Little long-term planning and poor policies are real constraints to making African growth more inclusive, sustainable and faster, says William Gumede.
For the past year Africa’s averaged economic growth rate has shot up well above the global average. Data from all the large international bodies shows that Africa will have the second-fastest growing region after Asia this year.
The continent’s Gross Domestic Product (GDP) growth estimates for the year ranged from the more conservative 4.7 percent from the UN Economic Situation and Prospects 2014 report to the more bullish 5.3 percent from the World Bank.
What has fuelled Africa’s higher growth numbers and are they sustainable? About half of Africa’s high-growing economies rely heavily on the exports of often a single commodity.
Many African countries, such as Ghana, Gabon and Equatorial Guinea have seen a phenomenal growth spurt on the back of the discoveries of oil, gas and mineral deposits.
Others such as Nigeria and Angola still earn most of their income from oil sales.
Tanzania is another East African economy which has benefited from new investments in natural gas. Huge coal deposits and offshore gas finds, new investments in uranium mining in Namibia and Zambia’s copper sector, will help lift growth in these countries.
In north African countries, where growth has generally been depressed because of political turmoil, the oil-producing countries grew faster than the non-oil producing ones.
This year the non-oil producing north African countries were expected to grow at 0.7 percent; while the oil-producing countries were expected to grow at 4.9 percent. The one-commodity exports of many African countries are often to one or two markets only making them heavily depended on the health of that market.
There are some outliers. A sharp rise in consumer consumption in Kenya has helped lift growth rates. Countries such as Ethiopia have lifted growth through a massive state-led effort to invest in infrastructure.
African countries such as Lesotho and Swaziland depend on upwards of 35 percent of their GDP on remittances from abroad to push growth.
Africa’s high growth is too dependent on changes in the external environment. The continent’s growth is over reliant on oil. Yet, global oil supply and demand and pricing is heavily dependent on outside geopolitical oscillations.
The World Bank has rightly warned that “a protracted decline in commodity prices due to increased output and weaker demand could shave up to 3.8 percentage points off growth for oil exporters whose economies are not diversified, like Angola and Gabon”.
But the African countries depending on one metal or agricultural produce for their growth are equally vulnerable to any changes in the price, production or demand of the produce or metal.
Rwanda, for instance, is heavily dependent on foreign aid and the health and goodwill of donor countries. Any slowdown will damage the growth prospects of many African countries in the same position.
Many of the continent’s countries which depend on single-agriculture products for their growth are vulnerable to weather-related shocks and climate change.
The continent’s growth is just inclusive enough. A worry is the fact that its growth surge is not creating jobs, or tackling high poverty and rising inequality in meaningful ways. Off course, exporting single commodities rarely creates many jobs. Africa needs to add value to its commodities which create jobs and earn more revenue than exporting raw materials.
African countries need to diversify from single-commodity exports.
The continent needs to diversify to other sectors such as telecoms, financial services, transport and construction.
African countries urgently need to establish manufacturing sectors. Africa’s informal sector is large and opportunities remain limited because policies are absent to leverage the informal sector further or to link the informal sector to the value chains of local and international companies.
Poor political and economic governance still remains a significant drag on growth.
African governments must govern economies and societies better, rather than in favour of small and corrupt elites.
Oil and other surpluses should be used to provide minimum social safety nets for the most vulnerable.
Many African countries, such as Gabon, Equatorial Guinea and the Democratic Republic of the Congo are poorly run by small elites which govern in the interests of small elites, ethnic groups or communities.
The inequality between small haves and the excluded majorities remains a structural constraint on growth in Africa, which could at any time lead to popular uprisings and civil wars.
On their own, high levels of political, economic and social inequality in Africa are obstacles to growth.
African countries also need to improve and properly implement their economic policies.
Lack of pragmatic industrial policies, little long-term planning, absence of manufacturing strategies and poor policies are real constraints to making African growth more inclusive, sustainable and faster.
* William Gumede is chairman of the Democracy Works Foundation. His latest book is South Africa in BRICS: Salvation or Ruination, Tafelberg.
** The views expressed here are not necessarily those of Independent Media.
Sunday Independent