Sunday, July 1, 2012

African Economies Growing on Wobbly Foundation


It is inconceivable that 10 short years ago Africa was the focus of the architects of the Millennium Development Goals, an effort to eradicate poverty. In 2001 Tony Blair described the state of Africa’s poverty as “a scar on our consciences”. Today the dominant narrative is that Africa will be for the first half of this century what Asia was for the second half of the last century.

In spite of the global economic downturn, Africa’s income is projected to increase by 4.5% in 2012. A recent World Bank report shows that poverty is declining at about 1% a year. Child mortality, a critical human development indicator, is falling sharply. Countries such as Rwanda, Ethiopia, Gambia and Malawi have reported declines of 25-40% in under-five mortality over the last decade.

Parts of Africa are enjoying economic growth inconceivable just a decade ago. According to the International Monetary Fund (IMF) seven of the world's 10 fastest-growing economies will be Africa. Ethiopia, Mozambique, Tanzania, Congo, Ghana, Zambia and Nigeria are expected to expand by more than 6% a year until 2015. According to African Development Bank Chief Economist Mthuli Ncube, Africa's middle class is about 300 million and growing at 3.1% per year.

It is no secret that the demand for commodities such as oil, iron, gold and copper are driving growth. For example, in 2008, the Democratic Republic of Congo took $6 billion of Chinese money to build 3,840 kilometers of road, 3,200 kilometers of railway, two universities, 32 hospitals and 145 health stations. China got access 10 million tons of copper and 400,000 tons of cobalt.

Africa’s growth gathered pace with the commodity of the 1970s but plummeted when commodity prices collapsed during the subsequent two decades. I submit that the fundamentals necessary for stable and sustained growth are weak or totally absent in some countries. Celebrating Africa’s growth is therefore both premature and mischievous.
It is premature because the magnitude of need is daunting. Africa is yet to make a dent on hunger and poverty. One person in four suffers from malnutrition and Africa remains the region hardest hit by food insecurity. It is mischievous because almost half of Africa’s 1 billion people still live on less than $1.25 a day. Moreover, Africa contributes a paltry 2.6% ($1.7 trillion; GDP of Britain is $2.26 trillion) of global GDP.

Africa’s historic stagnation amidst a vast ocean of material wealth is ironic and unconscionable. I offer three examples to illustrate my point.

First, with a per capita income of $300, the DR Congo posted a GDP of $25 billion in 2011. The untapped mineral resources – cobalt, diamond, copper and gold – of the DR Congo are estimated at 38% of global GDP ($24 trillion), equivalent to the combined GDP of Europe and the United States of America.

Second, Africa has 25 percent of the world’s arable land but remains hungry and malnourished, often needing food aid. Currently, nearly 15 million across the Sahel face severe food shortages. More than one million children in the Sahel region are at risk of severe malnutrition. In 2011, the Horn of Africa faced what has been called the worst drought in 60, leaving 12.4 million people in an acute food and livelihood crisis.

Third, Africa has 10 % of the world’s oil resources, 8 % of the world’s gas resources and 60 % of the world’s diamonds. Africa’s remains engulfed in eternal darkness, reeling from the economic burden of thermal fuel sources while the Hydroelectric power potential of the DR Congo alone is estimated at 100,000 MW.

The staying power of Africa’s growth is weak. Dependence on the global hunger for Africa’s raw materials as a basis for growth is akin to building a foundation on quicksand. Moreover economic growth alone is not sufficient to solve the complex and multiple dimensions of Africa’s socio-economic and environmental challenges.

The staying power of Africa’s growth must derive from investing in the education and training of its bludgeoning and youthful population. Africa must increase secondary and tertiary enrollments and improve the overall quality of their education systems. An educated workforce could become a significant source of domestic consumption, innovation and production.

The staying power of Africa’s growth must derive from strengthening the administrative capability of the state and public institutions to implement, policies, provide of basic services and uphold the rule of law.

The staying power of Africa’s growth must derive from economic diversification to reduce dependence on commodity exports. African economies must prioritize domestic service sectors. Research shows that internal services account for virtually all-net job creation in high-income countries and for 85 percent of net new jobs in middle-income ones.

Socio-economic progress is modest and but foundation is wobbly. Africa cannot afford to rest on its laurels. There is more work to do!

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