April 27th, 2011
02:08 PM GMT
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Business leaders and political bigwigs will soon meet in Cape Town for the World Economic Forum. There is a clear understanding that the dialogue has shifted in recent years when it comes to understanding Africa’s role in the world.

No longer dismissed as a business basket case, the global community knows that money is being made on the continent. Growth rates are strong. Investment is flowing. Returns are good.

The big question for Africans is to ensure that they too get a share of the spoils.

But how do they do this?

The answer for many is the rather wordy phrase “beneficiation at source.” Politicians like to throw this buzz phrase into conversations because it describes how local communities should “benefit” from their own natural resources.

Traditionally, foreign companies buy Africa’s raw materials, whether they are metals, oil or crops, and then sell the finished product back to Africa.

Now, there is a political push for more African control over its refining capacity, to have more influence over the end product.

While this makes sense, economists and analysts all point to two significant challenges that Africans face as they try to unlock the potential of their continent and grab the opportunities “at source.”

Over and over again, I hear the same two concerns - that a lack of infrastructure and a skills deficit continue to hold back Africans.

If Africa’s working-age youth - an estimated half-a-billion people by 2050 - are to seize the chances that lie before them, then more investment has to be plowed into education.

African engineers, farmers and architects are urgently needed to create a better infrastructure to underpin the continent’s economic potential.

Highways linking big cities and regional hubs need to be built. Fertile agricultural lands need to be farmed strategically. Electricity and power grids need to be upgraded and maintained.

The world and African leaders cannot talk about economic growth unless they increase investment in the critical areas needed to sustain that potential.



April 27th, 2011
03:53 AM GMT
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(CNN) – Time may be running out much faster than we thought for the United States.

In just five years, China may lay claim to the title “World’s Largest Economy”. This is not coming from China fearmongers or doomsayers – this is according to the International Monetary Fund and its new GDP forecasts.

The numbers: China’s gross domestic product will rocket $8 trillion in the next five years to $19 trillion. The U.S. GDP will grow $3.5 trillion in the same timeframe to $18.8 trillion. And it will be in that year - 2016 - that China's slice of world output will start to edge past the United States': 18% versus 17.7%. In the years after, that gap is forecast to widen.

So how can this be? And so soon? Especially after numerous prior estimates have forecast China’s #1 status to occur in the 2020s, if not 2050? Well, the IMF has based its predictions on numbers for purchasing power parity, or PPP. This gauges the strength of China's domestic consumption, which is then compared to that in the U.S. The famous Big Mac index is based on this. That operates on the notion that the iconic McDonald’s burger should cost the same in each of the more than 120 countries it’s produced. If a Big Mac costs less in another country, then that country’s currency is considered undervalued. This year, you’ll pay 40% less for a Big Mac in China than in the United States. Digest the implications of that morsel as you keep reading.

I interviewed Frederic Neumann, HSBC’s Managing Director of Asian Economics Research, here in Hong Kong. He confirmed PPP is one credible way to measure GDP, but that there are also other credible ways. Those 'other' ways, he says, show that China’s path to economic #1 is much longer than the IMF’s forecast leads us to believe.

Neumann says U.S. dollar terms are a different way to measure China growth. Using this "it would take much longer for the Chinese economy to overtake the U.S. - probably 2025," And while PPP measures domestic purchasing power, U.S. dollars are a better gauge for purchasing power on the world stage.

Per capita income is a third way to measure economic power. The CIA World Factbook estimates that China’s 2010 figure was $7,400, compared with $47,100 for the United States. With this in mind, Neumann says China might not overtake the U.S. until the 2040s or 2050s - a date more in line with past estimates.

Regardless, it is not a question of "if" but “when” China - which last year overtook Japan as the world’s second largest economy - will be the world’s biggest economy. Whenever it happens, that day will herald a new dawn for China and the end of an age for America.



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