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Staying competitive
The IMF is concerned about the economic prospects of the Sub Saharan Africa region over the next year. Average GDP growth is expected to come in around 3.2% this year and move up to 3.6% next year, according to its latest regional outlook. The global average GDP growth is expected to end this year around 3% and rise to 3.4% in 2020.
The sub-region’s largest economies, Nigeria (2.5% in 2020) and South Africa (1.1% in 2020) are the big drag even as Ethiopia promises 7.2% growth next year. The IMF highlights the “bifurcated growth paths” between resource-intensive economies like oil producers Nigeria and Angola versus more diversified, non-resource-intensive economies who are responsible for most of the growth averaging around 6%.
These resource-intensive economies are particularly vulnerable to the external headwinds of both China and the euro area slowing down faster than anyone expected, the fallout from rising protectionism around the world and global trade wars.
But the IMF had other non-macro concerns in the region too and carved out a whole chapter to discuss the particularly pernicious lack of competition in the region and the impact this has on a country’s economy.
By coincidence, another report out this week revealed Africans have to pay more than anyone else for internet access. It highlighted the lack of competition in local markets as the biggest obstacle to bringing costs down when some countries have just one or two telecoms operators dominating the market.
The weak competitive challenge is found across many industry sectors in Africa, but particularly in service sectors including hotels and restaurants, information/communications and transport. Sub Saharan Africa over-indexes with uncompetitive markets, says the IMF, more than 70% of the countries in the bottom half globally in terms of competition indicators are from Sub Saharan Africa.
And it ends up being an expensive problem for ordinary Africans.
Firms’ price markups are on average 11% higher in Sub Saharan Africa nations than for other developing countries and the IMF says it’s a more persistent and prevalent challenge in the sub-region. Many local markets are dominated by state-owned firms, with one of the best examples being Ethiopia’s Ethio Telecom where regulators are currently looking to change its monopoly status.
And yet, the analysis says increased competition can boost real per capita GDP growth by as much as one percentage point with improved export competitiveness, productivity growth, and investment.
There is a strong link between the number of competitors faced by a firm and its markup and profitability. This should suggest government regulators should work hard to reduce barriers to business entry to help boost both domestic and foreign competition. This makes sense on paper but in the real world much of this “commonsense” gets undercut by national politics and jingoism. But that doesn’t mean we should stop trying.
— Yinka Adegoke, Quartz Africa editor
Stories from this week
WhatsApp is the medium of choice for older Nigerians spreading fake news. WhatsApp’s popularity in Nigeria has particularly caught on among older users who are more comfortable with its easy-to-use features and “walled garden” set-up. For Quartz‘s Net Positive series, Yomi Kazeem explains, a lack of digital literacy is driving older users to unwittingly share misinformation through the platform.
Denying irregular African migrants the right to work in Europe is driving them to stay put. The continued flow of African migrants into Europe in search of jobs and better economic opportunities remains a hot-button issue. However, there’s now growing evidence, writes Chidinma Irene Nwoye that denying these undocumented migrants the right to work in Europe is not having the desired effect of sending them back home.
Inside Russia’s charm offensive to gain a stronger footing in Africa. This week, African leaders have been guests of Vladimir Putin as part of the first-ever Russia-Africa Summit—the culmination of the European giant’s recent attempts to garner greater influence in the region, explains Landry Signé. As these photos by Joe Penney show, African delegates in Sochi enjoyed Russia’s unique “arms trade diplomacy” at exhibits with Kalashnikovs, tanks and other weaponry. But despite Putin’s best efforts, which included signing dozens of MOUs, Russia is unlikely to match China’s influence in Africa anytime soon.
The rise of African art on the global stage has led to a growing market for forgeries. The centuries-old practice of creating and trading in fakes of established artists’ works is becoming more rampant in Africa. Fakers often get away with the deception because there isn’t enough published source material on targeted artists through which their authorship of works can be confirmed.
Nigeria’s tech leaders aren’t convinced by a government plan to reframe its focus on their sector. Nigeria’s erstwhile Ministry of Communications has been renamed Ministry of Communications and Digital Economy to cater for the country’s booming, yet fledgling, tech sector. Howeverv, industry insiders are skeptical of the move amid uncertainty as to how the renamed ministry will function or what its policy focus will be.
Chart of the Week
This is the best country for startup talent in Africa. Nigeria, South Africa and Kenya are Africa’s most advanced markets for tech startups and ecosystems but there are significant disparities in compensation packages. On average, startup employees across all levels earn far more in South Africa than anywhere else.
The Dealmaker
African startups remain attractive propositions for global investors as—taking only startups which have raised over $1 million into consideration—69 startups have raised $658 million from over 140 different investors according to GSMA research…The United Kingdom has announced a $12.5 million fund to support fintech startups in Kenya with investments set to focus on companies that drive up financial inclusion among low-income and under-served citizens…Mubadala, the United Arab Emirates’ sovereign wealth fund, has launched a $250 million investment fund to invest in startups in Middle East and North Africa.
Other things we liked
The socialist agronomist who helped end Portuguese colonialism. Amílcar Lopes de costa Cabral not only led the war of independence that toppled Portuguese rule in Guinea Bissau and Cape Verde but influenced the fight for decolonization across the continent. In an interview with Jacobin, Peter Karibe Mendy, the author of a new Cabral biography discusses how a socialist agronomist effectively brought Portugal’s colonial rule to its knees.
How I fell in, out, and back in love with the leso. “To some, it remained the leso. To others, it became the kanga. But whether leso or kanga, this piece of cloth has become uniquely associated with East African womanhood,” writes Idza Luhumyo for African Arguments. The leso is often at once a paragon of African femininity but also a tool used to police women’s bodies, Luhumyo notes in this essay.
ICYMI
Hacking Education with Mastercard. The Mastercard Foundation is seeking innovative growth-stage businesses EdTech companies to submit solutions that can “improve the quality of teaching and learning in Africa.” Selected companies will receive financial and technical support as part of a 12-month program . (Nov. 21)
Google AI Residency Program 2020. Selected residents will take part in a 12-month research training role designed to “jump-start or advance” careers in machine learning research. (Dec. 19)
Keep an eye on
AfriLabs Annual Gathering (Oct. 28-30). Afrilabs, a pan-African network of technology and innovation hubs, will hold its annual gathering in Addis Ababa, Ethiopia. The theme this year is “Connect:Towards an Integrated Innovation Ecosystem.”
International Book Fair of Algiers (Oct. 30-Nov. 9). The 24th edition of Algeria’s flagship literary event is expected to feature over 1,000 publishing houses and display nearly 200,000 titles. This year, the book fair will specially honor Senegalese authors.
*This brief was produced while listening to Sira by Ablaye Cissoko & Volker Goetze (Senegal/Germany). [Spotify]
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