Having successfully overcome, for the most part, its economic, political, and social struggles from the pre-1990s, Africa has been attracting the attention of countries worldwide. This interest is due particularly to reasons such as the discovery of gold, petroleum, and natural gas resources and its arable lands, workforce potential, as well as population size.
Although Africa’s steady growth rates, its significant rate of foreign aid influx, as well as the investments of development agencies in the continent, such as the IFC and MIGA, demonstrate a relative improvement in the economic situation, these have a limited contribution in decreasing poverty. Out of the 900 million people who suffer from famine in the world, 300 million of those live on this continent.
To date, having received foreign aid, Africa has begun to become aware that growth can actually be sustained through efficient use of foreign aid and economic resources, allowing her to stand on her own two feet. It is a known fact that the economic gain that can be generated by increasing her share in world trade by 1% will equal seven times that of the annual grants provided to the continent.
Report by MC Kinsey Global Institute
According to a report issued by MC Kinsey Global Institute, the emergence of available potential in the continent by means of long-term economic goals has led very powerful and global business circles to realize such potential and direct their investments towards this continent. The continent of poverty in the midst of prosperity, Africa is in fact the new favourite virgin territory for advanced countries.
Today, as it stands on the threshold of an economic leap, the opportunities are available to Africa that will enable it to follow a development path in much the same way that Asia did. According to IMF figures, Sub-Saharan Africa enjoyed a growth of 5.75% in 2012 and by virtue of the economic development, a growth of around 10% is expected in many countries on the continent.
MC Kinsey Global Institute’s report informs us that Africa’s real national income doubled to a rate of 4.9%, increasing to $1.6 trillion, compared to the period of 1990, despite epidemics, famine, and occasional natural disasters. This is almost at a level equal to the national incomes of Brazil and Russia. The main drive behind this increase is development in telecommunications, construction, retail, and banking industries across the continent. For instance, as a result of development in the telecommunications industry, there are 600 million cell phone subscribers continent-wide. Household consumer goods expenditures in Africa are above those of India and Russia, recorded at a level of $860 billion in 2008. As a result of the increasing rate of real national income, this figure is expected to reach $1.4 trillion by 2020.
Agricultural silo: In parallel with economic developments in Africa, urbanization has begun to increase significantly. By 2010, 40% of the population lived in cities, compared to 28% during the 1980s. In 2008, the annual per capita income of 85 million people was at a level of $5000 in Africa. The interesting point is the fact that around half of household income is used for non-food expenditures. This is also one of the important indicators for the great potential that the continent has for the consumer goods sector. In the following decade, it is estimated that the population will reach 128 million with an income of $5000 and upwards.
In terms of achieving economic growth in Africa, the development of the agricultural industry is one of the priority areas. We will be able to call Africa the next century’s “agricultural silo” for the entire world. Sixty percent of the world’s arable land is located on the African continent. Despite many unfavourable issues, such as lower levels of agricultural mechanization, inferior agricultural input, insufficient food safety, restricted market access of agricultural goods, and ambiguous ownership rights, agricultural production worth $280 billion was recorded Africa-wide in 2010. If all the unfavourable issues and deficiencies prevailing in the agricultural sector are eliminated and countries successfully implement the reform processes that they have been undertaking, the estimated agricultural production for 2020 is targeted as $880 billion.
Possessing 10% of the world’s petroleum reserves, 40% of the world’s gold reserves, and 80-90% of the world’s platinum and chrome, Africa has the potential to be a very significant market both for this century and the next in the mining industry. Based on 2008 data, the annual production of natural resources amounting to $430 billion is estimated to rise above $540 billion by 2020, with an annual growth rate of 2%. Eighty-five percent of the world’s petroleum, natural gas, and coal demand is supplied by this continent. The richness of valuable mines in the continent, such as iron and copper, particularly in Sub-Saharan Africa, is an affirmed fact. In 2010, $10 billion of mined iron was processed.
As it is known, infrastructure is the foundation of economic development. This especially concerns areas of transportation and energy. The problem of higher costs in transportation is a serious one especially for countries that do not have a coastline. For example, in Uganda, only 10% of the country has electrical infrastructure. Again, only approximately 30% of Uganda has land road infrastructure. This is also the sign of the serious potential available in the African market. In 2010, $72 billion was invested in the infrastructure of African countries. This was targeted at developing the continent’s infrascructure in such areas as road, water, waste water, energy, and communication, both intra-country and intercountry, either through the use of their own equities, or the budget they received from third countries or agencies. According to the calculations of the World Bank, the continent needs an annual average of $118 billion investments in infrastructure per year for the next decade in order to sustain economic development and social rehabilitation.
Table: Infrastructure investments in 2010. Africa recorded development not only in such other areas but also in foreign investment area. Foreign investments in the continent have septupled to $62 billion from the 2000s to 2008.
Without human resources, it is not possible to talk about development and growth. The African continent has serious opportunities in terms of workforce. It is stated that the employable workforce between the ages of 15 and 64 is around 500 million people. By the 2040s, Africa will have the largest employable population in the world, with 1.1 billion people, surpassing China and India.
As a result of developments in areas such as mining, agriculture, energy, water, and consumer goods expenditures, it is certain that Africa will have solid economic growth in the future, unlike of that its past. The continent is estimated to reach an income of $2.6 quadrillion by 2020 as a result of growth in the economic industry, positive changes in demographic trends, an increasing workforce, changes in the middle class, and consumer goods expenditures. As it is seen in the following table, consumer goods, mining, agriculture and infrastructure shall emerge as a result of changes in such industries.
Table: Industries expected to be developed by 2020 (billion dollar). Global players across the continent are mostly US, China and India-based companies. Last year, the USA’s production trade with Africa is seen to have reached $34 billion in exports and $119 billion in imports.
Multi-lateral foreign policy is extremely important. The Chinese presence in the region is undeniably large. For example, 13% of Africa’s petroleum is used by Chinese companies. Again, 37% of Africa’s petroleum exports are also shipped by China. If China’s activity across the continent keeps its pace, she will be the second major player in the continent in 2020. Again, the investment of Chinese companies in infrastructure has grown by 46% between 2000 and 2007.
As an important result of our multi-lateral foreign policy understanding, it is seen recently that Turkey has also been paying special attention to her relations with Africa. As a consequence of industrial development, experience in international markets, and our country’s growing economy, our economic relations with the continent have begun to develop very quickly. For this purpose, it is important to increase the mutual trade volume between the continent and our country as well as to develop said connections with our new partners. Again, it is impossible to ignore our historical and cultural bonds with many countries in this continent, especially in North Africa.
Since the end of the 1990s, Turkish relations with Africa have significantly transformed. However, the real momentum began with the adoption of the “Strategy to Strengthen Our Economic and Commercial Relations with Africa” in 2003 and with the announcement that 2005 would be the “The Year of Africa” in Turkey, thus elevating relations to a higher level. The participation of our country in the African Union as an observer state since 2005, the appointment our country as a “strategic partner” by the African Union in January 2008, and our membership in the African Development Bank, form the building blocks of our relations. Likewise, another indicator showing that our relations have gained pace is the rapid increase in the number of embassies across this continent. The number of embassies reached 35 in 2013, compared with 12 in 2009. In order to improve our commercial and economic relations with countries in the continent, agreements have been signed with more than 40 countries and Turkish Airlines has launched flights to more than 20 African destinations.
While Turkey’s industrial and foreign trade infrastructure has the capacity to support African economies, it should be noted that Africa is one of the target markets for a great number of Turkish SMEs. Turkey should first improve its competitive power, especially in the industries where it has comparative advantage. It should then intensify its investments in the region in such industries, as well as strategic industries such as energy and communications, and should provide technical assistance and support to African countries in areas where we are experienced. In time, this will deepen and expand our existing economic relations with the continent.
It is possible to say that Turkish commercial relations with the continent are being fostered at an increasing rate. As seen below, our trade volume, which is published as $9.6 billion in 2005, reached $11.9 billion in 2006, $12.7 billion in 2007, $16.8 billion, with an approximately 32% increase in 2008, $17.5 billion in 2009, and $20 billion in 2010.
In this period, where the world economy is being reshaped, Africa is very important in terms of the world’s future and stability. Therefore, Turkey has to become a leading player, both in industries where we have a comparative advantage, as well as many developing industries such as communications, transportation, energy, health, and consumer goods, by also making use of the opportunities provided by our membership in the African Development Bank. For this purpose, the Turkish business world must demonstrate the same courage that it has demonstrated in other regions so far. To this end, in particular, a close partnership must be established between the business world and the civil community, trade agreements must be activated between countries, Turkish Eximbank must extend loan limits for project financing in this continent, and we must become members of regional African associations in order to increase goods trading with the continent and contribute to our competitiveness in the continent’s countries. Again, the private sector will be more successful if it respects planning, sustainability, and localization principles in its future projects across this continent.
The continent of poverty in the midst of prosperity, Africa can move from being the center of Turkish people’s humanitarian aid donations to become a central market for the expansion of Turkey’s economic sphere.