Tag Archives: economy

Billionaire Boom?

JESS HARIG

There are 55 billionaires on the continent of Africa.

That was the big news from Ventures magazine just about one month ago, when Ventures Africa reported a list of the richest people in Africa. The total number of billionaires, much higher than reported by Forbes in previous years, combined to a total worth of nearly $144 billion. The billionaires themselves live in just 10 of Africa’s 55 independent countries. This “news” was reported across various media outlets, in essence cheering on the new development and focusing on personal stories of the individual entrepreneurs who made the list.

My gut reaction to the news was strong. In essence it was: “Why the *&%$ does this matter?” Of all the economic news both good and bad, the personal stories of triumph or despair that could possibly come from this vast continent, why should I care about the existence of a few incredibly wealthy individuals? What does this mean for the other billion or so people living on the continent? Most of the reporting, thanks to due diligence, did make mention of the numbers of people living in poverty on the continent, and referenced the debate over growing income inequalities in many African countries. But when the World Bank reports that the number of people living in extreme poverty on the continent of Africa rose from 205 million to 414 million over the past three decades, is just a mention of the debate on inequality enough? To me, absolutely not.  But clearly, others would disagree with me. Many would see the existence of billionaires to be extremely positive, as evidence of strengthening capital markets, and the promotion of regulatory systems that allow for entrepreneurship. While these trends may be true, I believe what should matter when discussing things related to economic development is the plight of an everyday person, not a rich outlier.

Don’t get me wrong. I’m not rejecting the notion that the ability of 55 people to become billionaires represents some positive economic trends.  I am also not complaining about this news because the reporting portrays Africa in a positive light. What I am rejecting is the dichotomous portrayal of Africa (in this instance, in the media) as either “Africa on the rise” – a place of youth, hope, opportunity – or “Africa: the Dark Continent” – a place of death, poverty and despair. In this case, clearly the media chose the former face of Africa.

The problem with either side of this coin is that it misses the nuance that is so important to understanding what is happening economically and socially in the diverse countries that comprise Africa. Reporting of this story hopes to portray Africa in a positive light, and seems to stay away from the more complicated, countervailing themes of income inequality and poverty. Journalists conveniently ignore problems or trends that cannot and should not be ignored.

One of the first trends I noticed in the reporting on the billionaires was a focus on the presence of several women on the list. As a feminist and women’s advocate, I am certainly pleased to see women doing well for themselves economically in Africa, independent of men. Reporters seemed to have fun with the female aspect of the list, with fun tag lines like “move over Oprah”, referencing the wealthy and powerful American who, according to this list, is no longer the wealthiest black female in the world. She has been replaced by Folorunsho Alakija, a Nigerian fashion designer and oil tycoon whose estimated worth is over $7 billion. But again, my thoughts go back to “why does this matter?”. It brings up questions that I struggled with throughout gender-focused courses in grad school. Does the presence of a few female billionaires mean empowerment for everyday women? Two other women heavily referenced in this context are Isabel Dos Santos, an investor and the daughter of Angolan President, Eduardo Dos Santos, and Mama Ngina Kenyatta, the widow of Kenya’s first President. While I would like to assume that these women are billionaires based improving economic conditions in Africa, I am fully aware of the nepotism and cronyism that plague industry and politics alike in Africa, I’m not so certain their inclusion on this list is a sign of improved gender equality or women’s empowerment. The articles reacting to these seemed to think these women were bucking the trend of “big men” ruling Africa, but at least two seem to have their wealth simply because of their connections to “big men”.

Another thing the reporting basically ignored, or chose not to delve in to, is the geographic disparity of where the billionaires are from.  Of the total 55 billionaires, 20 are Nigerian, nine are South African and eight are Egyptian. The fact that 20 of the 55 billionaires are from Nigeria is interesting. It’s no secret that many of Africa’s nations are plagued by corruption in politics and business. And Nigeria in particular is notorious for this, ranked the 37th most corrupt nation in the world. This known fact combined with the country’s disproportionate share of billionaires should raise some red flags. And furthermore, South Africa and to an extent Egypt are known economic outliers in Africa, with GDPs that far outpace most of their African neighbors.

The last aspect I’ll touch upon that I believe was underreported is the industries in which the billionaires on the list made their money. It’s no surprise that oil and gas industries are heavily represented on this list, particularly out of Nigeria. It’s also no surprise, at least to those of us interested in the environment or West Africa or both, that Nigeria has a dismal track record when it comes to oil and gas exploration. Their environmental practices are ruining the Niger delta, workplace safety is almost nonexistent, and corruption within the industry and government relations remains abundant. Not to mention the incredibly detrimental impacts of these trends on Nigerian communities who rely on the oil and gas industry for jobs. Obviously oil and gas was not the only industry on the list. Fields like telecoms, manufacturing, financial services and construction are also represented on the list, which I believe does evidence a changing and improving economic situation in Africa, as these are not extractive industries that have the potential to create long-term, skilled employment for Africans. However, based on what I gathered from the list, these industries are mostly gaining strength in South Africa and they may not yet be viable industries in all African countries.

So there you have it. My long-winded reaction to a very small piece of news that was both over-reported in terms of coverage, and underreported in terms of content and context. But where does it leave us? I can only speak for myself, but it leaves me with hope and a sense of challenge. It leaves me with hope because, yes, it is positive that entrepreneurship is taking hold in Africa on a larger scale than previously experienced. But the challenge is what I sense more – the challenge to change the way we view economic development. To dig deeper beyond the surface level “billionaires exist” to the more complex, and certainly more worthwhile ideas of who does this benefit? How did those billionaires come to be? And perhaps most importantly – what does this mean for the life of the everyday individual struggling to provide for their family? In essence, I’ll care more about these billionaires, these outliers, when I hear how they use their economic power to change the industries that made them wealthy – from industries that allow a few to capitalize, to industries that offer viable and safe livelihoods for the communities and families and everyday people who live in the African countries that they too call home.

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Rebalancing Act, Part Two – On the Extremity of China’s Investment-led Development Model

DANIEL ROARTY

The recently released data on China’s 3rd quarter growth seems optimistic on the surface – while many analysts have been predicting a gradual slowdown in the Chinese economy, 3rd quarter figures show it accelerating from 7.5% growth in the previous quarter to 7.8% this quarter. However, rapidly expanded credit enacted earlier this year is mainly responsible for this acceleration – industrial output, energy output, and exports all slumped in the same period. Conversely, investments in transportation infrastructure and sewage systems skyrocketed. These figures lead to the conclusion that China is still heavily dependent on investment for economic growth and that it has yet to begin a long-awaited rebalance away from investment-led growth to consumption-led growth.

This post will investigate China’s rebalancing from a historical perspective, comparing China’s consumption to GDP ratio to that of other countries using data from the World Bank, and will end with some conclusions that can be derived from this comparative historical analysis. Continue reading

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Rebalancing Act – On China’s Economy

DANIEL ROARTY

What a difference five years make. Back in 2008, as Beijing welcomed the world to its Olympic games, it seemed as if it was the next great, unstoppable superpower. Analysts were, with full confidence, running straight extrapolations of its 8-10% yearly growth rates decades into the future. From that time until now, China has approximately replicated the entire US commercial banking system, with overall credit jumping from $9 trillion to $23 trillion and creating what some analysts have called a credit bubble “unprecedented in modern world history.” China’s surging GDP rates in the past decades have mainly been fueled by investment-heavy growth. This model, however, is quickly losing its power, and China’s falling GDP growth rates raise an interesting debate on the roles of investment and consumption in China’s development. Continue reading

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