The Africa optimism is neither false nor unwarranted

A critique of Professor Havnevik's article

I read with interest the arguments put forward by Professor Kjell Havnevik in his article on the  so-called Africa optimism. He argues that the current growth in Africa is largely based on exports of natural resources. Projecting this trend forward, he was somewhat right to conclude that this growth optimism is unwarranted.

However, I think there are issues the author fails to take into account in his analysis. I will endeavour to highlight some of these issues. The truth is that for about a decade now, African economies have recorded robust growth. In per capita terms, GDP has expanded at 2.4 per cent per year, good for an average increase in GDP per capita of 50 per cent since 1996. Significantly, this growth momentum has been maintained.

Arguing from this, the assertion that this optimism is unwarranted even in the forward-looking perspective is contestable. Why have countries been able to hold on to this growth momentum for a decade now? And can it be said that this prevailing optimism is false? Absolutely not.

The paradox of economic growth and incidence of poverty and unemployment in Africa is structural. That is, economic structure has been built to largely survive on natural resource revenues making it vulnerable to commodity price volatilities. This structure has not been supportive of inclusive growth and improved welfare.

Though the current economic growth is driven by high commodity prices, the author fails to acknowledge that natural resource wealth alone does not explain the improved performance of the continent.

If this had been acknowledged, I think the debate would have been spiced up. Fast growth has been recorded in resource-poor countries like Rwanda, Ethiopia and Mozambique (before it became resource-rich). This demonstrates a common reality that Africa has the capacity to sustain growth without depending on natural resources.

As the author strongly argues, this growth indeed presents a conundrum. It masks the reality that poverty, unemployment and inequality still persist. The World Bank estimates that the $1.25 a day poverty headcount declined from about 65 per cent during 1995-2000 to an estimated 49 percent during 2008-2011 in resource-poor countries in Africa. Has poverty not been reduced in recent decades? Why then must The Economist’s sharp reversal of description of “Hopeless Africa” to that of “Hopeful Africa” be a surprise?

There is no denying that these positives are insufficient. The incidence of poverty has fallen but is still high. The continent is still riddled with youth unemployment aside from armed violence wreaking havoc on the lives of children and adults. Even with this, it is not wholly true that African economic development will in the future be characterised more by social exclusion and conflict than being inclusive and poverty reducing.

Why? From the natural resource perspective, governments, international organisations and most importantly the people have come to understand the negatives of loss of windfalls through corruption, transfer pricing and illegal capital flights. This has compelled governments to pursue reforms with the aim to derive the maximum benefits. Mining and oil and gas contracts have been reviewed in Guinea and Zambia among other countries.

The author catalogues the problems that confront the natural resource sector including among others, low or non-existent tax revenues from corporations, transfer pricing and illegal capital flight. I cannot agree with you more.

The Africa Progress Panel, chaired by Kofi Annan, highlights worrying details in its report Equity in Extractives: stewarding Africa’s natural resources for allpublished this year. Africa loses US$34 billion annually through transfer pricing and illicit capital flights. Multinational companies cannot absolve themselves of these practices, which are worrying also developed economies.

The G8 in its recent meeting called for purposive measures to tackle this menace, and the EU has issued Transparency and Accounting Directives. The global revolution on transparency in the extractive industry we are witnessing means the world is ready to clamp down on these losses. Africa has been involved in this development. Several countries have opted for the transparent way with online publications of revenues and contracts. These are positive signs. I think these are reforms that will drive sustainable change in the continent.

Flowing from the above, the argument that “African economic development will in the future be characterized by social exclusion and conflict rather than being inclusive and poverty-reducing” is very weak. There are grounds for optimism contrary to the author’s pessimism.

On agriculture, indeed there are issues. Though agriculture has contributed substantially to the growth of Rwanda and Ethiopia, the existing paradox is a cause for worry. Rural smallholder farmers who produce more than 70 per cent of food crops are among the core poor. The author is right to cite “weak water and land rights” as major issues that prevent efforts at harnessing the potentials of agriculture. But the argument ought to go beyond that.

Inaccessible local and international markets wreck the fortunes of these poor farmers. And of course, this stems from ‘unfair’ trade. African farmers do not have the capacity to compete with farmers in the EU and United States who benefit from huge subsidies.

I am not externalising the challenges that confront African farmers. Far from it. But there ought to be trade regime that gives equal leverage to all farmers in the world. Without this, one must not be surprised if some farmers, despite high food prices, struggle to survive. The issue of land rights depends largely on the political will of various governments to reform their institutions. What form should these reforms take?

Gender mainstreaming in agriculture is significant. Though women produce about 70 percent of food crops in Africa, the veritable constrains to enable them have access to productive inputs are still high. When this and other issues are considered, it is easy to predict that sustainable transformation of African economies requires re-structuring of smallholder agriculture.

Regarding the continent’s high population growth, I am a bit surprised that the author sees this mainly as a challenge in the long term. It is true that youth unemployment is high. Of course arguing from this perspective, it could be said that population growth will pose a challenge to the long term development of Africa. However, we  must not lose sight of one issue: Africa’s ‘youth bulge’ is a demographic dividend. Countries are able to grow with a potential human resource base equipped with education, skills and opportunities.

The reality of this has not happened in Africa. The enabling condition to help harness the potentials of the youth is constrained. The problem is not necessarily the predicted upsurge of population. Africa could make the growing youthful population a force for change by giving youth the needed skills and absorbing them in productive jobs. This has started in some countries.

In conclusion, let me add that Africa’s marginal capacity to reduce poverty can be reversed. It is possible with the right type of political leadership and enlightened people. Though there are still some miles to travel, good governance – a precondition for change – is progressively being applied in the continent. There is optimism. The Africa optimism is neither unwarranted nor does it depict a false picture. 

Article was originally published on Nordic African Institute forum: http://naiforum.org/2013/07/the-africa-optimism-is-neither-false-nor-unwarranted/