Africa’s economic outlook brightens amid continued inequalities

Scene near coal mine in South Africa UN photo.jpg

Africa is one of the world’s fastest growing regions and should remain so in the coming years. But its progress is hampered by an ever-widening income gap, development experts said at the Brussels launch of the 'African Economic Outlook 2013' report.

The 357-page report – whose authors include the United Nations and the Organisation for Economic Co-operation and Development – predicts that Africa's economy will grow by 4.8% in 2013.

Emerging from the uprisings in North Africa and the effect of the EU debt crisis, the authors predict a further acceleration to 5.3% in 2014.

But the report also flags continued conflict, trade fragmentation, political fragility, and the reliance of some African countries on overseas development aid as reasons for the continent’s unequal growth.

“The report shows this growth has been accompanied by insufficient poverty reduction, persisting unemployment, increased income inequalities and in some countries, deteriorating levels of health and education,” the authors said in a statement.

Africa’s strong economic performance becomes further tainted when its human development index – an indicator that combines education, life expectancy and other factors is adjusted for inequality. The continent also has disproportionately low levels of poverty reduction compared to its overall growth, less than 1% compared to some 2% for the rest of the world, said Andris Piebalgs, the European commissioner for development.

“Africa is changing fast,” Piebalgs said yesterday (25 June) at the report's Brussels launch, organised by the Friends of Europe think tank. “One-quarter of the countries in the region grew at 7% or better… Although the proportion of poor people has been slowly falling, from 57% in 1990 to a projected 42% in 2015, absolute poverty remains a challenge. Africa will be the only region not to reach the goal of halving poverty by 2015.”

“People don’t see the transformation of growth in their own incomes,” he said. “Future growth strategies must focus on making growth more inclusive.”

Mario Pezzini, the OECD’s development director, warned that Africa’s economic transformation could lead to employment difficulties similar to those of the EU, whose soaring youth joblessness has seen widespread protests. He said the continent's governments had to match “the expectations of young people” to avoid uprisings such as in Tunisia, which in the 10 years leading up to the 2011 revolution saw yearly growth of 5% with no government deficits. “Growth in itself is not enough,” he said.


Development experts believe many African countries hold huge development potential due to their major reserves of oil, gas and other minerals and raw materials. In recent years, Angola, Nigeria and Ghana have begun exploiting vast, previously untapped reservoirs of crude oil.

But the proportion of the revenue that goes into health care, infrastructure and other development projects from natural resource exploitation depends greatly on the individual country. Piebalgs called for good governance and policy-making across the continent for Africans to reap the rewards of their resources.

“Africa's strong economic performance needs to translate into opportunities for all. That is why the responsible [exploitation] of natural resources is imperative for sustainable development,” he said.

Piebalgs said recent revisions to the EU’s accounting and transparency directives would help improve public confidence and that the EU would continue looking for ways to “optimise” mining legislation and taxation.

Analysts long have been frustrated by Africa’s paradoxical “resource curse” – while resource-rich it is extremely poor – and warned of its potential for so-called “Dutch disease”, a decline of the manufacturing sector following oil and gas exploitation.

“In Africa natural resources are contributing less than in other cases … Does it make sense to insist on resources”, Pezzini said, referring to the potential for further polarisation of society due to the effects of Dutch disease.

“The point is not the amount of resources used but the dependence on resources. Most of the big economies are not dependent on resources. It is important to have economic diversification.”

According to the report, natural resources have accounted for about 35% of Africa’s economic growth since 2000. Resource-based raw materials and semi-processed goods accounted for some 80% of the continent’s exports in 2011, compared to 60% for Brazil, 40% for India and 14% for China.

“The report looks at development beyond income,” said  Pedro Conceição, chief economist of the United Nations Development Programme. “We look at an index called human development. Over decades we see sharp increase in human development. [According to the] increase, Africa is right at the top of the world. But Africa takes the biggest hit when it is adjusted for inequality. According to the measure Africa is the most unequal region in the world.”

Michel Camdessus, a member of the Africa Progress Panel and former managing director of the International Monetary Fund, called for a more coordinated to African policy issues, including taxation. “We need a global coalition on these issues. The G8 has proposed to join forces to fight tax evasion, multiplying the efficiency of such efforts.” He suggested governments and development organisation “give precedence to the initiatives of the African union itself” in forging new policies. “The African union has already produced an African vision on the extractives, which needs to be implemented by African governments at all levels.”

Angolan Minister of Geology and Mines Francisco Manuel Monteiro Queiroz said: “The Angolan experience pays, maybe to be generalised in all african countries. In only ten years in terms of macroeconomy  it achieved the most progressive rating of oil country producer, 9.2 annual level of gross product [GDP] in ten years … It has [US$] 33 billion in international net reserves. Public debt is less than 30% gross product. Angola now has 19 universities and 8 high schools… In construction, Angola built more houses and buildings in ten years than in more than 450 previously.

“It is possible to think about the African condition as in European countries,” he said, referring to three values, independence, sovereignty, and respect. “With independence, we are talking about natural reserves. In Africa these natural reserves belong to African countries. In Europe they belong to European countries. The roles of business must be based on a win-win solution. For sovereignty, Africa has the same right to decide how to exploit those reserves and how they will reallocate those reserves [through] transparency and good governance. Respect because the culture and spirit of African people must be respected. I think we can build another model of relationship. We cannot continue with this relationship. We have to go back.”

Momar Nguer, Africa-Middle East director at Total Supply & Marketing, a major oil and gas company, said: “It is contentious when I hear people say that we should tell our governments what we should do with taxes from us. Who are we to tell governments what to do with the money we pay to them. We should consider that. Let's think about the amount of money from aid over last 50 years. To what extent have we been transparent with the money we are transferring there. How long to get transparent on all the money that governments are receiving. Why are we just looking at oil revenues. I do not believe in any sort of Dutch disease. We must leave it to governments to define their priorities and [develop] trust in government.”

Sheila Khama, extractives director at the African Center for Economic Transformation, said: “I think we accept that there are significant lessons that Africa can learn from Asia. But we should also use our advantages a young labour force, [much] arable land and an abundance of natural resource in the form of raw materials. Africa should take advantage of these to transform their own economies, rather than cutting and pasting from Asia. That would be a real strategic approach.”

Logan Wort, executive secretary of the African Tax Administration Forum, named three examples of good practice in natural resource exploitation - the diamond trade in Botswana, oil in Ghana and resources policies in South Africa. He said Ghana had decided to allocated revenue from the oil industry to longer-term development projects, including financial services and education. He praised South Africa’s decision to label natural resources as a public good. “Companies have to pay a royalty for the right to exploit and sell that good,” he said. “Natural resources under the earth can more directly benefit the people.”

The 2013 African Economic Outlook is the 12th edition of the report, which tries to bring together the continent’s short-term economic performance and the macroeconomic, strucutural and social aspects of the Africa’s development.

The report covers 53 of the continent’s countries, with country-by-country breakdowns, excluding only Somalia.

The 2013 authors were the African Development Bank Group, the OECD’s Development Centre, the UN’s Development Programme and Economic Commission for Africa.

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