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Is Africa on the runway to economic takeoff?

FINANCIAL STANDARD
By | March 8th 2011
By | March 8th 2011
FINANCIAL STANDARD

By John Njiraini

Africa and China are today the best of sweethearts. But the affection is merely platonic and based on self-serving interests, for Africa and China are world’s apart.

Whereas China sees in Africa a continent full of resources that can fuel its booming industries and ready markets for its products, Africa sees in China billions of money that can be tapped for investment without the hustles of conditionalities.

Yet as the relationship between Africa and China gets deeper, the big question in the minds of many is whether Africa can emulate China and transform from a poverty-infested, political instable and struggling continent to an economic giant in a generation?

Last week, the World Bank released a new strategy that will define its terms of engagement with the continent that showed Africa in 2011 as equal to China of 1980.

Basing on various factors that included ongoing reforms, economic growth, reilient private sector and positive progress on the Millennium Development Goals (MDGs), the World Bank concluded that Africa is poised for economic takeoff.

"Putting these factors together, we conclude that Africa could be on the brink of an economic takeoff like China was 30 years ago," said the Africa Regional Strategy Blueprint on Africa’s Future and the World Bank’s Support to It.

The World Bank assessment came only a fortnight after audit firm PricewaterhouseCoopers released a report that showed China is set to replace the US as the world’s leading economy in a few years and that by 2050, China will be dominating world affairs.

"The global financial crisis has accelerated the shift in economic power to emerging economies. We expect Chinese economy to outrun that of US before 2035," World Bank said in a report.

But as China orchestrates the grand match to a new world order, many wonder if Africa can derive lessons and transform economically over the next 30 years?

It is imperative to note that before 1978 when China embarked on major economic reforms, the country’s only distinction on the surface of the globe was its growing population.

Labour productivity

Prior to this period, the Chinese economy shared many basic characteristics with the economies of other developing countries and could not significantly be differentiated with any African nation today.

Statistics by the World Bank show the gross national product per capita of China in 1986 was about $228, something that reflected low average level of labour productivity.

Besides, more than 60 per cent of Chinese depended on agriculture for their livelihood and agriculture, which was undertaken through traditional methods, produced around 30 per cent of the value of national output.

In early 80 most Chinese were considered to be very poor with infant mortality 39 per 1,000 births well below the average for upper middle-income countries though life expectancy was 69 years, higher than the average for upper middle-income countries.

"In the 1980s the Chinese economy was a system in transition, moving cautiously away from central planning and gradually adopting some of the institutions and mechanisms of a market economy," said one World Bank report.

But in a span of 30 years, China has exponentially transformed and is today an exemplification of economic prosperity.

Can Africa take the same route? According to observers, just like China embarked on an ambitious journey for economic transformation at the right time, Africa today is standing on the threshold of opportunities for transformation and sustained growth.

"Today’s Africa is exemplified by the many success stories and stronger economic growth being driven by the dynamism of its people and economies," said Obiageli Ezekwesili, World Bank Vice President for Africa region.

The signs that Africa is on the verge of an economic takeoff are clearly visible. Over the next decade, at least 20 countries in the continent are expected record a per capita income of 50 per cent higher that current rates, something that translates to gross domestic product growth averaging four per cent annually.

During the same period, poverty rate is expected to decline by 12 percentage points, at least five countries will achieve middle-income status while economies of most countries will greatly diversify with sectors like manufacturing, ICT and retail and services creating millions of jobs annually.

Productivity in agriculture, which is an integral component of the economies of most African nations, will register at least five per cent annual growth, Africa’s share in world trade will double from current four per cent to eight per cent while access to infrastructure like roads, rails, electricity among others will increase significantly.

"This is an exciting time for Africa. The continent has surprised naysayers with more than a decade of solid economic growth and sustained reduction of poverty. It can seize this historic opportunity. Other regions have done it so can Africa," said Shantayanan Devarajan, World Bank’s chief economist for Africa.

While the continent is with no doubt pregnant with optimism, it would be foolhardy to assume Africa would religiously follow in the footsteps of China.

Unlike the Asian giant that clearly knew where it wanted to go and the route to take, its important to appreciate that Africa is a configuration of many states that are often driven by divergent and conflicting aspirations.

This, for instance, is one of the reasons the continent is home to numerous trading blocs that serve the interest of a few cluster of countries, while making it impossible for outsides to benefit.

This notwithstanding, analysts reckon that Sub-Sahara Africa faces largely similar challenges that must be addressed if the continent aspires to emulate China.

Top on the list, the continent must, as a matter of urgency, address governance and political leadership issues, which many agree are the underlying factors in the continent’s development challenges.

Acute challenge

"The governance challenge in Africa is very acute and needs to improve," said Ezekwesili.

She added the continued existence of political instability, widespread corruption and civil conflicts in many countries has negatively impended investments and often destroyed gains realised.

Kenya, for instance, recorded impressive economic growth between 2003 and 2007 only to be wiped by violence that broke out after a disputed general election.

After addressing governance, the continent must find ways to revive and improve agricultural productivity. In most African states, the potential of agriculture in food security and economic development has largely not been fully exploited.

According to Professor Calestous Juma of Harvard University, Africa can feed herself within a generation and become a major agricultural exporter by adopting modern farming methods.

"Africa has abundant arable land and labour which, with an agreed common approach and sound policies, could translate into greater production, incomes and food security," he said in a new book entitled ‘The New Harvest, Agricultural Innovation in Africa’ released last year.

Just like China, the continent must also invest heavily in infrastructural development. Africa must develop creative mechanisms and partnerships to redress its $93 billion infrastructure deficit, says the Bank.

Investment in infrastructure would have numerous ripple effects in terms of opening the continent to foreign direct investments, injecting more energy in the private sector, igniting the mushrooming of small and medium enterprises.

This would have a significant impact in empowering thousands and uplifting millions from the yoke of poverty.

"Tackling infrastructure challenges is a sure way to facilitate many people participate in economic activities," observed Ezekwesili.

Observers reckon that for Africa to emulate China and achieve sustainable development, the continent must take its destiny on its own hands instead of relying on tokenism assistance from more developed nations.

This is more critical considering the global economy, which is expected to remain volatile in the coming years, has greatly squeezed aid while traditional multilateralism is coming under greater strain.

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