There are some external factors that have contributed to much of the boom in this new consumer class in Africa: evolving trade patterns, particularly from increased demand coming out of China, and technological innovation abroad that spurs local productivity and growth like the multibillion-dollar fiber-optic lines that are being laid out between Africa and the developed world.
Entrepreneurship has risen in Africa powered in part by the influx of returning skilled workers. Just as waves of experts returned to China and India in the 1990s to start businesses that in turn attracted more outside talent and capital, there are now signs that an entrepreneurial African diaspora will play a part in the transformation of the continent.
While brain drain is still a chronic problem in countries such as Burundi and Malawi—some of the poorest in the world on a per capita basis—Africa’s most robust economies, such as those in Ghana, Botswana, and South Africa, are beginning to see an unprecedented brain gain.
Reports suggest that roughly 10,000 skilled professionals have returned to Nigeria in the last year, and the number of educated Angolans seeking jobs back home has spiked 10-fold, to 1,000, in the last five years.
Bart Nnaji gave up a tenured professorship at the University of Pittsburgh to move back to Nigeria in 2005 and run Geometric Power, the first private power company in sub-Saharan Africa. Its $400 million, 188-megawatt power plant will come online this fall as the sole provider of electricity for Aba, a city of 2 million in southeast Nigeria. Afam Onyema, a 30-year-old graduate of Harvard and Stanford Law, turned down six-figure offers in corporate law to build and run a $50 million state-of-the-art private hospital with a charitable component for the poor in southeast Nigeria.
Just as India once harnessed its booming population of cheap labor, Africa stands to gain by the rapid growth of its big cities. Already the continent boasts the world’s highest rate of urbanization, which jump-starts growth through industrialization and economies of scale. Today only a third of Africa’s population lives in cities, but that segment accounts for 80 percent of total GDP, according to the U.N. Centre for Human Settlements. In the next 30 years, half the continent’s population will be living in cities.
Aliko Dangote, Africa’s richest black entrepreneur, has also cashed in on this consumer culture, with a net worth of $2.5 billion, according to Forbes. His empire, which began in 1978 as a trading business that imported, among other things, baby food, cement, and frozen fish, is focused on Nigeria’s burgeoning domestic growth, producing cement for shopping and office complexes; renting luxury condos; making noodles, flour, and sugar; and now expanding into services such as 3G mobile networks and transportation. “There’s nowhere you can make money like in Nigeria,” says the 53-year-old Dangote. “It’s the world’s best-kept secret.”
Not anymore. A recent study by Oxford economist Paul Collier of all 954 publicly traded African companies operating between 2000 and 2007 found that their annual return on capital was on average 65 percent higher than those of similar firms in China, India, Vietnam, or Indonesia because labor costs are skyrocketing in Asia. Their median profit margin, 11 percent, was also higher than in Asia or South America. African mobile operators, for instance, showed the highest profit margins in the industry worldwide. As a result, foreign multinationals like Unilever, Nestlé, and Swissport International report some of their highest growth in Africa.
Again, whilst grateful for the success, Africa must remain cognizant of the fact that the economic miracle has yet to prove itself in people’s everyday lives and until that happens, the hype must wait.