Day: June 9, 2012

Africa rising

Africa growth rates

Gregor Nazarian writes:

We are used to bad news from Africa.  The antidote was Wednesday’s discussion at Johns Hopkins/SAIS of “The Hopeful Continent: Can Sustained GDP Growth in Africa Lead to a New Future?”

Bernadette Paolo set the optimistic tone: despite the obvious challenges facing African societies, the continent’s economy is growing.  The central questions are whether economic growth translates into poverty reduction and whether growth is sustainable. Positive signs have emerged, but continued gains depend on many factors:  improved governance, strengthened civil society, restoration of peace and stability, rooting out corruption, diversification of economies, and regional integration.

The optimism continued with Tony Carroll stressing the growth of the middle class and the rise of consumerism. Susan Lund noted that economic expansion based on political and economic stability has benefited large numbers of Africans. Previously vulnerable workers (mainly subsistence farmers) are moving into stable jobs, but still only around one-third of the workforce is employed in productive occupations. Accelerating this process will require macroeconomic stability above all, as well as access to affordable financing and infrastructure improvement. The challenges are clear, but a transformation along the lines of East Asian economies in the 1970s is possible.

Ezra Saruma focused on how African states could maintain progress in this direction, arguing that political stability is the necessary prerequisite for sustainable growth. Uganda’s experience during and after the Idi Amin era demonstrates the need for a framework of reasonable justice, fairness and inclusiveness. Recent growth in countries like Sudan and Nigeria based largely on oil and mineral finds will not be sustainable without equitable political arrangements and cohesion. Short-term gains from resource wealth should be spent developing state institutions as well as investing in sustainable infrastructure.

The effects of the resource boom should not be overestimated, according to Volker Treichel. Much of the economic growth in Africa in the last decade has been in other areas, reflecting fundamental change. Generating formal sector jobs is one of the keys to emulating the East Asian model.  This structural transformation toward labor-intensive industries is beginning to happen. With China losing its competitive edge in low-cost labor, African economies have an opportunity to step in. Governments can and should facilitate this evolution by working closely with the private sector, creating special economic zones and dedicated power plants, ports, airports and roads.

The question-and-answer session revolved around several recurring themes. Expanding access to financial services is vital but should also come along with methods of generating wealth and better execution of funded projects. China’s involvement in Africa represents both promise and peril; the most constructive direction is a move toward Chinese manufacturers setting up in Africa and using domestic labor rather than imported Chinese labor. Investments in infrastructure and increasing productivity in agriculture are the best avenues for sustainable growth.

Vivian Lowery Derryck‘s closing remarks centered on the theme of promise and threat. The resource boom and political stability in a number of states should allow continued growth of the middle class and civil society. Lingering economic and political instability elsewhere threatens all of Africa, as do global recession and worrisome unemployment numbers. Still, the outlook is positive, provided there is investment in education and responsible economic stewardship.

Event details: 

Moderator: Anthony (Tony) Carroll, Vice President of Manchester Trade Limited Investment and Adjunct Professor at SAIS

Opening Remarks: Bernadette Paolo, President and CEO of The Africa Society


Susan Lund, Director of Research and a DC Partner at the McKinsey Global Institute

Dr. Ezra Saruma, Senior Advisor to the President of Uganda on Finance and Economic Planning and Brookings Institution Fellow

Volker Treichel, Lead Economist, Operations and Strategy for the World Bank

Closing Remarks: Vivian Lowery Derryck, President and CEO of The Bridges Institute


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