When you think of the fastest growing economies in the world you might think of a country like China, because they have been growing at a high rate of roughly 6 to 7% per year for the past several years, and have become an economic superpower.
But…China is actually not even in the top 20 fastest growing economies on the planet. In fact, when you take a look at the 50 fastest growing economies on the planet, roughly 38% of them come from one single continent. A continent that is quickly becoming the economic battleground of the world.
This is Africa.
In 2002, the GDP per capita of Sub-Saharan Africa was a paltry $588. Yet by 2019, the GDP per capita had grown to well over $1600. That is a 272% increase in the wealth of the Continent in less than 2 decades. This massive increase in wealth has brought many of Africa’s countries like Nigeria, Botswana, and Ghana out of relative poverty, and into the middle-income class of the world.
But that brings up the question, what has brought Africa’s economy out of poverty? Or maybe more importantly, who has brought Africa’s economy out of poverty.
You see, Africa has been the most underdeveloped continent over the last several centuries as It has historically had a poor infrastructure that has drastically limited its economic development.
For example, the united states has a surface area of 9.8 million kilometres squared, and
the continent of Africa has a surface area of roughly 30.4 million km squared.
Yet the United States has over 108 thousand kilometres of highways constructed within the country, and africa has only 60 000 kilometres of highways constructed for the entire continent.
In fact, to this day there are still no paved highways that travel through anywhere in Central Africa.
And the transportation network has been just one of a litany of infrastructure flaws in Africa. The continent has also historically had problems with electricity availability, internet access, and water shortages as well.
But…things started to change just a few decades ago.
As China began transforming itself from a poor farming nation in the 1970’s, to an economic powerhouse, it slowly started gaining large amounts of influence in Africa. IT did this by increasing foreign aid to african countries, increasing trade with many african countries, and by investing billions of dollars per year in African infrastructure projects.
For example, Africa’s main railways in Kenya, Ethiopia, Angola, Djibouti, and Nigeria are all funded by China.
China has also funded The African Union Headquarters, The West African Block Headquarters, Several major power plants, oil refineries, hydropower plants, Zimbabwe’s new parliment building…and… a private chinese developer is funding the development of an entire city in egypt.
But that brings up the question. Why is China investing so much money in Africa? Well there are a few key reasons. One of which is that China has now become Africa’s largest trading partner, trading nearly $128 billion dollars worth of goods every year, meanwhile the United States only trades roughly $48 billion dollars worth of goods with africa every year. What this means is that Africa has resources that China wants. For example, about one third of all the oil used in China comes from Africa.
Another reason why China has pumped so much money into Africa is because return on African investments has been fairly good. For example, from 2006 to 2011, the average return on African investments for China was a hefty 11% per year. In fact, roughly 15% of all african debt is owned by the Chinese government, and two thirds of all loans given to african nations in the past 3 years have come from China.
China has also begun shifting a lot of its labor industries to other countries that have cheaper labor. And the continent with the cheapest labor in the world right now is Africa. That is why many Chinese manufacturers have shifted their base to countries in Africa such as Ethiopia. It is estimated that roughly 12 percent of Africa’s manufacturing production today is being run by Chinese companies.