African economies have posted growth rates of 6% on average for most of this decade. The average for Western Europe and North America is 3%, while for India and China it is 9%. Although buoyed by significant increases in international trade, capital flows and a booming global economy, this is still an impressive performance for Africa.
What does this mean for the continent?
Economic growth is the increase in the amount of goods and services produced by a country. This means that African countries have created more wealth due to the production of goods and services. It also means that national income and therefore earning capacity of Africans have generally gone up.
Unlike the past where growth on the continent was natural resource based this time it is different. Oil exporting countries (Gabon, Nigeria, Equatorial Guinea, Angola and Gabon) and non oil exporters with diversified economies (Mozambique, Namibia, Uganda, Cape Verde, Tanzania, Ghana etc) all had growth rates of about 6% on average by 2005. Even amongst oil exporting countries other sectors like finance and communications amongst others now contribute significantly to GDP. It also means that African countries again unlike the past will be less vulnerable to shocks due to fluctuations in global commodity prices.
GDP Growth Forecast 2009 Source: Nazret
This is a result of better policies enacted by African governments. Significant macroeconomic stability has been achieved - Inflation, budget deficits and exchange rates are more manageable. Foreign debts have been paid off (Nigeria and Mozambique amongst others) and those countries that still have debt have a manageable debt to GDP ratio. Economies are more open to trade and private enterprise. There is also better governance and fight against corruption.
Economic growth is an increase in a nation’s capacity to produce goods and services. It can be positive (expansion) or negative (recession) and does not necessarily mean development. Even though Africa has been growing 6% on average it really says nothing about improvements in technological progress, literacy rates, poverty, leisure time, life expectancy, freedom and social justice.
What does this mean for development on the continent?
Economic development refers to increases in the standard of living of a nation’s people following decades of sustained economic growth. It also encompasses improvements in the socioeconomic and political wellbeing of the populace. For a poor country to develop she will need sustained economic growth for upwards of thirty years, during this period the structure of the economy begins to change. If it was agriculture based, as growth is sustained, the economy shifts so that manufacturing and service sector share of GDP overtakes agriculture. Accompanying this shift will include improvements in technology, production of goods and services, literacy rates, poverty, life expectancy and basic freedoms.
A quick look at India’s journey so far will prove that this is not an easy process. India is one of the BRIC countries, has had a decade of 7%+ growth, a star in the global economy in recent years, a darling of foreign investors and a leader amongst emerging markets.
According to the United Nations development programme (UNDP), despite robust economic growth, India continues to face many major problems. Approximately 80% of its population lives on less than $2 a day (nominal), more than double the same poverty rate in China. Even though the arrival of Green revolution brought an end to famines in India, 40% of children under the age of three are underweight and a third of all men and women suffer from chronic energy deficiency. According to the CIA world fact book India’s debt to GDP ratio is 58%. To be fair India might not be a good comparison for Africa since she has more people (1.2 billion) than the whole of Africa (900 million) combined. However, it still shows how a decade plus of solid of economic growth can be far away from development.
Can and will African countries press past growth until development?
If African countries have used policies like improved macroeconomic stability, better governance and fight against corruption to attract foreign investment and sustain growth of 6% in the last decade. These policies must continue for at least 30 years and upwards for the continent to move from mere economic growth to development.
This is not a matter of taking five steps forward and ten steps backwards. It involves continuous planning and implementation on the part of governments and policy makers forever. This will take a lot of political maturity which post colonial history suggests Africa lacks – and therein lays the challenge.
