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Monday, February 29, 2016

Africa must chart unique development path

Africa’s economic performance in the last two decades has been impressive. Leaders of multinational corporations and development bureaucrats have proclaimed the irreversible march of prosperity. But Africa’s path to durable and inclusive prosperity is far from certain.

Many economists and development experts believed that Africa’s most promising path to growth would be through modernization of agriculture and the advancement of rural prosperity. Many, including myself have argued that harnessing the combination of vast land resources and the abundance of rural labor would lay a most durable foundation for inclusive growth and economic transformation.

Imagine the eruption of agriculture-based cottage industries, which in turn spur increased productivity and value addition while attracting requisite enabling investment in services and infrastructure. I am talking about water and sanitation, financial services, health centres, electricity, broadband Internet, roads and railways.

Africa’s growth has been impressive and the continent has shaken off the stigma of squalor and deprivation. But such growth has not spread beyond the clutch of economically dominant minorities and the precincts of major urban neighborhoods. For all intents and purposes, Africa’s rural economies are comatose. The tragedy is that this is where a majority of Africans are born and live.  

A majority of these rural Africans practice subsistence agriculture. They keep livestock and grow crops, mainly for subsistence. In many rural African communities cattle is not reared for beef or hide. Cattle are kept as fungible capital assets. Many cleaver things have been said and written about why Africa’s agriculture is shackled by low productivity. What is tragic is that so little has been done, based on these cleaver diagnoses, to increase the productivity and profitability of Africa’s agriculture. My view is that we don’t have the right diagnoses.

How one might think about Africa’s growth and shared prosperity is so different today than it was 20-30 years ago. A path of inclusive growth and prosperity predicated on mass employment through industrialization and agriculture is pretty unlikely, thanks to globalization and large educated youthful population.

The emergence of China and other countries like India, Mexico, Indonesia, Turkey and Brazil as industrial powerhouses has made improbable Africa’s path to industrialization. African economies have been turned into warehouses and consumer destinations for cheap manufactured goods. A fairly sophisticated service economy is emerging to support this veritable trend of de-industrialization.

Take a walk downtown Nairobi and you will encounter a staggering density of retail shops. Our roads, streets and alleys are chocking with merchants who brave the sweltering heat, dust and foul air to sell Chinese toys, razor blades, clothes, watches, cheap art, groceries and mobile phone accessories. The business of building and renting warehouses is both booming and lucrative. What used to be Nairobi’s industrial area is now warehouse central.

Agriculture is unlikely to drive meaningful growth. FAO estimates that the average age of the African farmer is about 60 years. A study by the East African Institute of the Aga Khan University revealed that only 11 percent Kenya’s youth would prefer to work in agriculture. Interest in farming was negatively correlated with educational attainment. Moreover youth below the age of 25 years were least interested in farming. Emboldened by high education and enticed by the glamour of urban living the youth are city-bound and find low paying jobs in the service sector more appealing than working the land.

Today a large number of African countries are largely agrarian, but characterized by rapid urbanization, a well-educated youthful population, a trend of de-industrialization (thanks to globalization), a weak modern economic structures and primordial democracies. It is not surprising that a majority of the so-called development experts get Africa wrong. The content is replete with failed projects.

The structural transformation models of the past century focus on the mechanism by which underdeveloped economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, more urbanized, and more industrially diverse manufacturing and service economy. Such simplistic staging of development is irrelevant for 21st century Africa.

In my view African scholars lack the conceptual apparatus with which to define generalizable theories to guide economic growth, which take into account Africa’s unique contemporary context. Many intellectuals, including myself have argued for structural transformation for Africa. However, the transformation must be integrated and capable of simultaneously leveraging agriculture-based rural economies, educated youthful population, urbanization and the emergence of a strong service sector.  

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