Of all the countries in sub-Saharan Africa to be optimistic about, the most promising is Kenya. Economic and political forces are converging to put the continent’s seventh-largest nation in a relatively favorable position.
Africa is the fastest-growing continent and is expected to account for one-quarter of the world’s population by 2050. That means more multinational corporations see a need to have a direct presence somewhere in sub-Saharan Africa.
Many such companies already realize they need a presence in Asia, with Singapore proving increasingly popular as the hub, especially as Hong Kong has been absorbed into communist China.
Illustration: Louise Ting
Where in Africa might such a comparable cluster of companies evolve? Unfortunately, some of Africa’s leading nations have experienced major troubles lately. Economic growth has slowed in Nigeria, Africa’s most populous nation, and the country has only begun to make much needed reforms. Ethiopia, the second-most populous country, just went through a civil war. Political problems and power shortages continue to plague South Africa. For the time being, those places are not in the running to be a dominant sub-Saharan economic hub, if only because expats would be reluctant to move there.
In contrast, a locale with a reasonable level of English fluency and an attractive year-round climate would get a lot of attention — and that nicely describes Kenya. Kenya had a growth rate of about 5.5 percent last year, despite negative shocks to the prices of imported food and energy. Since 2004, growth rates have been in the range of 4 to 5 percent.
Kenya has some geographic advantages. It has an extensive coastline on the Indian Ocean, and research suggests that landlocked countries have worse economic performance. Countries with a coast find it easier to stay in touch with the rest of the world, and Kenya has relatively easy access to China and India — large markets and sources of capital.
In the current geopolitical climate, East Africa is attracting more interest from more sources than most of West Africa.
In terms of scale, Kenya’s population of about 57 million cannot compete with Nigeria’s 222 million.
However, East Africa, with almost 500 million people, has a larger population than West Africa.
Tanzania, just south of Kenya, has a larger population than Kenya.
However, Kenya is much wealthier and has superior infrastructure — including the digital infrastructure, as Internet access in Kenya is ranked among the most reliable in Africa.
To the extent the world focuses more on green energy, Kenya has a positive story to tell. The country already has more than 80 percent renewable energy, and the climate is ideal for an ongoing expansion of solar power.
Foreign companies looking to boost their green reputations might find Kenya an attractive destination.
However, expensive energy — due in part to taxes and poor regulation — has been a growth drawback.
There are other elements in the case against Kenya. It has had difficulty attracting foreign direct investment, even compared with other African nations. Corruption, regulatory barriers to entry and political instability remain concerns that cannot be dismissed lightly.
However, Kenyan governance has been stable, and last year’s election went relatively well. The government is proving more adept at preventing major terror attacks, often coming from groups in Somalia.
As Kenya becomes wealthier, there is a good chance those problems would diminish further.
It is also possible that sub-Saharan Africa might not develop a single dominant corporate hub. The United Arab Emirates would continue to evolve into Africa’s financial center, Lagos would have the most start-up activity, South Africa would remain the dominant business center in the south — and London, Beijing and India would play more important roles in Africa’s economic future.
Still, African distances are great and its population is growing, which suggests Kenyan growth no matter what. The idea of putting a manufacturing plant or service center near Nairobi or Mombasa makes sense even if it serves only East Africa.
Kenya’s immediate neighbors to the west and south, Tanzania and Uganda, also have an English-language background, and Tanzania could become one of the world’s most populous countries.
Not only is Africa rising, but East Africa is too. Kenya is likely to be the easiest and most predictable way to bet on it.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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