Transformation and growth for Africa - CNBC Africa

Transformation and growth for Africa

Special Report

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Professor Mthuli Ncube, Chief Economist & Vice President, African Development Bank Group

The African Development Bank’s Tracking Africa’s Progress in Figures publication released last week reveals that the growth is driven mainly by strong domestic demand, improved macroeconomic management, a growing middle class, and increased political stability. 

The publication examined six key megatrends of the last few decades that will shape Africa’s future.

Human Development

The African Development Bank report says that over the last 20 years the continent’s population has grown rapidly and in 2011 exceeded the 1 billion mark. Of all global regions, Africa will lead population growth over the next 50 years.

Linked to this megatrend of rapid population growth is that of urbanization. The people of Africa will increasingly be city dwellers.

“Since 1960, the urban share of Africa’s population has doubled from 19 to 39 percent, equivalent to an increase of more than 416 million people in 2011. This means that Africa will have some of the largest mega-cities in the world,” the report says.

With a large population, Africa can harness and build on the expanded workforce to spur economic growth. However, this is conditional on Africa improving access to and equity within health systems, articulating right education policies, and creating employment opportunities

Economic performance, inclusiveness, and structural transformation.

The publication says that on aggregate, the region’s GDP growth is expected to average more than 5 percent over 2013–2015. Average inflation in Africa stood at 8.9 percent in 2012 and has since edged down to 6.7 percent in 2013, having been largely contained in most African countries.

Macroeconomic stability, trade and exchange rate liberalization, and new policies and incentives supportive of the private sector have helped drive private sector development.

Supported by the strong economic growth, the proportion of people living in poverty has fallen from over 50 percent in 1981 to less than 45 percent in 2012. This is coupled with the continent’s emerging middle class, grown to some 350 million people and projected to reach 1.1 billion by 2060.

Africa’s growth, however, has not been even across all countries. Six of the ten most unequal countries in the world are in Africa, and there is not yet any evidence of progress in reducing income inequality.

With the endowment of a young growing workforce on the one hand and natural resources on the other, Africa has an important opportunity for inclusive growth.

The challenge is to seize it through well executed investment in infrastructure, increased access to education and relevant training, the development of capable institutions, and support for private investment and job creation.

Structural economic change is indispensable to achieve the desired progress of Africa and to bring prosperity to the continent’s populations.

The report notes that in order to alleviate poverty and reduce income inequalities, Africa will need to embrace structural transformation while maintaining robust economic growth.

Fostering diversification through transition to high-productive sectors will be a catalyst for industrial upgrading and technological innovation which in turn will increase job creation.

The path toward obtaining the status of middle-income and high-income countries will necessitate diversifying African economies away from dominant sectors such as agriculture and commodities.

Governance, fragility, and security

AfDB says that Africa’s rapid economic growth is transforming the lives and livelihoods of Africans at an unprecedented pace.

Such growth is underpinned by improvements in governance: over the period of 2000-2012, around 89 percent of African countries have improved their capacity to deliver economic opportunity and human development; 67 percent of countries made progress in fostering political participation, gender equality, and human rights; and 40 percent of countries strengthened their safety and rule of law.

Tackling corruption remains an essential part of Africa’s development agenda.

“Africa is growing, creating both opportunities and risks. Change is intrinsic to the development process; if managed effectively, they can help unlock Africa’s development potential. Yet change can also be disruptive: urbanization and slum development, the youth bulge, inequality and social exclusion, climate pressures, environmental damage, new resource rents and resource scarcity, and weak governance all have the potential to place African societies under considerable strain.”

Fragility comes about where these pressures become too great for countries to manage within the political and institutional process, creating a risk that conflict spills over into violence. Despite tough challenges posed by fragility, progress is possible.

Regional integration, trade, and investment

In recent years, Africa has emerged as a frontier market, having increasingly attracted the attention of investors.

“In 2012, Africa’s foreign direct investment (FDI) inflow grew to USD 50 billion while exports amounted to USD 641 billion. At the same time, intra-African trade remains low. Integration remains essential for Africa to realize its full growth potential, to participate in the global economy, and to share the benefits of an increasingly connected global marketplace.”

With plans to establish regional- and continental-wide free trade areas well underway, political commitment will be required to translate the trade agendas into sound policy and regulatory reforms to maximize the benefits

Infrastructure development

Africa continues to urbanize, the importance of public investment in infrastructure becomes increasingly evident.

Basic amenities such as housing, drinking water, and sanitation facilities are needed to provide Africa’s growing population with a better standard of living. Investments in energy and transport will also help increase access to affordable and reliable electricity, improve transport connectivity, and reduce transport cost and time.

At the same time, Africa’s rising consumer class has resulted in a surge in mobile-cellular subscriptions and internet usage. As it stands, broadband coverage is at 16 percent and will likely reach 99 percent by 2060.

Agriculture, food security, and a greener environment

Agricultural production has increased, but mainly by bringing more land under cultivation rather than by improvements in yields.

The report notes that feeding the expanding urban population will present a challenge that will entail adoption of the latest technologies and high-yielding crop varieties as a way of raising productivity.

Strengthening agriculture and food security through an integrated value chain approach can improve the livelihoods of Africans who live in rural areas. Many are reliant on subsistence farming, and a sizable proportion is chronically vulnerable to climatic uncertainty.

Africa lives off its land, and more than 227 million Africans work on the land, which too often fails to provide for their needs. By continuing to invest in rural infrastructure (such as rural roads, irrigation, electricity, storage facilities, access to markets, conservation systems, and supply networks), countries can increase their agricultural productivity and competitiveness

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