Thursday, April 25, 2013

The Rise of Africa - a fairy tale?

During my recent trip in East Africa, I saw a frenzied building activity in Dar es Salaam, Nairobi and Kampala. I saw an industrial park outside Kampala, and even between Mwanza and remote Tabora in Tanzania a new road was built. Oil drilling is set to commence in Uganda and gas pipelines are built from gas fields off the coast of Kenya and Tanzania. It seems like a lot of money is spent and investments are high. So far you could say that I witnessed the Rise of Africa – an increasingly popular narrative. 

Africa is now sometimes referred to as the New China. Africa’s booming economic growth fuelled by a rigorous focus on government and citizen accountability will boost poverty reduction and prosperity, according to the World Bank’s latest Africa’s Pulse, the twice-yearly analysis of the economic trends and latest data on the continent.
“The broad picture emerging from the data is that Africa’s economies have been expanding robustly and that poverty is coming down,” says Shanta Devarajan, the World Bank’s Chief Economist for Africa, and lead author of Africa’s Pulse. Throughout Sub-Saharan Africa, the report found, economic growth remained strong at an estimated 4.7 percent. Excluding South Africa, the region’s largest economy, the remaining economies grew at a powerful 5.8 percent—higher than the developing country average of 4.9 percent.”

This "Africa Rising" narrative has been recently also been taken up by cover stories in Time Magazine and The Economist.

And as I said, there is building going on. But....
To compare Africa’s current development with China’s is nonsense in my view. China was always an industrial powerhouse – its GDP was much bigger than the whole of Europe before European imperialism. It has just undergone a temporary slump. In contrast Africa was never industrialized and it has been plundered for centuries, most importantly of its biggest resource – its people. Colonization certainly didn’t help.

For how long have you seen “made in China” on products you buy in the shop? And how often do you see “made in Nigeria/Kenya/Uganda/Zambia” on anything you buy? Even in African countries themselves, most industrial goods are imported from China, Thailand, India, USA or Europe. South African supermarkets are increasingly dominating the shopping scene in East Africa, and in their shelves most stuff is imported. And all those wonderful East African textiles – made in Bangladesh.

The industrial park I saw outside of Kampala seems to house mainly import/export companies. And looking in my own field of expertise, agriculture, it is still mainly dependent on manual labour with very low productivity.

Africa attracts a lot of investments  now. Part of it is from the African diaspora. Foreign remittances are said (of course data here is extremely fuzzy) to be bigger than total aid. Of course, all this money pouring in will have to be spent. Of course it will trigger economic growth, but there is no guarantee for a lasting development.

 “The idea of development as industrialization has been completely abandoned in the last few decades. Free market economics has come to advise poor countries to stick with their current primary agriculture and extractives industries and "integrate" into the global economy as they are. Today, for many champions of free markets, the mere presence of GDP growth and an increase in trade volumes are euphemisms for successful economic development. But increased growth and trade are not development”.

The data behind the Rise of Africa narrative is also questioned. Morten Jerven’s research, Poor Numbers, in various Anglo-phone African nations suggests that the data supplied by national records and statistical offices are highly unreliable, with figures that substantially misstate the actual state of affairs.

Also, an economic growth rate of 5% per year is not so impressive when it is put in relation to the growth of the population. After all it is the growth per capita that counts when it comes to poverty reduction. Again, compare China with a 8% economic growth with almost no population growth with Sub-Saharan Africa with a population growth that is almost as big as economic growth. Between 1980 and 2010 GDP per capita in 2005 International dollars increased only from 1,800 per person to just above 2,000, albeit with a drop down below 1,500 in the early nineties (source).

Some are terrified by the growth of population in Africa, but by and large Africa is not much populated compared to Europe and Asia. Perhaps, this population growth also holds a promise for the future. The biggest shift in Africa’s demography resulting from the population boom is the increase of the working age population. In 2010, 34 per cent of Africans were aged between 25 and 59. They represent 34 per cent of the population or 353 million people. By 2050 this number is expected to reach 892 million people, representing 45 per cent of the population. This would represent a dramatic shift in the world’s labor force, with Africa likely to replace China as the biggest contributor to the global workforce.

Historically, a big work force has been one of the major drivers for economic development. But historical relations might no longer hold: in an industrial development with increasing automation the importance of the size of the workforce will perhaps be less pronounced. We already see that industries are to some extent coming back to the USA and Europe. In general, it seems like industries are going the same way as farming, a constant over-production as a result of that increase in productivity is quicker than growth of demand. This means that the industrialization path for development will be increasingly narrow and hard to go for newcomers.

Of course, there will be spots and pockets than can thrive without either industrial development or agriculture productivity growth; living on tourism or mining for instance. And there are countries which can – and have already – developed industries. After all Africa has 54 countries with varying conditions. But for a large scale development of Africa it needs both agriculture growth and industrialization. And both seem hard to get.

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