Monday, April 1, 2013

The Next Shanghai May Be in Africa

Stephen Hayes is president and CEO of the Corporate Council on Africa.
In 1987, I visited Shanghai for the first time. As I walked the streets, it was as if I were walking on a movie set that focused on 1930s China. Vendors were cooking along the streets, and there wasn't much you couldn't buy if you were hungry or looking for cheap goods. The hotel in which I stayed had been built in the 1920s of brick, and the bare rooms were adequately but simply furnished. I was shown the plans for Shanghai of the future and thought them highly imaginative and hopeful, but in my mind they were dubious.
Seven years later I returned to Shanghai and I could not believe that any city anywhere, even with the most modern technology, could possibly change in such ways and in such a short time. The plans I had been shown in 1987 had not only been realized, but the city had pushed beyond them. There were new cities within cities, giant throughways, and where there had been thousands of bicycles there were now thousands of automobiles, so many that one imagined they had been hidden all along.
Now, more than a quarter century later, the transformation of Shanghai, and really most of eastern China, remains the most spectacular feat I have witnessed in my lifetime. Although I think they would have been far better off using bicycles instead of so many automobiles, the transformation was simply overwhelming. Shanghai in a decade became one of the greatest cities in the world.  Impossible to imagine and almost as hard to believe.

I say this thinking of Addis Ababa, Ethiopia. If one goes outside the city to the hills around, and looks down at the bowl into which most of the city fits, I think that this too will be a very different city in less than ten years, as will many African cities. In Abuja, Nigeria, they are enacting a twelve-phase development plan, and are now in phase four. For nearly all the development work for phase five, the Chinese have invested, ensuring that phase six is not so far away.
Addis Ababa, at 8,000 plus feet above sea level, is the third highest capital in the world, but because it sits in a bowl, at times of thermal inversion it will be a city increasingly hard to see from the hills, just as Mexico City and Los Angeles are on some days now. The pollution of progress will wash over the city, and what one will see will be the peaks of buildings that have yet to be built. Addis Ababa will be a very different city than even the hub of activity and perceived chaos it is today, a mix of old and new, just as Shanghai was thirty years ago.

There are several similarities to China of 1987 in the Ethiopia of 2013, though it seems difficult for Americans to comprehend. The standard of living for the people is rising and there is slowly, cautiously, a creeping openness in public discussions. By American standards, political control is too heavy-handed, but one must realize what the country's recent past has meant. China had the Cultural Revolution and its aftermath into the early 80s, and Ethiopia had its own horrific oppression in the 70s and 80s. Both countries took a giant leap backwards before beginning to come out of the abyss.
It is difficult to have perspective if you haven't ever been through these type of experiences. We can look at how our own Civil War affected our nation and see some of those wounds still affecting us more than 150 years later.
In ten years, Ethiopia may be the most changed nation on the continent. Its investment in building a national power grid is greater than any other nation in Africa. This alone presents major opportunities for American power companies large and small. China, and to a lesser extent Japan, are building its road and rail infrastructure. The Ethiopian Government is investing $5 billion in the light railroad project between Djibouti and Addis Ababa, as Djibouti serves as the major port for landlocked Ethiopia. Of its total annual budget, Ethiopia is allotting ten percent to infrastructure development, the highest such percentage in Africa. A $1.2 billion dollar power line to Kenya is also in planning.

Ethiopia is challenged by a population of 90 million people, and as a country with one of the highest population growth rates in the world, there will be a younger and growing population, a potential reservoir of discontent without jobs. This was not so different from Shanghai and the surrounding area in the 1980s.
Telecom and IT investors such as Samsung are also entering Ethiopia, and as noted in a previous blog, dialogue and debate will slowly open up in the country, just as it did in Shanghai and throughout China in the 1990s. Ethiopia, just as China, will see that they have no choice but to ease communication restrictions if they want even more investors and a supportive nation.
Not all changes will be improvements, of course. Pollution will likely increase significantly, and global warming may be accelerated because of all that we call progress. We can only hope that greater investment in clean energy and a careful examination of our transportation schemes worldwide will also be considered carefully. The great cities of the future, of which Addis Ababa could easily become one, depend on forward thinking. These are also great opportunities for investors and entrepreneurs.