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A changing Africa

November 30, 2012

DESPITE the wars and ethnic strife, there is a marked change in global perceptions of Africa.

As many of the continent’s once slow-growing nations discover a new spring in their step, world attention is focused on Africa’s so-called ‘lion economies’ — their economic potential, investment opportunities and the consumer power of a small but dynamic African middle class.

Serious challenges of poverty, social inequality and governance remain, however. Most seriously, the benefits of growth are still not reaching all segments of society. But many African governments are slowly but surely engineering a turnaround in their nations’ economic fortunes. Rising commodity prices, including for oil and gas — and a growing appetite for Africa’s natural resources in China, India and Brazil — have helped to bolster Africa’s economic prospects.

There is no shortage of countries seeking to cash in on Africa’s commodity bonanza. China is most often in the headlines and its influence in Africa is visible in the stadiums, parliaments and roads it is building across the continent.

But other emerging nations including India, Brazil and Turkey are also making their mark as investors, importers and providers of aid and technical assistance.

The African Economic Outlook report says that while there is no evidence to suggest that the new players are hindering Africa’s industrialisation, debt sustainability or governance, “Africa needs a clear engagement strategy and all sides must show greater transparency”.

Deborah Brautigam, associate professor at the American University’s International Development Programme and the author of a book on China in Africa, The Dragon’s Gift, believes the West could learn a lot from the way that China operates on the African continent: “The Chinese understand something very fundamental about state-building: new states need to build buildings and dignity, not simply strive to end poverty.

Even as world headlines wax lyrical about ‘Africa rising’ the continent is grappling with an array of economic, political and social challenges. Discoveries of oil, gas and other minerals in African countries are generating wealth but governments have yet to ensure that these resources benefit the general population.

Maintaining high growth rates will require additional African efforts to build better infrastructure and improve the performance of non-commodity sectors of the economy including banking, telecommunications and construction. For all the talk of an emerging middle class, a majority of Africans live below the poverty line.

Progress towards the Millennium Development Goals is slow and uneven. With the population set to double from one to two billion over the next four decades, governments must ensure that the youth bulge — Africa has the youngest population in the world — is transformed into a true demographic dividend by providing employment and economic opportunities to young people.

The stakes are high. Africa’s ‘jobless’ economic growth is a waste of the continent’s most valuable resource: its young people. Also, in parts of the continent, unemployment is fuelling political violence and recruitment into armed groups, including the Islamist extremist movements.

Schools and health infrastructure must be improved and food production increased through efficient farm policies. Skills pose another common problem, with schools and training centres not providing young people with the know-how that employers are looking for.

In addition, governments must reinforce efforts to deal with social inequalities. Meanwhile, pressure for more democracy, good governance and accountability is growing. African leaders are also under pressure to replace their often anti-business policies with a pro-business agenda.

While the challenges remain daunting, there is increasing confidence in the long-term outlook for Africa’s so-called ‘lion economies’. The World Bank predicts a 4.8 per cent growth rate for Sub-Saharan Africa in 2012 but warns that this could change in the event of contagion from the eurozone crisis and the slowdown in China, Africa’s leading market for commodities.

Overall, however, after 10 years of high growth, an increasing number of countries are moving into ‘middle-income’ status, defined by the bank as those countries achieving more than $1,000 per capita income.

Africa’s fast-growing economies in 2011 included resource-rich countries such as Ghana, Mozambique and Nigeria, as well as other economies such as Rwanda and Ethiopia. In 2011, foreign direct investment flows into Africa jumped 25 per cent to an estimated $35.6 billion, after declining sharply in 2009 and 2010, according to the World Bank.

The business climate is improving and favourable economic prospects are attracting investment flows in the telecommunications, real estate and retail sectors. Remittances have rebounded as well. As the World Bank points out, Africa’s long-term growth will increasingly reflect interrelated social and demographic changes creating new domestic engines of growth.

Key among these will be urbanisation, an expanding labour force and the rise of the African middle-class consumer. In 1980, just 28 per cent of Africans lived in cities. Today, 40 per cent do. By 2030, this share is projected to rise to 50 per cent, and Africa’s top 18 cities will have a combined annual spending power of $1.3 trillion.

Greg Mills and Jeffrey Herbst, authors of Africa’s Third Liberation, say African leaders must also end their “public and private animus to business”. Sustainable growth in Africa requires the active participation of a vibrant private sector.

It’s also about peace and democracy. Mthuli Ncube, vice president and chief economist at the African Development Bank insists that democracy is a prerequisite to improve governance and manage the ethnic tensions that impede and frustrate African development efforts.

Most importantly, fighting corruption remains an overriding challenge for African governments, with experts warning that the combat against graft is essential to ensure faster growth and development.

Clearly, the world has high expectations for Africa. But much will depend on whether governments have the will to implement a vast transformational agenda.

The writer is Dawn’s correspondent in Brussels.