Three steps forward, one step back

African economies are on the fast track. Six of them now belong to the world’s ten fastest growing. But many governments fail to make all people benefit from rising incomes. Almost 50 % of Africans still live on less than $ 1,25 a day, and social disparities remain great.

By Eva-Maria Verfürth

African economies are on the fast track. Six of them now belong to the world’s ten fastest growing. But many governments fail to make all people benefit from rising incomes. Almost 50 % of Africans still live on less than $ 1,25 a day, and social disparities remain great.

“The hopeful continent: Africa rising” was the title of an article published by The Economist at the end of last year. A decade earlier, in 2000, the same magazine had called Africa the “lost continent”, because African economies hadn’t grown significantly for years. Today, economists are optimistic.

Christian Wessels of Roland Berger Strategy Consultants says that, in past years, violent conflict has become less virulent. Poverty decreased too. A small middle class has emerged, and governance has improved. Unreliable electricity supply and corruption remain huge problems for businesses, but at least, efforts were made to close the infrastructure gap. “In past times, three steps forward in Af­­rica were always followed by three steps back,” Wessels says. “Today, after ad­vancing three steps, it feels more like only going back one step.”

“We certainly have economic growth in Subsahara Africa,” agrees Abdoulaye Diagne, the representative of the economists’ network PEP-Africa and director of the Senegalese research consortium CRES. “But we want it to be more sustainable and more inclusive.” The question how African countries can achieve more pro-poor growth and generate more jobs was the main topic at this year’s annual PEGNet conference in Dakar in late September. PEGNet – the Poverty Reduction, Equity and Growth Network – links German research institutes with international ones.

The culture of public institutions

At the event, Mwangi Kimenyi of the Brookings Institution highlighted that inequality in a country highly influences the impact of growth on poverty. Large income disparities can only be overcome by clear and deliberate policies, according to him. Growth will mainly benefit the rich otherwise, as is the case in Angola.

In Kimenyi’s view, two things are needed for a country to achieve human development: income and political effort. He calls countries with less than $ 2,400 income per capita “income deficit countries”, because their incomes are too low to facilitate human development. Such countries, Kimenyi argues, need to focus on economic growth. One example is Sierra Leone. But even middle-income countries that have sufficient resources sometimes don’t achieve development. Kimenyi calls them “effort deficit countries”.

According to the scholar’s assessment, most African nations are marked by both income and effort deficit. Kimenyi says that, in sub-Sahara Africa, even countries surpassing the per-capita threshold of $ 2,400, such as South Africa for instance, tend to perform badly in terms of fighting poverty.

Kimenyi considers the culture of public institutions poor. He has statistical evidence of pupils at Senegal’s schools only being taught for 3:15 hours a day on average. The figure for Tanzania is a mere two hours. Health sectors are similarly inefficient. In Senegal, doctors on average only spend 39 minutes per day counselling patients. In Tanzania, the comparative time is 29 minutes. To address such issues, Kimenyi emphasises the importance of decentralising power. He says the poor must be given a voice and influence.

Challenges prevail

Trade experts similarly conclude that good governance and investments in social cohesion are key to pro-poor development. Maelan Le Goff of the French research centre CEPII argues that trade liberalisation is more likely to lead to poverty reduction where the financial sector is deeper, education levels are higher, and governance is better. However, whether a nation’s economy benefits from free trade, obviously depends on its industries and other country specifics. According to research done by Ismael Fofana of the International Food Policy Research Institute (IFPRI), for instance, trade arrangements between the EU and the Economic Community of West African States (ECOWAS) will only have positive effects on African countries as long as liberalisation remains restricted to a certain range of products.

Most African countries may still be rather far away from achieving sustain­able and pro-poor growth. The conference participants were especially concerned about youth unemployment rates (see box above). Furthermore, according to Ki­menyi, high growth rates currently tend to hide the fact that most African countries cannot even assure food security yet. Good data for formal democracy, he adds, does not reveal that, in most countries, nation building is still only in progress or may even be failing. The researcher says that, to many people, tribes still matter more than nations, and even educated people tend to vote tribal. In regard to Africa’s new middle class, Kimenyi says that the people concerned are still rather close to the poverty line, and their situation tends to be quite unstable. He happily admits, however, that it is growing and pushing for change.

Aliou Faye of the Senegalese research institute CEPOD sees at least one fundamental change in Africa: “Since the year 2000, there is dynamic progress”, he says, “and it’s being pushed by Africans themselves.”

Eva-Maria Verfürth

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