Africa Rising (or is it?)

Africa Rising (or is it?)

Image: Shoppers and street sellers outside a mall in Alexandra Township Johannesburg South Africa.

Peter Lawrence, Keele University

Celebrations across Africa over the last few of the 50 years of independence from colonial rule have prompted assessments of the continent’s development. ‘Africa Rising’ and ‘daring to dream’ has replaced ‘hopeless Africa’. The rise of an African upper middle class that can afford to buy Porsches and BMWs and live in gated communities, and of a middle class that can enjoy shopping malls and drive less expensive imported cars are all, apparently, signs of a waking giant on the cusp of an economic transformation. More scholarly accounts are less hyperbolic. They point to the predations of the ruling political class and its allies on the rest of the population, to the contrasts between the confident rising middle class and vast majority (the ‘bottom billion’) who live in urban slums or rural poverty. Can we really say Africa is rising?

The World Bank recently estimated that 414 million Africans lived below the poverty line, set at USD1.25 a day. While East Asia, which in the 1960s had much the same level of economic development as most of Africa, had reduced this proportion of extremely poor from 77% to 12% over the previous 30 years, in sub-Saharan Africa, it had fallen from 52% to 48% – in fact, hardly at all. Meanwhile the top 10% of the population of African countries enjoy between a quarter and a half of national consumption. In relatively rich South Africa, the top 10% enjoy over 50% of total consumption while the bottom 20% account for less than 3%, one of the most unequal distributions in the world.

In contrast, there have been substantial improvements in the social indicators, though these are not as impressive as those in East Asia. Life expectancy at birth has risen from around 40 years in the 1960s to 56 years in 2012, compared with 45 and 74 years respectively in East Asia. Over the same period, infant mortality rates have fallen from 150 to 64 per 1,000 compared with 84 to 17 in East Asia, while enrolment in tertiary education grew from well under 1% of the age cohort to 8%, compared with from just over 1% to 27% in East Asia.

Back in the 1960s there was considerable optimism about Africa’s future. The World Bank embraced models of development that in the absence of a capitalist class gave a substantial role to the State in accumulating capital for investment in infrastructure, industry (especially manufacturing) and in raising agricultural productivity. The growth rates required to ‘catch up’ with the developed world determined high rates of investment which in turn required a domestic savings rate higher than existing income could generate, so the gap had to be bridged by foreign aid and investment, which also helped to bridge a gap between foreign currency earnings and expenditure on imports of investment goods such as factory machinery and agricultural chemicals. The Cold War rivalry gave the ‘West’ an incentive to ensure development for Africa to avoid countries forming links with the communist ‘East’ and so helped to increase the levels of aid from both sides.

The mainstream of development economics placed industry, and especially manufacturing industry, at the forefront of economic growth. Industrialisation strategy focused on substituting domestic production for imports. Importing capital goods (machinery) to produce consumer goods was supposed to be the first stage, after which countries would start to produce capital goods, thus substituting domestic production for imports and saving scarce foreign currency. In principle the strategy was an obvious and sensible one. It failed for many reasons: most notably a lack of educated cadres able to manage enterprises efficiently; heavy dependence on external expertise, investment and technology; a lack of planning; and a failure to take advantage of domestic sources of raw materials. This left African economies again heavily dependent on the export of their raw materials to pay for the capital goods and raw materials required for the expansion of manufacturing.

The optimism of the 1960s and early 1970s was blunted by droughts and the oil price hikes of 1973 and 1979. The need to import food and oil against the backdrop of a commodity price boom followed by falling or stagnating prices as the developed world went into recession, left African economies with increasing debt and decreasing means to repay it. The World Bank and IMF, under the domination of their newly adopted neoliberal economic ideology, set the terms for Africa’s rescue. The price – a shrinking of the State and the liberalisation of domestic and foreign trade – was effectively a process of de-industrialisation as imported goods substituted for domestic products.

A slow recovery in the 1990s was followed by a growth boom in the 2000s giving rise to the renewed optimism of ‘Africa rising’. In some countries growth rates of GDP were in double figures and overall they averaged 4-6%, while import and export growth rates ranged from 2-15% over the decade to 2010. The high rates largely resulted from a boom in mineral exports, driven by a buoyant world economy and increased Chinese demand. Yet, in spite of this growth, Africa’s share of world trade is 2% now compared with 4% in the 1960s, while its share of world GDP has fallen from 2% to 1.7%. To gain a greater share of world trade requires the production and export of high value consumer and capital goods itself requiring a change in economic structure only possible through a process of sustained industrialisation.

However, the change associated with economic development from a predominantly agricultural and mineral economy to one dominated by industry has shown no signs of regaining the momentum of the early years of independence. Instead there has been an increasing proportion of GDP derived from the service sector, something that occurred in developed countries after industrialisation rather than before. The proportion of GDP derived from manufacturing has, in many African countries, actually fallen in the first decade of this century, in most cases from around 15% in the 1970s to around 10% in the late 2000s. Shares of manufacturing in total exports have actually risen, although this often reflects the inclusion of the initial processing of high value mineral exports such as diamonds and gold. Manufacturing itself is dominated by the food, drink and tobacco, and textiles and clothing clusters of industries. Any signs of structural change in manufacturing would appear in a higher proportion of output coming from the capital goods industries. But here most countries show very little increase, or even often a decline, in the share of industrial output coming from this sector, a share that was already very low in the 1960s.

So in many ways African economies are in a place similar to where they found themselves at independence: heavily dependent on the export of raw materials, on foreign aid and investment and on imported technologies. Much of the increase in investment that is now taking place is related to the search for new sources of raw materials, especially oil, involving widespread ‘land-grabbing’ . There is an increasing recognition that gains from new sources of export earnings need to be mobilised for domestic development in infrastructure and manufacturing. Yet the political history of Africa since independence does not suggest that this is a foregone conclusion. There are very few countries with stable political regimes and democratic processes. As elsewhere in the world, corruption exists in very overt forms: the awarding of contracts to political friends, the siphoning of state revenues for private accumulation, and the bribery of decision makers by both the domestic private sector and foreign companies. Such activities subvert the possibilities of widely distributing the gains of development.

What is happening in Africa reflects what is happening everywhere else: increasing and widespread inequality, the apparently overwhelming power of the global corporations, especially the banks and other financial institutions, and the seeming inability of governments to exert some control over them. In Africa, there are renewed efforts at gaining some economic independence through political and economic cooperation of the African Union with its mantra of ‘African solutions to African problems’. Such cooperation is long overdue, not least in trade. At present, only 10% of the documented trade of African countries is with other African countries, though there is much unofficial cross border trade that avoids customs bureaucracy and additional ‘charges’ to get goods transported across borders. The new regional economic unions will increase intra-African trade and investment as will South Africa’s expansion of its retail and mining enterprises into the rest of Africa. However, without a clear strategy to generate a genuine independent economic development along the lines of East Asian-style ‘developmental states’, hopes for development through regional and continental union will continue to be unfulfilled.

 

 

References and Further Reading:

Data on economic and social indicators of development can be found at: http://databank.worldbank.org/data/home.aspx, and their recent discussion of poverty at: http://www.worldbank.org/en/topic/poverty/overview#3

The references to the phrases ‘Hopeless Africa’ and ‘Africa Rising’ come from issues of the Economist : http://www.economist.com/node/333429 and http://www.economist.com/node/21541015 , respectively. The reference to ‘daring to dream’ is from http://www.theguardian.com/world/series/new-africa

The reference to the ‘bottom billion’ comes from

Paul Collier, The Bottom Billion, Oxford: OUP, 2007, a critical review article on which can be found in Peter Lawrence, Development by Numbers, New Left Review 62 March/April 2010

Histories of African development since Independence include:

Richard Dowden, Africa: Altered States, Ordinary Miracles, London: Portobello Books, 2008

Martin Meredith, The State of Africa,London: The Free Press, 2006

Paul Nugent, Africa Since Independence, Basingstoke: Palgrave Macmillan, 2004

On corruption, see: Laurence Cockroft, Global Corruption, London: IB Tauris, 2012

 

Peter Lawrence is Emeritus Professor of Development Economics at Keele University. He has researched and written widely on economic development, especially in Africa.

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