Commodities are usually raw materials. Some are gold and copper. Some are energy products like oil and gas.
Africa is a continent rich in commodities. Kitwe, Zambia prospered as the price of copper went up.
The population of Kitwe doubled in the last decade. A prosperous middle class flourished. Houses, private schools and shopping centers appeared everywhere. The price of copper was high. A flood of Chinese workers and investment flowed into the country. Highways were built. The city became a beacon for Africa’s rising middle class.
Things have changed. The price of copper is half of what it was two years ago. Chinese contractors and store owners are leaving the country. Zambia’s kwacha currency is losing its value.
Violent crime is rising. There are blackouts. Thousands of miners are losing their jobs. They are withdrawing their children from private schools. Support for HIV and malaria medications is going down. Inflation has ruined sales of household goods.
Nigeria, Angola and South Africa are also suffering. Oil, gold and platinum have been mainstays of the economy. Commodity prices are falling in those places.
“Africa Rising” was the talk of the continent. Now that is in danger. It is not clear if governments can meet the challenge. Important numbers are changing. The middle class was about 350 million people. It included people earning more than $2 a day. That low earning amount increased the number.
There is a new definition of middle class. It is having, at least, $50,000 in assets. The new number is about 20 million Africans.
A great deal of money flowed into Africa. Can the financial sector of African countries manage the economic downturn? Can Africa’s politicians rise to the task? These are the important questions.
Source: The Wall Street Journal March 5, 2016