Growth Limiter

Some African countries, e.g. Rwanda and Ethiopia, are being tipped for economic take off, although these aren’t without their doubters, especially over succession planning. Other countries have liberalised their markets and, anecdotally, there would appear to be lots of business opportunities there, but few are predicting economic miracles any time soon.

In Anglophone Africa many of these latter group of countries have large communities of (mostly white) South Africans. The less charitable view says that some of these folks have moved north to maintain the kind of segregated life-style which is no longer tolerated in SA. Although a minority do seem to have some fairly unreconstructed views (as do too many expats from other countries!), I think, much like the Indian communities in the same countries, they bring a much needed boost; they are prepared to invest where others are not. I guess Malawi looks less scary a proposition from Jo’burg than from Washington DC.

However, the presence of these relatively recent, economically well-off migrants also tells me something else. It says that the incomers see potential business opportunities which are not being exploited by local people. And, as I see it from my admittedly narrow perspective, this brings us to one of the main reasons that economic growth is not taking off in these countries. The stock of human capital is too low. Service companies that depend on highly skilled staff such as banks start off promisingly but then quality of service drops through the floor once they expand very much; they just cannot get the staff of the calibre they require. In contrast, the new growth candidate countries, have apparently invested significantly in developing a skills economy (admittedly easier in a small country like Rwanda).

As a recent discussion on this blog recently concluded, this is probably not something which is going to take a while to change. However, it does have significant impact on a country’s capacity to absorb aid, something I shall discuss in my next post

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