Is Africa poised to lead the global economic recovery?

The Sierra Leone Telegraph: 27 May 2013

recessionThe global economic downturn which started almost five years ago, has left most of the developed economies too weak and fragile to make a quick recovery.

Low economic growth, high unemployment and a volatile energy market are dampening confidence of a recovery any time soon.

A massive programme of austerity measures and unprecedented financial restructuring by most of the G8 countries is weakening consumer demand and hampering sustainable industrial recovery.

There is hope however, that emerging economies – such as China and India, may provide the engine for a speedy global economic revival.

But recent global industrial production figures show that not even China is immune to current volatility of consumer market demand and the erratic supply of oil and raw materials.

Yet, few would disagree that the current protracted global recession must end soon. And Africa, with its population of over a billion is said to be poised to provide the market for the much needed global economic recovery.

But doubters of such optimism disagree. They point out to the fact that recent increase in GDP enjoyed by a handful of African countries, has not ushered in the level of prosperity that could expand consumerism in those countries.

“As far as many western policy-makers are concerned, middle- and low-income countries seem to be doing fine on their own. A mixture of sounder economic policies, a commodity boom and the financial help made possible by debt relief and increased aid flows has meant growth rates for sub-Saharan Africa in the 5-6%-a-year range” the British Guardian Newspaper explains.

cameroon 1Tanzania and sierra Leone are examples of countries in Sub-Sahara Africa where GDP has risen exponentially, but with very little impact on poverty and the distribution of income in those countries.

Without an expansion in consumerism and purchasing power triggered by increased earnings, such talk of Africa’s potential to lead the world out of recession will but remain a fantasy.

The president of the African Development Bank (ADB) – Mr. Donald Kaberuka is a man known for his unflinching commitment to ‘building a better future for Africa’.

Mr. Kaberuka is the best ambassador and champion of ‘African economic prosperity’. He is confident of Africa becoming the engine of global economic growth.
What’s his secret?

Speaking at the opening ceremony of 50th Anniversary of the Africa Union in Addis Ababa yesterday – Saturday, 25 May 2013, Mr. Kaberuka said: “The sleeping giant is on its way.”

Leaders from across the continent had gathered in Addis to mark the progress made over the past five decades.

He said that that the last fifty years of Africa’s existence have brought political freedoms and laid a basis for socio-economic development; now is the time for economic transformation, he told leaders of the continent.

Africa’s GDP has increased from US$ 600 billion to US$ 2.2 trillion since the year 2000, he said, and the continent “now offers the highest risk adjusted return on investment… our economic managers are doing a reasonably good job navigating the difficult global economic slowdown”.

Mr Kaberuka noted however that despite strong economic growth, economic transformation remains a challenge for the continent.

Poverty in salone“Quality growth” of 7% is what Africa needs for the decade to come. Kaberuka stressed the importance of quality growth as one “which is not only strong, but sustainable, fair, addresses inequalities, and leaves no one behind.”

On May 25, 1963, the AU’s predecessor, the Organization of African Unity, or OAU, was established with the goal of forging a common identity for the continent as Europe’s colonial rule of Africa fell apart.

Since then, the African Union has shifted focus to an organization spear-heading Africa’s development and integration.

Leaders from across the continent who spoke at the ceremony, agreed with the ADB chief’s prognosis of Africa’s ailing socio-economic condition.

The Ethiopian Prime Minister – Hailemariam Desalegn said: “This historic day marks not only a great leap forward in the Pan-Africanist quest for freedom, independence and unity, but also the beginning of our collective endeavour for the realization of Africa’s socio-economic emancipation.”

But speaking of the need to build a strong integrated Africa, the head of the African Union – Nkosazana Dlamini-Zuma told leaders of the continent that; “When we talk about African solutions to African problems, it is because we know that we can only permanently silence the guns if we act in solidarity and unity.”

But Donald Kaberuka – president of the African Development Bank, said that; “This is the most exciting time in Africa. Africa’s economic journey over the last fifty years has been a tortuous one: Many achievements, but numerous setbacks.

“In our quest for a prosperous Africa, which is a dynamic force in the Global arena we need to take note of three things;

“First, the World is now different from what it was in the last fifty years – economic power is no longer concentrated in Western Europe and North America; the concept of North and South is no longer very meaningful; the rise of the South, from Asia, the Gulf, and Latin America now makes for a multi-polar economic World, and since 2000, Africa has joined that momentum.

“Second, there is unfortunately a very large flux in the global governance organs and institutions with global mandates, supposed to provide multilateral solutions, say on trade or climate are constrained by global politics.

“That means for the solutions, Africa needs to trade her way out of poverty or deal with climate change, have to be largely internal.

“Third, a number of key mega-trends will influence the trajectory of Africa’s economies in the next half a century which we need to be aware of.

“Africa entered the new Millennium in 2000 with a stride of Confidence. With the exception of countries at war, or emerging from war, economic performance has remained very strong.

“Indeed Africa’s economic performance is now back to the level it was in 2008 – before the near collapse of the Western banking system.

“At the turn of the Millennium Africa’s GDP was 600 billion. Today it is 2.2 trillion. Adjusted for inflation, Africa’s GDP has doubled in 10 years.

“Adjusted for inflation, Sub Sahara Africa’s economic size has doubled. Per capita GDP has tripled, or up 40% if you adjust for inflation.

“As they say, ‘the sleeping giant is on its way’. The World is slowly abandoning that sometimes patronising look at Africa.

“The debilitating narrative of Africa and her whole litany of problems have given way to a Rising Africa. “Our continent now offers the highest risk adjusted return on investment.

And our economic managers are doing a reasonably good job navigating the difficult global economic slowdown.

“At this moment the global economy still shows no signs of recovery. Some regions are in recession and the world needs growth. But where will it come from? It will be Africa and the emerging markets.

“For now, the emerging markets are supporting the world economy. But as their markets for exports to Europe mainly shrink, they are looking at stimulating domestic demand.

“China, in particular, is pulling no stops to stimulate the internal consumption.

“Africa too can do otherwise, unlocking domestic demand. This market of a billion people must be a primary objective.

“As we look to the next half a century, I cannot imagine a more important agenda for Africa – unlocking its internal market. That is what will lay a basis for industrialisation and for jobs.

wind turbine in Tanzania“That is what will enable the economies of scale for some of the large infrastructure projects Africa needs.

“Lest I am asked whether I am painting too rosy a picture, let me say clearly that from whatever angle you look at it, Africa still faces myriads of problems – the journey is long. In some countries, absolute poverty is not declining fast enough.

“Millions of our youths are entering the labour market each year – 14 million to be exact – and cannot find a decent job.

“The reason for that is straight forward. Yes, Economic growth is strong but economic transformation remains a challenge.

We celebrate that Africa now has more mobile phones than North America and Europe combined. But as Mo Ibrahim reminded us: none of the hundreds of components in those phones is made in Africa.

“That is why there are not enough jobs in Africa. That now must be the next Agenda.

Looking ahead

“As we celebrate today, looking to the next 50 years, three factors must be carefully observed: The global economy; the mega-trends; and sources of finance for development.

“Let me begin with the mega-trends. 50 years is of course quite a long way, and predictions are not very helpful. But what is important is to identify big trends that will have large impact and build scenarios around them.

“Together with Dr. Zuma and Mr. Lopes, we are preparing such an analysis for you, on those mega-trends which will have a significant implication for the economic trajectory of Africa in the next half a century.

Freetown youthsFirst – Demographics

“With one billion people – closer to India and China, Africa’s population grows at 2.2%, compared to Asia which is 0.9%. There will be around 2.2 billion Africans in 2050 – not only more – but younger. The median age in Sub-Sahara Africa is 18.5 years.

“Provided the right investments are made in education, this is the basis of the so called demographic dividend – more people in the labour force than dependants; a wider consumer base for almost everything from food, housing and infrastructure.

Second – Urbanization

“Africa will not only be having more people and a youth bulge, but most of them will live in cities and towns.

“Now the figure is 40%. By 2050 it will be anywhere between 60 to 80 percent. This will not only happen in existing large cities, but also smaller cities and towns, which will grow in size.

“This has very large implications for planning, for infrastructure, for food supplies, etc.

adb oilThird – the Growing Natural Resource Industry

“Over and above our existing mineral wealth, precious and base metals, oil and gas, there are now new findings almost everywhere, sometimes a multiple of the country’s economic size.

“And much more will be found as capacity for geological mapping increases. These resources will generate revenue, which if invested in education; in infrastructure, will enable us realize the demographic dividend.

“The key will be pursuit of sound management, including negotiating contracts that ensure Africa gets what it deserves for her wealth.

NEPAD - EMPOWERING WOMENFourth – Ability to leapfrog technology

“Another positive mega-trend will be Africa’s ability to leapfrog on some technologies. We are all familiar with what the mobile revolution has done in terms of lowering the costs of doing business, delivering services and financial inclusion.

Fifth – Climate change and food security

“I mentioned that an international deal on climate looks quite remote. As the Continent most affected, this will have implications for our agriculture, marine and forestry resources as well as biodiversity.

“With an increased population and pressure on land and water resources due to climate change, there will be need not only to accelerate national green and adaptation plans, but also fully embracing what science and genetics offer in the domain of agricultural production.

adb -COMESASixth – Infrastructure

“Two of the big trends I mentioned above have huge implications for Infrastructure, that is; increased population and Urbanization.

“At the same time, the massive discovery of new mineral resources, gas and oilfields will demand a huge scale in infrastructure from rail, maritime ports, mass transit systems, etc.

“These will provide large opportunities for jobs and higher productivity for the economies as a whole. These are things which will require attention.

“I began by pointing out the strong economic record of the last decade.
However, the bar to aim for is 7%, on a consistent basis for at least another decade. Not only 7%, but 7% of quality growth.

“Quality growth is one which is not only strong, but sustainable, fair, addresses inequalities, and leaves no one behind. That kind of growth creates trust in society and builds stability.

“It is crystal clear that now the effort will be primarily internal, with international donor finance coming to support that internal effort. Already today, approximate figures indicate various forms of domestic finance account for 3/4 of all expenditures.

“International Cooperation has played a major role in the last fifty years to finance Africa’s development. No doubt it will still be needed and much appreciated especially by the countries with limited resources.

“Its possibility now is curtailed by the global recession, budget cuts and a diminishing constituency for aid.

“In the last decade, cooperation with new partners has contributed especially in infrastructure.

“We must now do more, from domestic revenue mobilization, to spending wisely, to more effective natural resource management and leveraging the capital markets.

ADDAX“The Report by the Africa Progress Panel under Kofi Annan and how Africa is being deprived of revenues from our natural resources will require your action. Let those mining businesses prosper in Africa, but let them also pay what Africa deserves.

“At this moment, capital markets are awash with liquidity, and interest rates are at a historic low.

“Next week in Marrakech, we will discuss with Finance Ministers, a bold new proposal of an AFRICA Infrastructure Fund and a Special Purpose Vehicle to raise money in the markets for high return infrastructure projects that will help Africa to unlock her potential.

“The last fifty years have been a remarkable, eventful journey for Africa. Africa, faces in the next fifty, a complex landscape, but she also has many opportunities. Provided we do the right thing, this could truly be Africa’s hour.”

 

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