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Africa: the paradox of economic growth

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DESPITE the fact that since the beginning of the century, Africa has ranked second behind Asia on the table of the world’s fastest-growing regions, with average annual growth in gross domestic product (GDP) of 4.7 per cent between 2000 and 2017, African economies are not delivering for the people.

This level of growth has been insufficient to trigger fundamental changes, according to a joint report by the African Union Commission (AUC) and the Organisation for Economic Cooperation and Development (OECD).

Africa’s Development Dynamics 2018, the first annual economic report by the AUC, released on July 11 at the Commission’s headquarters in Addis Ababa, focuses on ‘growth, jobs and inequalities’ and highlights the importance of accelerating the structural transformation of African economies.

It says growth is still inconsistent: between 2016 and 2020, just three of the continent’s 55 countries should reach the targeted average annual growth of over seven per cent set by the AU’s Agenda 2063.

This growth has not created enough decent jobs and of the 282 million people who are currently working, many face unstable employment, according to the report.

It notes that at the current rate, 66 per cent of jobs will still be insecure in 2022, a figure far higher than the targeted 41 per cent for 2023.

This would be compounded by Africa’s rising population, which would see a quarter of the global population being African by 2050.

The report also draws attention to the need to increase productivity: African businesses are lagging far behind the rest of the world in sectors with high job-creation potential, such as agribusiness, construction, leather, light manufacturing and logistical services.

Furthermore, growth in Africa has less of an impact than elsewhere in the world on reducing inequalities and improving well-being.

If the continent’s Gini coefficient had fallen by seven further points to 35 – the same level as in Asia – growth would have lifted another 130 million people out of poverty between 1990 and 2016, according to the report.

Despite a reduction, extreme poverty still affects 35 per cent of the African population, or 395 million people.

The report also reveals the mixed performances of different African regions in terms of growth, jobs and inequalities.

It says that East Africa has enjoyed stronger and more resilient economic growth than the other regions, at over four per cent a year since 1990, on the back of a more diversified economy.

In addition to the underemployment and vulnerable employment that characterise most of the African labour markets, some countries in North and Southern Africa face high structural employment.

In Central Africa, the number of jobs in the formal economy has been falling since 2015 while East and West Africa managed to reduce extreme poverty by 23 and 12 percentage points respectively between 1990 and 2013.

The report points out that inequality in Africa is most prevalent in Southern Africa, which, in terms of income, contains six out of the 10 most unequal countries in the world.

The report stresses that public action is the key to improved performances when it comes to growth, jobs and inequalities.

Domestic strategies are more effective when they encourage good inter-sectoral coordination of government action, the active participation of economic stakeholders and citizens, and a regional approach to development, according to the report.

‘Africa has significant assets for addressing its issues: a young and enterprising population, regions undergoing fundamental change with growth in the countryside and rapid urbanisation, considerable natural resources, dynamic economies, rich ecosystems, and a solid diaspora,’ said Victor Harrison, Commissioner of Economic Affairs of the AUC, while launching the report.

‘However, far too often, public policies have failed to leverage these assets effectively. The implementation of the reform programme as set out in Agenda 2063 requires an increase in government capacities, greater responsibility, transparency, co-ordination and the promotion of positive institutional action.’

Mario Pezzini, Director of the OECD Development Centre and Special Adviser to the OECD Secretary-General on Development, who was also present in Addis Ababa, said: ‘Africa also has a vital role to play in the extensive reshaping of the framework of international co-operation as required by the Sustainable Development Goals.

‘The continent is an extraordinary cradle of innovation for development strategies, and it is important that its partners pay it greater attention and better support the implementation of its creative strategies.’

Africa’s Development Dynamics 2018 proposes 10 decisive strategic actions in three areas – economic, social and institutional – for reaching the development targets in Agenda 2063.

The report says that Africa needs development strategies that are more coherent and which prioritise improved public action to stand up to the challenges of growth, jobs and inequalities prompted by the continent’s ‘remarkable emergence.’

The report finds that a favourable trend in commodities prices, strong domestic demand, progress in the pursuit of macroeconomic policies and strategies to diversify national economies have been major drivers of the continent’s recent growth, which is forecast to reach four per cent annually between 2018 and 2020.

The decision by certain countries to increase investment in infrastructure and the growing number of commercial partnerships – with China, India and other emerging countries – had also proved judicious, the report added.

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