Africa’s Rise

Africa’s rise is in danger of faltering. After years during which the continent’s economy grew at an average annual rate of 5%, global uncertainty, depressed commodity prices, and jittery external conditions are threatening to undermine decades of much-needed progress.

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Africa’s rise is in danger of faltering. After years during which the continent’s economy grew at an average annual rate of 5%, global uncertainty, depressed commodity prices, and jittery external conditions are threatening to undermine decades of much-needed progress. Ensuring the wealth and wellbeing of the continent’s residents will not be easy; but there is much that policymakers can do to put Africa back on an upward trajectory.

First and foremost, policymakers must secure the financing needed to pursue sustainable development in an uncertain global environment. The World Bank estimates that Africa will require at least $93 billion a year to fund its infrastructure needs alone. Climate-friendly, sustainable infrastructure will cost even more. And yet, as long as global growth remains weak, Africans cannot count on developed countries to fully honor their commitments to help attain the Sustainable Development Goals.

Africa must rapidly develop its own resources, beginning by nearly doubling tax revenues. Across Sub-Saharan Africa, tax revenues account for less than one-fifth of GDP, compared to more than one-third in OECD countries. This means there is plenty of room for improvement. From 1990 to 2004, for example, Ghana reformed its tax system and raised revenues from 11% to 22% of GDP. Admittedly, such progress is difficult; in Nigeria, we saw an opportunity in raising non-oil tax revenues, but struggled to seize it.

Another source of domestic resources is the roughly $380 billion in pension assets held by just ten African countries. Policymakers should be leveraging these considerable sums.

At the same time, African countries will have to find a way to diversify their economies. Diversification requires investment in the future, in the form of education and well-developed infrastructure, including telecommunications, power, roads, rail, and water.

There are plenty of models to follow: Dubai, Singapore, Thailand, Malaysia, Mexico, Indonesia, and South Korea are all admired by Africans as economies that managed to transform themselves. Dubai, for example, set out more than three decades ago to prepare for a future without oil. The government implemented a step-by-step transformation of the country into a service economy, putting in place the infrastructure and incentives necessary to build up financial services, tourism, medical services, real estate, media, arts, and culture. South Korea and Singapore, which had few natural resources on which to rely, are no less inspiring.

The secret behind these countries’ success is relentlessly focused leaders, whether entrenched but benign dictators or democratically elected politicians with a shared vision of a broad-based economy. Sub-Saharan Africa has paths for diversified growth that many of the trailblazers did not: value-added agriculture and agro industry, the processing of mineral resources, petrochemical complexes, manufacturing of durable and consumer goods, tourism and entertainment, and an emerging information-technology sector.

As the necessary measures for diversification are implemented, policymakers must ensure that the economic growth they are pursuing creates jobs. Sadly, this has not always been the case. Much of the recent growth has benefited only a few, leaving many behind – most notably young people and women. From 2006 to 2013, inequality rose in many of the continent’s most important economies, including South Africa, Nigeria, Ghana, Tanzania, and Rwanda.

These were challenges that we were starting to address in Nigeria when I was finance minister. We knew that we needed not just to secure growth, but also to improve the quality of that growth.

To that end, policymakers must ensure that growth is channeled into sectors that create jobs, such as agriculture, manufacturing, and services. They may also have to redistribute income and strengthen social safety nets to protect better those at the bottom of the ladder.

Matching skills to job opportunities will be crucial. Some 70% of Africa’s population is under 30, and the continent is home to half the world’s primary-school-age children who have been deprived of the opportunity to study. Offering Africa’s children basic reading, writing, and technology skills, as well as vocational, technical, and entrepreneurial training, must be a top priority.

Weak health-care systems must also be strengthened in order to tackle the endemic diseases that sap productivity, such as malaria, as well as improving preparedness for outbreaks of deadly epidemics. The stakes are high. The World Bank estimates the Ebola outbreak shrank the economies of Sierra Leone, Guinea, and Liberia by 16%.

As the world economy sputters, African countries will have to develop trade with one another. In 2013, African goods and services accounted for just 16% of trade within the continent, and just over 3% of world trade. One problem is that most African countries produce the same type of commodities and trade them with very little value-added. Policymakers must encourage greater specialization; differentiated goods and services will add value and volume to trade.

Logistics pose another obstacle to intra-African trade. Policymakers must make it easier to move goods across borders, by improving connectivity between countries and reducing bureaucratic hurdles and administrative costs. For example, road transport tariffs across Africa are estimated at $0.05-$0.13 per ton-kilometer, compared to the average of $0.01-$0.05 for all developing countries.

The Rift Valley Railway project, which will eventually link Mombasa on the Kenyan coast to Kampala in Uganda, is a good example of the benefits that investments in transportation could provide. The African Development Bank estimates that it will double the volume of trade between the two countries, while reducing marginal costs by 30%.

As they make these investments, policymakers must not forget that much of Africa’s recent growth can be credited to good macroeconomic policies and sound economic management. Extending the continent’s rise will require strengthening the continent’s economic fundamentals.

This means ensuring that prices in the economy are correct, starting with the exchange rate. Some countries may need temporary controls to curb damaging capital outflows, but policymakers should aim for a market-based exchange rate and a solid plan for governing inflation, debt, foreign-exchange reserves, current accounts, and fiscal balances.

Africa’s potential can hardly be overstated. The continent is well placed to build diversified economies based on low-carbon, sustainable infrastructure. But policymakers cannot simply assume that Africa’s rise will continue. They must take the right steps to ensure that it does.

Adapted from project-syndicate.

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19 Comments


  1. Africa’s rise is predicted to be stagnated if certain changes aren’t made: author introduces several solutions that were made by several countries that made considerable economic growth recently. It is a country of potential, but modifications must be made in order for the growth to continue.

    Reply

  2. must diversify economics, trade must increase + specialization important, must strengthen economy

    Reply

  3. Policy makers in Africa must take several steps, in different areas of policy, to ensure that Africa’s economic potential comes to fruition.

    Reply

  4. MI1: diversifying economy = Africa’s growth
    MI2: growth should increase jobs
    MI3: increased trade b/w African countries could be ameliorated by specialization of goods

    Reply

    1. M1) Africa econ in danger
      M2) Redistribute resources, focus on broader economic sectors
      M3) Lots of potential but requires action

      Reply

  5. Africa has great economical potential and in order to unlock their potential steps x, y, and z should be taken.

    Reply

  6. MI: Africa’s continued economic growth depends on policy makers ability to improve infrastructure, diversify the economy, and improve health/education systems .

    Tone: Pro

    Reply

  7. Africa’s rise = in danger to be stopped, policemakers must do something to ensure the future growth. Building of diversified economies = can help.

    Reply

  8. africa has potential to grow in their economy like other countries who did not have to rely on natural resources. if they could strengthen health care system, better work, economic policies, investment on infrastructure and also on creating jobs. they could be like the other countries

    Reply

  9. MI: Africa’s economic growth has been increasing by 5%, but will likely decrease if steps are not taken by Africa and help not given from more developed countries.
    Says that Africa has models to look towards, but should note where they faltered.
    Points to focus on 1) sustainability 2) improving healthcare 3) diversifying Africa’s economy 4) improving trade logistics

    Author tone: urgent, persuasive, provoking to action (using should)

    Reply

  10. In order to continue Africa’s economic growth in the future, the economy must diversify with higher taxes and more infrastructure. Africa must also shorten the wealth gap and provide education and trade.

    Reply

  11. In order to keep Africa’s economic growth, the economy must be diversified and there must be an increase in trades between countries in Africa.

    Reply

  12. MIP: Africas progress is in danger , but things can be down for another upswing such as increasing tax revenues and diversifying the economy with different routes to money. An issue of diversifying the econ is that in the past it has shown to not always lead to job creation, and maybe even increasing inequality by benifiting a small minority.

    Reply

  13. affrican should become more independent by increasing diversification in economics. Leaders= important. Increase in africa’s Trading by diff means.

    Reply


  14. africa has recent economic growth but policy members need to put a plan in place to secure $$ and focus on trade, infrastructure, technology, education, trade, and more so that Africa can continue to grow.

    Reply

  15. Africa’s economy is experiencing a downturn after an upward trajectory. Her economy is beset by global uncertainty and depressed commodity prices. Onus lies on policy makers to out things right. Africa needs to rely on herself to secure funding and not be reliant on developed countries for help.

    She can obtain funding through taxation (not taxing enough) and seize opportunities to raise taxes; leverage on pension assets; diversify through education and infrastructure. There are many models for Africa to emulate and Africa needs good leadership and strong political will. She needs to create more jobs for people (young and women) and redistribute wealth to everyone. Educating her people and strengthening healthcare should be carried out too. African countries need to trade more with one another and produce differentiated goods and services. Improving transportation can improve trade between countries.

    Recent growth credited to good policies and sound management. Policymakers should strive for market-based exchange rate to control inflation and det. Africa has lots of potential and its leaders need to diversify the economy and take proactive steps to ensure its growth.

    Reply

  16. policymakers must make policies to reform and strengthen Africa’s economy bc there is potential

    Reply

  17. MIP
    (1) Africa has potential; policymakers must harness it
    (2) Diversification of economic = necessary
    (3) Economic growth must create jobs + address inequalities
    (4) Intra-African trade = necessary

    Tone
    Positive towards Africa and its potential
    Not extreme

    Reply

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