Wealth creation is the key to Africa's development
Consumption is a fundamental driver for growth. When disposable income and consumption rise, so does demand for goods and services. This leads to enhanced demand for labor, reductions in unemployment, and leads to even more consumer spending.
A Bank employee, sitting beside a woman, reviews the details of a loan application in Accra. (Creative Commons)
Accordingly, low GDP per capita, or the majority of a population living, for example, off less than $4 a day, is incompatible with meaningful economic growth. If a family of 5 lives off less than $4 a day, the approximate average for 29 of 55 African nations, which includes MICs, this level of consumption will not aid development. A family of 5 living off less than $4 a day will effectively have no, or limited disposable income, beyond their daily living expenses, food, utilities and transportation.
Yet, in one African nation after another, government policy seems oriented towards taking income away from its citizens, rather than attempting to supplement it. But, what if there is another way. A way that promotes and creates wealth, rather than the exact opposite.
This will have to mean moving the means of production, land and capital, further away from the state to its citizens. This will have to mean creating economic opportunity within communities, strengthening the middle class, creating millionaires, and advancing wealth across various income brackets.
There are countries in Africa where over 90 percent of land is still owned by the state. Where the means of capital is firmly in the hands of the state. Where if you own land, and underneath that land you find oil, that land becomes the property of the state. Unless the means of production move coherently towards private ownership, and away from the state, wealth creation and development will stall.
For example, China has learned that a society without wealth, without consumers and high levels of disposable income and spending, will never allow a nation to prosper. Today, China has the seventh largest number of millionaires on planet Earth, millionaires who own the means of production, and not the state.
More perplexing still is that every economic strategy of virtually every African nation I’m familiar with, their vision 2030s, are void of a coherent wealth creation strategy. A strategy specific to every community, to every locality, to create wealth, disposable income, consumer spending, and eventually a vibrant middle class.
I’ve argued for years of the importance of new development approaches focusing exclusively on wealth creation. African countries, where people live off less than $4 a day, is a formula inconsistent with consequential economic development. Having no wealth creation strategy, and expecting more of the same to magically promote economic growth, is the definition of folly. Thinking that development is possible without creating wealth is folly. Until this thinking changes, poverty in Africa will not only remain unresolved, it will prevail.