
Burkina Faso have all made jumps of at least five years of expected
schooling in the past three decades.
Health is another area where some countries have separated themselves from
the pack. In Eritrea, Ethiopia, Guinea, and Niger, life expectancy at birth
has risen by at least 15 years since 1980. Much of this change came from
reductions in infant mortality. It is all the more impressive given that it
came against the tide of the AIDS epidemic. For these countries, higher
life expectancy will mean less hardship for families, lower fertility
rates, and more investment of resources in each child.
Some of these countries, like Burundi and Eritrea, may be too small to
capture investors' imaginations. But in East Africa, Uganda and Ethiopia
offer more than 100 million potential consumers. And in the west, homegrown
multinational corporations are already starting to span the mid-sized
francophone countries.
As Korea showed starting half a century ago, vast natural resources are not
a prerequisite for rapid growth. With better education and health come
higher productivity, rising wages, and greater buying power. To plan for
this growth, companies will need to use a long time horizon. One way to do
it is by laddering the marketing of their products in parallel with
increases in living standards.
An excellent example of this kind of long-term planning is Honda's
investment in Vietnam. Honda established a subsidiary there in 1996, and
within a few years its stripped-down Dream scooters were ubiquitous in city
streets. As Vietnam prospered, the scooters got fancier. Eventually, they
got doors, too. In 2006, Honda opened its first auto plant in Vietnam,
producing the compact Civic for local consumption. Vietnamese consumers
were used to relying on Honda products, but it took a decade for them to be
ready for the big-ticket items.
Some investors may still be nervous about Sub-Saharan Africa, given its
history of political instability and humanitarian disasters. But things can
turn around quickly. Vietnam, a nominally communist country involved in
military conflicts until the early 1990s, saw a huge surge in foreign
direct investment once it made peace with its neighbors and opened its
doors to trade. The resulting economic growth helped to underpin that same
stability and openness. More recently, Sri Lanka's economy has expanded by
more than 8 percent annually since the end of its civil war.
In this century as in previous ones, much of the investment boom in
Sub-Saharan Africa has come from companies seeking to extract natural
resources. Resource booms come and go, though, and commodities are
eventually exhausted. What endures is human capacity, the greatest economic
engine of all.
Received on Mon Nov 26 2012 - 21:59:40 EST
