The woes of the BRICs are making Africa shine brighter. The not-so-dark continent is set to outpace all but one of the BRIC nations next year, the International Monetary Fund now believes. Policy failures in Brazil, Russia, India and China have led to reduced growth. These economic powerhouses may look to African stars like Ghana and Nigeria for useful lessons.
The much-vaunted BRICs have been running out of steam. Just three months ago the IMF thought the Indian economy would grow by 5.6 per cent this year. Now, it has cut that by a third to a pedestrian 3.8 per cent. Brazil, which as recently as 2010 was expected to expand by 7.5 per cent, looks set to grow around 2.5 per cent through 2014 - a level more appropriate for a fully developed rich nation. The IMF even scaled back the growth rate of BRIC dynamo China.
Heavy-handed government policies in the BRICs have been partly to blame. In Brazil and India in particular the IMF rightly complains of burdensome regulations slowing output. Brasilia, for example, has slowed what should have been an explosive rise in oil production by insisting that drillers use mostly domestic supplies. India, too, has binged on subsidies and local content rules.
In Africa, on the other hand, the private sector has been allowed more leeway and the relatively modest flow of capital has been better allocated. Thus Nigeria's current development, in which the growth rate of six per cent almost entirely derives from non-oil-sector expansion, should be an object lesson to Russia's Vladimir Putin, whose economy relies too heavily on crude. Similarly, public spending even in non-oil exporters like Botswana, Kenya and Tanzania is well below the bloated Brazilian level as a percentage of GDP.
Most fast-growing African countries are also more open to foreign investment than protectionist BRICs. Ghana, for example, set to grow by close to eight per cent this year, has been far more amenable to foreign oil explorers than Brazil.
Carried away with the hype surrounding their growth prospects, and drowned by enthusiastic flows of hot money, BRIC nations neglected necessary economic reforms. Of course, African countries need to get better at ensuring that the rewards of growth are not monopolised by privileged elites. Still, a glance at the continent shows how effective humbler and more open policies can be.
The much-vaunted BRICs have been running out of steam. Just three months ago the IMF thought the Indian economy would grow by 5.6 per cent this year. Now, it has cut that by a third to a pedestrian 3.8 per cent. Brazil, which as recently as 2010 was expected to expand by 7.5 per cent, looks set to grow around 2.5 per cent through 2014 - a level more appropriate for a fully developed rich nation. The IMF even scaled back the growth rate of BRIC dynamo China.
Heavy-handed government policies in the BRICs have been partly to blame. In Brazil and India in particular the IMF rightly complains of burdensome regulations slowing output. Brasilia, for example, has slowed what should have been an explosive rise in oil production by insisting that drillers use mostly domestic supplies. India, too, has binged on subsidies and local content rules.
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Most fast-growing African countries are also more open to foreign investment than protectionist BRICs. Ghana, for example, set to grow by close to eight per cent this year, has been far more amenable to foreign oil explorers than Brazil.
Carried away with the hype surrounding their growth prospects, and drowned by enthusiastic flows of hot money, BRIC nations neglected necessary economic reforms. Of course, African countries need to get better at ensuring that the rewards of growth are not monopolised by privileged elites. Still, a glance at the continent shows how effective humbler and more open policies can be.