Africa Keywords:, economy, world crisis, real sector, development forecasts

L. L. FITUNI

Doctor of Economics

The current global crisis continues to raise questions that analysts, at least for now, have no answer for. One of them is whether the seven" fat " years of Africa (2001-2008) will remain an unprecedented successful, and therefore unlikely to be repeated, period of economic development of the continent, or will the overall positive growth dynamics be maintained, and over time begin to increase success?

Indeed, from the point of view of the real growth of African economies, the mentioned seven-year plan has no analogues. Since the historic Year of Africa (1960), the region has never been able to maintain a sustained excess of economic growth over population growth over a long period of time. And the "quality of growth" in the 7 years under review was excellent. It was mainly due to the expansion of production in the real sector of the economy. Analysts all over the world have debated whether this is the beginning of the "sustainable development" that has always been talked about from the stands of high international forums, from the presidencies of pre-election meetings and from university departments both in Africa and abroad.

HOW DO I ESTIMATE REAL GROWTH?

Steady production growth began in the 1990s. However, during the last decade of the twentieth century, it still lagged behind the increase in population. In other words, Africa, as in previous decades, "ate up" the resources created. This is particularly evident in sub-Saharan Africa. From 1990 to 1999, GDP per capita calculated at purchasing power parity (PPP - an indicator that reflects more closely the real growth of the economy as a whole) grew from $1,158.9 to $1,327, or 15%, i.e. approximately 1.5% per year with almost 2.5% annual population growth*.

The real acceleration came only with the beginning of the new millennium. The economy began to grow faster than population growth, i.e. the basic conditions for expanded reproduction were created. In the period from 2000 to 2008, the above indicator increased by 54% (from $1,372. 9 to $2,113, or almost 5.5% per year).

Of course, as the saying goes, " the devil is in the details." According to the World Bank, more than half (51.4%) of the total "sub - Saharan" GDP (although not at PPP, but at face value) is created by only two countries-South Africa and Nigeria. And the spread of the country's GDP is too large. In 2008, the largest figure belonged to South Africa - $83 billion, and the most modest - to Guinea-Bissau - $202 million. At the same time, the highest gross national income per capita in 2008 was registered in Equatorial Guinea ($14,980), and the lowest in Burundi ($140). In other words, the average Equatorial Guinean theoretically earned a daily gross income of $ 40.93, while the average Burundian earned 38 cents. In general, if we apply the decile coefficient, which is used by sociologists and economists to study the degree of income differentiation of the population, to the countries of Africa as a whole, it turns out that the total GDP per capita of the 10 richest countries on the continent is 25.2 times higher than that of the 10 poorest ¹.

However, with all the caveats regarding the uneven development of individual countries and

The article was prepared with the financial support of the Russian Foundation for Science and Science in the framework of the research project No. 09-02 - 00547a "Emerging images and real opportunities of Russian - African "raw material interaction" in a multipolar world".

* Hereafter, unless otherwise indicated, statistics on national accounts (GDP, national income, gross savings, etc.) are provided from the World Bank database: http://data.world-bank.org/indicator

persistent overall poverty on the continent, unprecedented growth in the real economy (REE)² in the specified period is an indisputable fact.

LIFE HAS BECOME BETTER, LIFE HAS BECOME MORE FUN?

In the previous article (see No. 8, 2010), we examined in sufficient detail the impact of the global crisis on the financial sector of the continent's countries. However, in order to assess the underlying long-term factors of both previous growth and development prospects, it is necessary to pay no less attention to the dynamics and trends in the development of the real sector.

So, Africa at the beginning of the 20th century found itself in very favorable economic conditions. Many attribute this to the favorable conjuncture of global commodity markets. Indeed, prices for many of Africa's commodity exports have been rising over the years. But it would be a mistake to reduce the overall acceleration of economic growth to just this factor. Between 2000 and 2008, the commodity sector accounted for approximately 24% of the continent's total GDP growth. The remainder was accounted for (in terms of importance) by wholesale trade, agriculture, transport, manufacturing, financial services, and other industries.

It can be said that for the first time in decades, the African economy has made real tangible steps towards diversification and greater balance in a number of areas - sectoral, geographical (in terms of the distribution of foreign economic relations), the ratio of factors of production and forms of ownership in GDP formation, the orientation of production to the domestic and foreign markets, etc. (see tables 1 and 4).

Two new trends are particularly important: the growing role of REES in GDP formation and the acceleration of the development of industries focused not on the external market, but on meeting the domestic needs of African countries.

Table 1 clearly shows that although the growth rates of certain sectors of the economy (tourism, finance, and other non-REM segments of the economy) were higher than those of many traditional sectors of the real sector, total GDP was mainly driven by the real sector. Even excluding the trade part (see explanations in footnote 3), GDP growth of almost 62% was due to REE. This is the most important qualitative turn in the economic development of the continent.

Again, we can expect objections from our opponents: 24% of the increase was in mining, which is mainly exported mineral raw materials and fuel, which sharply rose in price on the eve of the crisis. Indeed, at least a third of the global price growth is the result of stock market speculation with financial instruments tied to raw materials. This is a fair point, but the fact is that even "cleared" of the influence of the "speculative component", the contribution of the real sector to the growth of the African economy exceeded 50%, and therefore was decisive.

GROWTH FACTORS

It is impressive that the growth of basic industries, the foundations of sustainable welfare and the further development of the economy of any country-industry, agricultural production for domestic needs, construction-will continue for a long time.-

Table 1

Contribution of industries and segments of the economy to Africa's GDP growth and their growth rates in 2000-2008 in % (calculated at constant prices in 2005)

Источник: Lions on the move: The progress and potential of African economies. McKinsey Global Institute. L., 2010, p. 11.

Over the entire period, the population growth rate was almost 2 times faster.

A number of domestic factors also contributed to the strengthening of the real sector in Africa, along with a favorable external environment. There was a slight decrease in the severity of internal political confrontations in the region (although bloody clashes continued in some countries). Inter-African armed conflicts gradually subsided. The qualitative renewal of national elites by the end of the 20th century and the emergence of a second generation of highly educated specialists in most African countries led to the emergence of technocratic professionals and managers in power structures in many countries, who began to pursue a fairly balanced and pragmatic policy aimed at stimulating economic growth.

At the pan-African level, efforts have been made to create a more enabling environment for economic growth in general and business in particular. A number of region-wide initiatives, such as the New Partnership for Africa's Development (NEPAD), the New Africa Initiative (NAI), the Omega Plan for Africa, and the Millennium Partnership for African Development (MAP), have also served these goals to a large extent. The development and implementation of principles and mechanisms for monitoring progress along this path, in particular the African Peer Review Mechanism (APRM), played a major role. The latter was based on voluntary monitoring of countries in 4 areas: democracy and good political governance; economic policy direction and governance; corporate governance; and socio-economic development.

Many international organizations have concluded that the reforms implemented have indeed made it easier for both foreign investors and local private entrepreneurs to do business on the African continent.

However, business conditions still vary greatly from country to country. For example, in Guinea, in order to start a business, it takes 213 days to complete various formalities for each procedure, and in Rwanda it takes 3 days for everything. For direct exports (which do not involve additional procedures or complex schemes), it will take an average of 16.6 days to clear goods exported from Ivory Coast, compared to 3.8 days in Gabon. Import customs procedures in the Congo (Brazzaville) They will take an average of 31.4 days, while in Lesotho they will take only 4.4 days.

Yet, while describing the unprecedented success of African economies in the 2000s, the main point cannot be ignored. A unique GDP growth of 5-6% per year is still not enough to radically solve the most acute African problems (poverty, disease, illiteracy, etc.). Even in the "happy seven-year period", the gap between most countries of the world and African states has not narrowed. Only the pace of the backlog has slowed down, which means that new additional efforts are needed.

THE CRISIS CREPT UP UNNOTICED

Researchers are closely monitoring the impact of the recent global financial and economic fever, which seems to have turned into a phase of prolonged sluggish economic malaise in developed economies, and will have on the further development of Africa. The latter are still struggling to recover from the crisis. They have limited demand for traditional exports from Asia, Africa and Latin America. Entrepreneurs are afraid to invest in expensive investment projects on the world's periphery, and growing budget deficits in Western countries are forcing them to curtail the amount of aid provided to poor countries.

But the more distant the beginning of the current global financial and economic crisis, the less predictable the recovery time of developed countries and the growth of production in the West, the more surprised analysts look at the dynamics of the development of the real sector of the African economy.

At first, it looked as if the crisis had bypassed the continent - the main indicators of both the financial and real sectors, in general, remained very good. It seemed that the continent's economy, not responding to the curtailment of markets for African raw materials in the West, was going to continue the upward development of the previous seven years. During the five - year period 2002-2007, sub - Saharan Africa's GDP growth rate was even higher than the pan-African indicators mentioned at the beginning of the article, averaging 6.5% per year. In 2008, this indicator decreased to more than a satisfactory 5%.

Almost all African oil-importing countries have been quite successful in dealing with the crisis, which was largely due to the sharp drop in oil prices from $ 150 per barrel in mid-2008 to $ 40 at the end of 2008. African food-importing countries also benefited, with prices falling sharply in the second half of 2008.

In 2008, despite the crisis, foreign capital inflows to Africa were record-breaking. Foreign direct investment (FDI) totaled $87.6 billion. (2007 - $69.1 billion), official development assistance (ODA) - $44 billion. (2007 - $40 billion), and migrant remittances - $44.2 billion. (2007 - $38 billion) ⁴.

The fact that the African economy did not collapse catastrophically under the blows of the crisis, there was a completely reasonable and satisfying explanation. Analysts agreed that the impact of the global crisis on Africa was somewhat "delayed" due to the lack of integration of afri-

Table 2

GDP growth rates in emerging market regions(%)

Source: IMF Wold Economic Outlook. 10 June, 2010.

integration of the Canadian economy into the global financial and economic structure. A significant part of the continent's population still subsists on semi-natural farming, and the fate of this population depends more on natural conditions than on the state of global financial markets.

ANALYSTS: "THE OUTLOOK IS PRETTY BLEAK..."

Since the second half of 2009, the main indicators, especially those related to finance, began to deteriorate sharply. At the lowest point of the crisis (roughly from October 2009 to March 2010), the continent's GDP growth rate as a whole declined to a disconcerting -1.3% year-on-year. At the end of 2009, there was a net reduction in per capita GDP indicators. Capital inflows have greatly decreased, foreign exchange earnings have decreased, and the problem of budget deficits has worsened.

The moderate optimism of specialists quickly changed to serious concern. The forecasts have become quite gloomy. In particular, they discussed the prospects for financing investment projects, the cost of food imported to Africa, and energy prices. At the same time, African leaders and international organizations - the African Union, the United Nations Economic Commission for Africa, and the African Development Bank-did not spare the gloomy tones in their forecasts.

However, even in this case, the African situation was by no means the worst. In Russia, for example, GDP decreased by more than 7% over the past year, and in the whole region of Eastern and Central Europe - by 5%, Latin America-by 2.5% (see table 2).

The export sector of the economy suffered greatly. The value of sub-Saharan exports declined by 45% between August 2008 and May 2009. A qualitatively negative aspect was also the fact that the decline was mainly due to the fall in world prices for most African exports. This meant that with the previous labor and capital investments in real production, African countries received less foreign exchange income per unit of export goods.

In the real sector, the crisis has most affected industries focused on the markets of developed countries. Due to the sharp drop in prices for crude oil and other resources (metals, diamonds, timber, rubber, tropical agricultural products, etc.), the ability to fill the budget in countries exporting fuel and raw materials has sharply deteriorated. Foreign exchange earnings of most African exporting countries decreased by 30-50% in 2009, while remittances from African migrants also decreased by 7% ($44 billion in 2008 and $41 billion in 2008). 2009). Developed countries ' stated goal of increasing official development assistance (ODA) to Africa to $50 billion. it was not implemented. In 2009, revenues did not exceed $43 billion.⁵ The foreign exchange reserves accumulated in previous years by African fuel and raw material exporting countries decreased by about a third in 2008-2009, which significantly affected the ability to finance social and economic development programs already launched in a number of African States.

In the first quarter of 2009, there was a sharp drop in FDI inflows to Africa. It declined by 67% in three months, which was an unpleasant surprise for many countries and led to a delay in the implementation of a significant number of large investment projects, on which the authorities of some countries had high hopes. By the end of the year, the situation has somewhat leveled off, but according to available estimates, the" shortfall " in annual investment will fluctuate between 38 and 50% and amount, according to preliminary estimates, to $56 billion.

Direct investment in the real sector of the African economy has always been highly concentrated, both geographically and by industry. The main investments were made in the development of mineral raw materials and other natural resources. The fall in global oil prices has made new investments unprofitable.

The geographical concentration of FDI has increased even more. If in the period 2004-2008 63.2% and 87.9% of new investments accounted for 5 and 15 leading recipient countries, respectively,then in 2009, according to preliminary estimates made on the basis of the OECD database, these figures were 76% and 95%, respectively ^.6 The leaders are Angola, Algeria, Egypt, Equatorial Guinea, Morocco, Nigeria, South Africa and Tunisia. They are lagging far behind in terms of volumes, but they are catching up, and in some cases they are not.-

Table 3

Projected annual inflation rates in selected African countries (2009-2013) (in%)

Source: Africa: Forecasts. Standard Bank, Johannesburg, 2010.

In some cases, they outperform Sierra Leone and Sao Tome and Principe in terms of FDI growth.

Despite the fall in global food prices, an analysis of domestic food prices in 38 African countries shows that in 80% of cases, they have increased by 30 to 40% compared to prices recorded 12 months ago. In 2009, the number of people suffering from hunger in Africa increased by 50 million. ⁷ Rising food prices are the main driver of consumer inflation in Africa. It is possible that the food situation will worsen in 2011 due to the almost inevitable increase in world grain prices due to poor harvests in 2010 for almost all major world grain exporters except the United States8.

The problem of inflation can be a serious obstacle to economic recovery and further successful development of the real sector. Unlike many of the consequences of the crisis, which can be overcome in a relatively short time, inflation is projected (see table 3) to settle on the continent for a long time.

In 2008 - 2009, Africa's social problems worsened: unemployment increased, the flow of illegal migrants and refugees outside the continent - to Europe and the United States-increased, and with them - the export of many humanitarian problems and social tensions from Africa.

As a result, in 2009, for the first time in a decade, the GDP growth rate in sub-Saharan Africa was more than one and a half times lower than the population growth rate (1.6% and 2.5% in 2009, respectively), that is, at the end of the year, there was a net reduction in per capita GDP indicators in most African countries.

The dismal results of 2009 suggested that, over time, the cumulative negative impact of the global crisis will weigh heavily on the continent's economies (see table 4). Most likely, there will not be a sudden sharp deterioration in the economic situation, but the aggravated problems of the eurozone, the prolonged recovery from the crisis of developed countries will not allow African economies to rely on external resources (financial, technological, food) to the same extent as in the past decade. Meanwhile, the internal development opportunities of the African continent are still very little used.

LIGHT AT THE END OF THE TUNNEL

However, since the end of the first quarter of 2010, the comments of experts from international financial institutions began to show signs of optimism, and by the end of the third quarter, very positive (against the background of global trends) assessments of the prospects for the continent's recovery from the global crisis began to prevail again.

9^{In April 2010 The World Bank in an official press release stated that Africa is " confidently emerging from the triple (food, fuel and financial) crisis"}.

By the middle of the year, trends were clearly identified that positively affect the development of the continent's REE, even in times of crisis. Despite the decline in production in the West and some reduction in the overheating of the Chinese economy, prices for Africa's main exports continued to rise during the first half of 2010.

There is still interest in the continent as an alternative source of strategic raw materials produced in other regions and countries that are currently less stable from the Western point of view.

Africa, for example, has 10% of the world's oil reserves and produces about as much as Iran, Venezuela, and Mexico combined. By 2020, Africa will account for approximately 15% of global oil production. This makes the continent very attractive for multinational corporations in terms of promising investments. Their investment in Africa increased by about 4% between May 2009 and May 2010, with a significant increase in the number of investments in Africa.

while in other parts of the world decreased by 16%. Tropical Africa is also attractive for a number of oil TNCs because it is geographically remote from the coasts of developed countries and, therefore, spending on the environmental safety of offshore oil fields absorbs less financial resources than in the Gulf of Mexico, near California, Alaska or in the North Sea. It is expected that by 2030, the waters of Tropical Africa will account for more than 30% of all global investment in the development of raw materials on the continental shelf.

Overall, economic recovery in Africa is expected to be faster than in Latin America, Europe and Central Asia. GDP growth for the continent as a whole is projected to be 3.8% (even 4.2% in sub - Saharan Africa) in 2010 and ^{4.5 % (4.8%, respectively) in 2011.10}

According to analysts ' forecasts, the real sector of the African economy is expected to have favorable prospects. As the global economy recovers, it will increase demand for traditional African exports, especially fuel and minerals. Agricultural products will be in demand primarily in those market segments where Africans have an indisputable competitive advantage - in the field of trade in tropical agricultural products, especially for goods whose quality in Africa exceeds other regions with similar climatic conditions (cocoa, cloves, industrial crops used for the production of essential oils, etc.).

In the longer term, opportunities for export production in the manufacturing industry are expected to improve. It is possible that some African producers will eventually be able to push even Chinese and Indian competitors here.

The real sector of the economy of sub-Saharan Africa, provided that the policy of investing in human capital, skills and abilities of producers, launched in 2003-2008, continues, has the potential for rapid growth of labor-intensive industries. In East Asia, which now occupies this market niche, workers ' wage costs are growing rapidly everywhere. These costs are still extremely low in absolute terms compared to developed regions, but they are already far higher than in Africa. In China and India, their growth was accelerated in 2010, with the following trends:-

Table 4

Long-term dynamics of macroeconomic indicators for Africa before and after the crisis (%)

Notes:

* rating.

** data for 2005-2008

Источник: Economic Report on Africa 2010. Promoting high-level sustainable growth to reduce unemployment in Africa. AU-UNECA, Addis-Ababa, 2010, p. 130.

We are interested in inflationary trends in the economy. In China, the situation may get even worse if the yuan really starts to get more expensive relative to other currencies. In 2010, wages in China may grow by about 7%, and they are expected to double in the first half of the next decade. In this case, at least some of the competitive advantages inherent in the "salary component" may be transferred to exporters from Africa. It is possible, however, that by this time these exporting enterprises will be owned by Chinese or Indian capital.

conclusions

The analysis shows that the real sector of the African economy as a whole is better able to withstand the blows of the global crisis than the monetary and financial sector. The decline in production mainly affected the export sector of the economy and a number of enclave industries, while industries focused on the domestic market, especially the consumer market, continued to grow successfully, although much more slowly.

The overall outlook for the African economy is expected to be favorable in the medium - to long-term if current trends continue, with the REM outpacing growth. As it was shown above, the long-term acceleration of the continent's economic development was not only due to the resource boom, but (perhaps to a greater extent) also due to the weakening of the continent's conflict potential, improved macroeconomic conditions and the business climate. This, in turn, made it possible to extend the growth in breadth and depth of the economic fabric of the continent.

The future economic development of Africa can be supported by a number of external factors - the global competitive race for natural raw materials, and therefore easier access to capital resources, and the readiness of the international community to search for new more productive forms of economic and especially raw material interaction with Africa.

Long-term growth can also be promoted by internal socio-demographic factors - the numerical growth of the labor force, urbanization, and the associated increase in the number of middle-class consumers.

It is expected that by 2020, the total GDP of African countries will exceed $2.6 trillion (in 2008-about $1.6 trillion, which is comparable to Russia). Consumer spending will total $1.4 trillion in 2020 ( compared to $860 billion in 2008). At the same time, the number of households with discretionary incomes¹¹ will reach 128 million ¹². If these forecasts are generally met, Africa will see rapid economic growth, primarily in the consumer-oriented industries (the real sector, but also in retail, banking, and telecommunications), as well as in infrastructure, agriculture,and natural resource development.

Will Russian companies be able to take advantage of the new market opportunities? The author will try to answer this question in the third article of this series. Here we note that, in the author's opinion, Russia needs to pursue a more active policy on the African continent today.

African economies are more open to new partners than ever before in a crisis. Right now, there are additional opportunities for expanding Russian exports to the continent, access to natural resources that are scarce for our country, as well as political and military cooperation.

¹ http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRI-ES/AFRICAEXT/0"contentMD K:20563739-menuPK:1613741~pagePK:146736~piPK:146830~theSitePK:258644,00.html

² REM is a rather vague concept. The term REE does not offer strict scientific criteria that clearly distinguish the economy into "real" and other. It usually includes: industrial production (industrial enterprises), energy, fuel and energy, construction, agro-industrial, forestry complexes, high-tech (knowledge-intensive and innovative) sectors of the economy, transport, communications and telecommunications, and other manufacturing businesses (including small ones). At the same time, various services (tourism, finance, healthcare and education, advertising, housing and utilities, sports and entertainment, mass media, intermediary trade, etc.) are usually not classified as REES. Some industries (catering, restaurants, trade as primary sales of goods, etc.) are located in the intermediate zone. to the real sector, others do not. In Russia, there is a tendency to use it, including in the scientific sense, which, apparently, goes back to the voluntary or involuntary recognition by the majority of domestic economists of K. Marx's division of capital into "real" and "fictitious", although by the latter the founder of Marxism understood only capital invested in foam papers .that is, it was closer to the modern Western understanding of the issue.

³ http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRI-ES/AFRICAEXT/0,,contentMD K:20563739-menuPK:1613741-pagePK:146736~piPK:146830~theSitePK:258644,00.html

⁴ United Nations Economic Commission for Africa. "Economic Report on Africa 2010". Addis Ababa, pp. 30, 36, 39, 100.

⁵ Ibidem.

⁶ Calculated according to the portal data http://stats.oecd.org

⁷ ODI. The Global Financial Crisis and Developing Countries. Phase 2 Synthesis. Overseas Development Institute. L., 2010, pp. 28 - 29.

⁸ The Wall Street Journal. 19 July, 2010 - online.wsj.com/article/SB10001424052748703287204575374133591946.358.html?mod=WSJ _article_related

⁹ http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRI-ES/AFRICAEXT/0"contentMD K:22555665-menuPK:258657-pagePK:2865106-piPK:2865128-theSitePK:258644,00.html

¹⁰ Fulfilling the promise of sub-Saharan Africa // MC Kinsey Quarterly, 2010, L., p. 2.

¹¹ Discretionary income - a part of the consumer's net income that remains after unavoidable expenses, taxes, and the cost of meeting the first vital needs. Such residual income is spent at the consumer's own discretion and is free in this sense. Today, the majority of African households (families) such incomes are practically not available. The availability of discretionary income is a necessary condition for the transition to a modern (Western) type of consumption. Without them, it is impossible to increase the quality of life in its modern sense.

¹² Lions on the move: The progress and potential of African economies. McKinsey Global Institute. L., 2010 p. 2.

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