African economy: All growth, no prosperity
African Centre for Economic Transformation (ACET), an independent think-tank has ended a two- day conference tagged, African Transformation Forum (ATF) 2016, last Tuesday. The conference brought together leading thinkers, policy makers, business leaders, journalists, civil society and development partners to share ideas and collaborate in order to advance Africa’s economic transformation. AJIBOLA AMZAT, Features Editor, who attended the inaugural conference held in Kigali, the capital of Rwanda, reports.
It was a pensive looking Kagame that entered the hall of Serena Hotel in Kigali, Rwanda last Tuesday morning, walking through the din of applause by 250 participants or thereabout that came from different parts of Africa and the rest of the world.
In his brooding demeanor, Paul Kagame, the President of Rwanda, cut the image of a leader who bears the burden not only of his 12 million people but also of the rest Africans.
Clearly, the Kigali conference was not about Rwanda; it was rather about Africa and the future of its over 1 billion population. And such scope of discussion would give any Kagame a furrowed forehead.
To start with, a 2016 World Bank report revealed that the number of Africans living in extreme poverty increased by more than 100 million between 1990 and 2012, despite the economic growth experienced by the continent within the decade. And as the African population continues to swell, the number of its poor people may also rise, the report stated.
This does not have to happen though if African leaders prioritize economic transformation by creating better jobs for their citizens and widening the circle of shared prosperity, said the ACET President, Dr. Kingsley Amoako.
According to Amoako, “By 2050, Sub-Saharan Africa will have a larger and younger workforce than China or India. With the continent’s abundant land and natural resources, that workforce can be a global competitive advantage and a great asset in driving economic transformation.”
A probable reality, that is. But the economic transformation will not take place, if the continent does not diversify its economies, boosts its competitiveness in world markets and increases its shares of manufacturing in GDP, using more sophisticated technology in production.
The African Transformation Report published in 2014 noted that African GDP indeed is growing, especially due to macroeconomic reforms, better business environment, and higher commodity prices.
But growth is not enough. The continent must ensure that growth improves the living condition of all its citizens by providing more productive jobs and higher incomes.The ACET report describes this progress as “growth with DEPTH.”
“Our report’s main premise is that African economies need more than growth – if they are to transform, they need growth with DEPTH. That is, they need to Diversify their production, make their Exports competitive, increase the Productivity of farms, firms, and government offices, and upgrade the Technology they use throughout the economy – all to improve Human well-being,” Amoako, a former Chief Economist at the World Bank, wrote in the ACET report.
This kind of growth, according to Dr. Carlos Lopes, the UN Under- Secretary-General and Executive Secretary of Economic Commission For Africa (ECA), is achievable only by combining the reallocation of economic activity across the three broad sectors namely, agriculture, industry and services, with sustainability and inclusiveness.
Lopes identified four countries that have demonstrated a successful implementation of economic transformation. They are Brazil, China, United Arab Emirates and Malaysia.
For example, Brazil, through its implementation of creative policies, has joined the league of industrial nations. China also has combined a variety of policies to develop both its agricultural and industrial sectors including the service sector. UAE succeeded in diversifying its formerly crude oil-based economy which accounted for about two-thirds of the GDP, to include manufacturing industries. As of 2010, manufacturing in the UAE accounted for around 10 percent of GDP, a significant jump from the 0.9 percent share in 1975. Malaysia went through three distinct phases of industrial expansion: Import substitution, 1957-1970; New Economic Policy 1970-1985 and the New Development Policy of 1986 which placed the country in the league of the East Asian Newly industrialized Economies.
The success story of these countries are not perfect, but they signal hope even for Africa.
With a strong political will, African states can replicate the success of other emerging economies, Lopes said.
One African state that has been recording significant success in the area of economic transformation is Rwanda.
According to Kagame, the progress Rwanda has made in the last 22 years after its bloody ethnic conflict is a testimony that economic transformation is possible if leaders of African states are prepared to set realistic targets and follow through with implementation.
“Making it happen is understandably going to be harder. However it can become a reality within our lifetimes,” he said.
His advice: “One, let’s change how people think; and two, let’s shape how resources are allocated and later on utilized.”
On changing mindsets, he told the audience: “this challenge is not technical. It is political and social because it’s about people. It’s about developing a mindset of urgency, ownership, responsibility and service as well as, quite frankly, the mindset of money-making and long-term investing.”
Citizens, he said, bear most of the risks – and gains – of transformation. “They have to be included in the decisions and understand the benefits of transformation – because success comes from what they do every day.”
Reflecting on how Rwanda rose from the ashes of its bloody conflict that claimed the lives of over 800, 000 citizens, Kagame said: “We figured it [economic transformation] out by doing it, because we had no choice.
“Help took years to arrive or was not appropriate to our circumstances. We had to start with our own resources and ideas, and in fact, our desire to get out of the mess and chaos our country was in. This taught us some important things. You don’t need to have all the answers or all the funds to get started. Constantly assess and correct course, but don’t wait for perfection or rescue.
“As we began to turn our attention to economic transformation, these habits and lessons served Rwanda well. They have become part of who we are and how we approach challenges,” Kagame said.
Indeed, Rwandan story is the story of the resilient spirit of a people under the leadership of a committed visionary, said a participant at the ATF, Aliyu Ahmed-Hameed of Cardston Consulting.
The country was rated last year by the World Bank as one of the fastest growing economies in the world alongside China, India, Ethiopia, and others. The economy grew 7.1 percent (year-on-year) according to a report published by World Bank Group in February 2015.
The poverty rate in Rwanda has dropped from 59 percent in 2001 to 45 percent in 2011 while inequality measured by the Gini coefficient reduced from 0.52 in 2006 to 0.49 in 2011.
Between 2005 and 2013, life expectancy increased from 55.2 to 64.0, under-5 mortality decreased from 106.4 to 52.0 per 1,000 live births.
Rwandan government in 2012 started to provide free education in state-run schools for 12 years: six years each in primary and secondary schools.
Within the next four years, the country, according to the Finance Minister, Claver Gatete, aims to become what he described as a “knowledge-based, service-oriented economy with middle-income country status.”
That indeed is achievable, not only for Rwanda but for the rest of Africa.
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