We had a fascinating seminar on this topic yesterday. Goolam Ballin of Standard Bank said that Africa today looks like Asia did 20 years ago--poised to grow rapidly over the next two decades. At the same time, he was worried about the next two years because of Africa's dismal experience in adjusting to the external shocks of the 1970s. Nigerian central bank governor Chukwuma Soludo struck a distinctly more optimistic note, pointing out that, for example, Nigeria's non-oil sector was growing even faster than its oil sector. Justin Lin (chief economist of the World Bank) reconciled the two positions by noting that we may be somewhat pessimistic in the short-run, but the medium-term prospects are definitely good. If East Asia could bring its poverty rate down from 80 percent to 18 in 25 years, Africa could do the same with its 50 percent poverty rate in the coming quarter century.
Tanzanian central bank governor Benno Ndulu was cautiously optimistic even in the short-run, saying that if private capital flows declined as a result of the financial crisis, African countries could still look to domestic sources of capital, such as local currency bonds. He emphasized though that maintaining macroeconomic stability was paramount. Francis Beddington of Insparo Asset Management was even more upbeat. He thought the big difference between the 1970s and now was that today "Africa is in charge". Finally, Mike Spence of the Growth Commission pointed out that, in addition to seeking internal sources of funds, African countries could look to some of the sovereign wealth funds, which had been investing in Europe and the U.S. (and losing money these days), looking to Africa as an investment destination. Mike did point out, though, that if Africa is to accelerate to 7 percent or more per capita growth, savings and investment rates will have to increase to the 25-30 percent of GDP level, and growth must be employment-creating.
With all the bad news in the financial markets these days, I came away buoyed by the optimism and insights of these wise gentlemen.