RIVERSIDE, CALIFORNIA – The eurozone crisis is taking a toll on its citizens: low growth, soaring unemployment, and tough austerity measures, with no relief in sight. The likely adjustment of Europe’s fiscal strategy offers a glimmer of hope, but it does not address the challenge of restoring long-term growth.
One solution that Europe’s leaders should pursue is to develop strategic partnerships with African governments aimed at increasing exports. A developed Africa can open up new export markets for the West’s saturated and stagnant economies, and help to revive global growth. Indeed, Europe should be laying the groundwork for African countries to absorb its exports for the next 50 years.
According to global business consultant Vijay Mahajan, “50-150 million Africans are classified as economic elites with spending power similar to working-class citizens in the West,” and an additional 350-500 million Africans live in households with stable jobs. Moreover, the McKinsey Global Institute reports that Africa boasts a robust and growing consumer class, with a combined spending power of over $800 billion.
That number is expected to reach $1.4 trillion by 2020, and the continent’s population is expected to exceed two billion by 2050. This powerful consumer base will demand the products – such as housing, appliances, automobiles, and computers – that European consumers demanded over the last 50 years.
In order to tap into Africa’s growing middle class without falling into a pattern of exploitation, the European Union should enter into collaborative agreements with African governments that help to meet the continent’s infrastructure requirements. The World Bank estimates Africa’s need for such investment at more than $35 billion annually.
For example, Nigeria requires 100,000 megawatts of electricity to support its population of 150 million, but generates less than 5,000 megawatts. With a stable power supply, Nigeria’s economy could grow 8-12% annually, according to Nigerian Finance Minister Ngozi Okonjo-Iweala, strengthening the middle class and, in turn, increasing demand for European products. At a rate of $1 million per megawatt, Europe could line up an export market worth $100 billion annually, while creating thousands of jobs in Europe and Nigeria.
Moreover, with its population projected to double in the next three decades, Nigeria needs two million farm tractors and resources to build up to two million houses annually. European companies could be given tax breaks or other incentives to establish assembly plants in Nigeria, thereby creating jobs in the region and further expanding Africa’s consumer base. Given that nearly all consumer and industrial products are in short supply in Africa, similar job-creation partnerships could be established in other sectors, resulting in permanent, mutually beneficial cooperation between Europe and Africa.
Africa’s output is projected to increase by more than 5% annually over the next 30 years, and the International Monetary Fund predicts that its growth will outpace that of Asia in the next five. European leaders seeking to escape austerity and stagnation should pursue new opportunities for recovery in this fast-growing region. By forming mutually beneficial partnerships with its former colonies, Europe can increase its exports and put its industry back to work, while providing African countries – which are already looking to China and India – with the resources that they need.