Falls in economic growth rates do not spell the end of the “Africa rising” story, but rather provide an opportunity for countries on the continent to regroup, refocus and make themselves more resilient to external shocks.
This is the word from Uhuru Kenyatta, president of Kenya, speaking at the 26th World Economic Forum on Africa.
“It is a wake-up call, not a point of gloom,” Kenyatta says. One lesson to be learned from recent growth declines in many sub-Saharan African countries is that they need to diversify their economies to avoid global commodity price falls having such a devastating effect.
Kenyatta adds that his own country shows the value of diversity. Kenya is not heavily reliant on mineral resource extraction, with agriculture, tourism and financial services making significant contributions to growth. Kenya’s growth rate has remained relatively steady at around 6%, whereas the figure for the subcontinent as a whole has dropped a couple of percentage points to 3%.
David Lipton, first deputy-MD of the International Monetary Fund (IMF), agrees that growth rates in Africa are likely to recover as the right economic fundamentals are still in place. He likened this recovery to running in a marathon. “In the Boston Marathon, at the 18-mile marker, there is Heartbreak Hill. This is where the good runner adjusts stride and then powers on,” says Lipton.
In terms of fostering growth, such a change of stride would include, among other things, a greater drive for regional integration – of trade, communications, infrastructural projects – to build local demand in the face of falling international demand.
Tony Elumelu, founder of the Tony Elumelu Foundation in Nigeria, and co-chair of the World Economic Forum on Africa, says he has never lost his appetite for investing in Africa. “In fact, African investment into Africa is rising despite the downturn.”
The key to making African investment contribute more strongly to economic growth is to ensure that the money goes into the processing of raw materials – as opposed to simply extracting and exporting. He mentioned the coffee being exported from Côte d’Ivoire and oil from Nigeria, only for those materials to return as chocolate and petroleum imports, with all value-add processes taking place elsewhere.
Elumelu also says that infrastructure needs urgent re-engineering, as most transport and communication routes were built decades ago and were intended to simply export raw materials. “Fix the infrastructure through public-private partnerships and we will build our processing capacity.”
The need to invest strategically in the continent’s young people is a pressing growth issue, said Elumelu. Building entrepreneurship and the skills base would lead inevitably to inclusive growth.
The need to link economic growth to poverty reduction was emphasized by Winnie Byanyima, executive director of the UK’s Oxfam International. She points out that, between 2003 and 2009, strong oil-driven growth in Nigeria only benefitted 10% of the population – the number of poor people in the country actually increased during that period.
Byanyima called for governments to better police multinational companies to curb tax dodging and “tax competition”, where potential investing companies bid down rival governments in terms of tax incentives – thus depriving the fiscus of billions in potential revenue.