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Is Africa’s development an illusion?

By Nicholas Norbrook in Marrakech
Posted on Wednesday, 24 May 2017 14:57

As Sudanese businessman and philanthropist Mo Ibrahim so memorably put it at the start of our 7 April debate in Marrakech: “What the hell is going on in Africa?” After a decade of progress, things are suddenly stagnating, or worse. Is the continent back to the old cycles of political and economic boom and bust or are things more democratic and diversified today?

The fifth edition of The Africa Report Debates asked the question: Is Africa’s development an illusion? With 54 countries on the continent, each case has its own dynamics. But trends do stand out. There has been clear progress in countries like Cabo Verde, Morocco, Mauritius and Côte d’Ivoire, and impressive transfers of political power in Nigeria and Ghana, despite hard-fought elections.

Meanwhile, some big economies are foundering. The liberation movement is losing its way in South Africa, and Egypt has slipped under the yoke of the military. That is without mentioning that hunger is stalking the land in the Horn of Africa, South Sudan and northern Nigeria. Donald Kaberuka, a former African Development Bank (AfDB) president, has no time for pessimists.

Cast your minds back 50 years, he says, and most experts called Africa “the future” and Asia “the basket case”. Things went relatively well until the oil shocks and subsequent debt crisis, which tipped the African continent into 25 years of poverty and mayhem, he recounts. But, after 2000, there was a reversal of fortunes, and the continent has not looked back.

Kaberuka says he understands the frustrations but argues that with population increases of around 3% per annum, it is natural that people feel current growth rates are not enough. “Even if you have a 7% growth in gross domestic product (GDP), which under normal circumstances should double your GDP every 10 years, population increases simply eat it up,” says Kaberuka.

He points to what professors Paul Collier and Jan Willem Gunning wrote in 1999: that “Africa is a capital-hostile region”. They gave four reasons: lack of openness to trade, a high-risk environment, a low level of social capital, and poor infrastructure. “On lack of openness to trade, Africa has made huge progress – tariffs are down everywhere. We still have risks of some types but, as Mo Ibrahim likes to say often, how many companies have been nationalised in Africa in the past 25 years?,” asks Kaberuka, keen to point out the large advances made in social capital on the continent.

Below a dollar a day

“Finally, on poor infrastructure, I spent 10 years in the AfDB. We alone put out there $28bn of infrastructure – including the airport in Marrakech, including the airport in Casablanca,” Kaberuka insists. “Everywhere I have been, we are making progress. It’s different from what it was in 1999. We are no longer a capital-hostile region.”

Vera Songwe, recently appointed as executive secretary of the United Nations Economic Commission for Africa (UNECA), but head of West and Central Africa at the International Finance Corporation at the time of this debate, says: “I’m glad that president Kaberuka talked about 1960 and where we started from […]. But look at Nigeria. Two-thirds of the population live on below a dollar a day. For them, this discussion about growth is an illusion.”

Songwe explains that with more than two-thirds of the population on the continent working in agriculture, “they only work three months a year, which means that for the rest of the nine months of the year, that 70% of the population is essentially unemployed. It is this 70% of mostly women and young kids who do not see the great new health facility in Tangier or the fancy mall in Kenya.

These are people who do not have a job, and they do not understand what is going on. What they have, however – thanks to [Safaricom chief executive] Bob Collymore – is a phone that tells them all the wonderful things that are happening in the airport and the malls. But they cannot get there because they do not have the incomes.”

Governance curse

That divided experience can be seen across every development indicator, says Jon Marks, an energy specialist and founder of consultancy Cross-Border Information. This is especially true in electricity provision: “There are about ­4 ­million people living in Dakar who get some power, while along the coast of Senegal and in the interior of the country, there are people who just live almost exclusively without power,” he says.

In essence, the problem is the glacial pace of Africa’s per capita GDP growth. In 1960, the GDP per capita of China was $89, but it grew to $8,000 by 2015. And it is not necessarily a ‘resource curse’ problem, whereby countries loaded with natural resources face challenges like overly strong currencies. In 1960, the GDP per capita of copper-producer Chile was $526, and today it is $13,000.

For Songwe, the problem is not a resource curse but a governance curse. “Our leaders are on average 66 years old, and our population 25 years old. It is an illusion that our leaders represent us.” Mohamed Ould Bouamatou, a Mauritanian businessman who created the Fondation pour l’Égalité des Chances en Afrique, asks: “How many of those leaders have used their position for personal gain? […] Power should never be a shortcut to riches. Instead of making companies in Africa, people become politicians.”

As a result of this corruption eating away at the heart of African institutions, he sees the continent’s growth as fragile. He highlights the collapse of African currencies when the commodity cycle recently turned, the rise of phenomena like Boko Haram, and West Africa’s unpreparedness for the 2013 Ebola outbreak. That is not how Safaricom’s Collymore sees it.

Rather, he sees a much stronger and more resilient economy underpinning Africa’s recent growth spurt. “The first thing you must remember is that the consumer and business spend on the continent today is about $4trn.” And thanks to the macroeconomic reforms that Kaberuka outlined, Collymore points to the roughly “400 companies that are generating more than $1bn in revenue, profitably, outperforming their global peers.”

He also talks about some of the global trends that are contributing to African countries’ economic recovery, such as growing Asian wages. “We are beginning to see relocation of light manufacturing away from China. Ethiopia is beginning to attract shoe manufacturers. […] China is seeking a stable manufacturing space, and Africa presents that,” says Collymore. “So both in export and supply, Africa’s growing consumer economies are, I believe, what are driving developments on the continent and what are actually moving this away from being an illusion to reality.”

But is there still a clear path to that kind of labour-intensive growth? Ann Grant, a former British high commissioner to South Africa, says technology is hurting jobs in certain businesses more than others: “The UK and the US have seen the largest net decline in jobs over the past 15 years, and new technologies impacted most on sectors with traditionally the large numbers of lowest-skilled jobs – in manufacturing and wholesale and retail.”

Grant adds: “Perhaps less well-known is the impact on the professions and the middle class – which we’re all hoping will grow in Africa – […] with algorithms already doing much of the data capture, number crunching and analytical tasks currently performed by qualified accountants, lawyers, tax officials and so on.”

The World Economic Forum’s 2016 report on the future of employment predicted that more than 50% of such jobs across the countries of the Organisation for Economic Cooperation and Development will go within the next 20 years or sooner.

Demographic challenge

So, is Africa fighting the last war and trying development models that may be obsolete? Not so, says former AfDB president Kaberuka, who recalls a UK prime minister appearing on television to decry the job-killing power of the microchip.

Since then, it has provided thousands of jobs in Britain. Former World Trade Organ­isation boss Pascal Lamy argues that from another of the great global challenges – the protectionism of US President Donald Trump – Africa has less to fear, partly because there is far more intra-­African trade. “If Trump acts crazy, it won’t mean that all the others will act crazy – and the Europeans and Chinese won’t follow him,” says Lamy.

More difficult, says Lamy, is Africa’s demographic challenge. “There are a billion people on the continent today. By 2050, that will double. To avoid this becoming a migratory wave impossible for Europe to manage, you need 4-5% growth in GDP per capita [per year] between 2020 and 2050.” Kaberuka is more sanguine on migration, recalling how Australia went from preferring white immigrants to welcoming refugees to boost its population.

The Morocco case study (see TAR 89) was also hotly debated in Marrakech. And the view from the ground at home and across Africa is of opportunity and growth, rather than alarm bells, says Mohamed Ben Ouda, the chief executive of Morocco’s SNTL, a logistics company.

He has seen the strong push of Moroccan companies keen to conquer new markets south of the Sahara. “In 2015 and 2016, we grew 16%,” he says. “In my travels across the many markets we operate in, I meet with businesspeople, young people. There is a real drive to succeed.”

Inclusive growth?

Ouda argues that the Moroccan model of diversified growth, with industrial policy driving key sectors, is something the continent should look at. He disputes the idea that the Tangier health facility that Songwe mentioned is not part of a wider push for inclusive growth.

“I’m from Tangier. There are lots of jobs which have come there. Renault has built a factory, and many more have joined. There is a real dynamism in the manufacturing ecosystem that has managed to generate jobs. We have really woken up,” Ouda says.

He also salutes the growing resistance of local companies in the logistics sector in different African countries, even with international competition. “In Senegal, it’s SNTT. In Algeria, it’s La Flèche. In South Africa, it’s Super Group. And they are doing well because they are close to the market and because of a new cadre of management who have gone to Harvard, MIT, HEC, Oxford, Ecole Nationale des Ponts et Chaussées. There is now a really strong level of education in lots of different African countries.”

Songwe insists Africa should focus on the fragile corporate base of the pyramid, small and medium-sized companies which may be able to use a mobile phone to send money, but often have no pension systems or insurance. “These are the people who, if there is a fire, their life savings are gone and they are lost,” she says. “For these people, [development] is still an illusion.”

Safaricom’s Collymore disagrees: “Since we launched mobile money, we have moved a significant number of people into the financially included space. And when I say significant, I mean millions, tens of millions […]. Whereas 40% of Kenyans used to rely on emergency funding, we now have that 40% who are relying on savings that they can do through the mobile phone.”

Thinking ahead

Inclusive finance is certainly a key route towards prosperity, agrees Ismail Douiri, the co-chief executive of Attijariwafabank, a Moroccan financial institution that has successfully expanded across the continent. “We’ve put in place the right mandatory savings mechanisms very early on, so we have social security. Of course, it only applies for the formal sector, a minority employer, but still it’s pensions, savings that are gathered for the long term.”

And Morocco has not been afraid to ignore advice from Washington DC. “We have had heavy investment in infrastructure, sometimes not necessarily immediately productive, so the World Bank keeps on saying: ‘Okay, it’s not returning what it should have’. But, nonetheless, we are now in the top 20 countries in terms of maritime connectivity. That is a huge asset that we now have,” says Douiri.

The Rabat government has also not been afraid to push for more ‘orthodox’ policies either, he says: “It’s not only tariffs; it’s really regulatory framework.” The result is that Morocco is bound up into global industrial supply chains. One can rightly say that, for those involved, development is not an illusion.

From the May 2017 print edition

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