Jeffrey Sachs: The path to double digit growth

By Jeffrey Sachs

Posted on Thursday, 2 September 2010 16:00

A number of success stories in sub-Saharan Africa show how

governments can invest in five target areas to make rapid progress

towards achieving the UN’s Millennium Development Goals (MDGs), says Jeffrey Sachs, Director of the Earth Institute and Special Advisor to UN Secretary General Ban Ki-moon on the MDGs.

Join in our debate on whether you think the MDGs are useful for Africa.

Despite the global downturn, Africa is turning in respectable growth, projected by the IMF to be 4.7% in 2010 and 5.9% in 2011. This follows solid growth above 5% per year since 2001 and a mild slowdown to around 2.1% during the global recession in 2009. Sub-Saharan Africa is showing progress, though full success will be measured in growth rates roughly twice as high as today’s.

African countries can build on the lessons of Malawi, which has recently achieved growth of around 8-9%, Ethiopia, which has been at around 10% since 2005, and the relatively high growth rates in Rwanda, Tanzania, Uganda and other countries. These experiences highlight several key dimensions to accelerated development.

Of course, there are the well-known basics: macroeconomic stability, open trade and a favourable business environment that encourages private-sector investment. But there is more than these basics. There are five targeted investments needed for sub-Saharan Africa to achieve rapid economic growth over a sustained period.

The first is increased public and private investment in smallholder agriculture. Malawi has been able to accelerate economic growth by investing in its smallholder farmers. President Bingu wa Mutharika has promoted a policy of getting subsidised fertiliser and high-yield seed to families, using a voucher-distribution system. The results: food production has roughly doubled since 2005 and hunger has been reduced. The reason is clear. When farmers are using high-yield seeds and fertilisers, their yields rise from roughly 1tn/ha to around 3tn/ha.

The second major investment needed is in national-scale infrastructure to promote electrification, highway networks, improved rail service, telephone and internet connectivity, and access to water and sanitation. Without doubt, infrastructure is a driving force for economic growth and for attracting investment.

China has been Africa’s greatest supporter in this regard in recent years, making grants and loans to build infrastructure throughout the continent. The World Bank and African Development Bank are keen to step up their infrastructure grants and loans as well. With a major and sustained effort on electrification and transportation, in particular, the opportunities for accelerated growth would abound.

The third major investment needed is in the extractive industries, including hydrocarbons and minerals. Many African countries have made important mining discoveries in the last couple of years and these can be the basis for greater earnings and budget revenues. Everyone is familiar with the ‘resource curse’, where the mining sector becomes a burden rather than a benefit. Turning minerals into economic growth is therefore a challenge.

The fourth investment area is the creation of urban employment in manufacturing and services through special economic zones and industrial parks. Here China is working with governments to transfer the successes of its special economic zones to the African context. Africa’s coastal cities, such as Dar es Salaam, Maputo, Accra and Dakar, can become major growth poles if the right urban economic policies are implemented.

The fifth component of rapid growth is investment in health and education, paying special attention to opportunities for girls and women. With advances in technology, Africa can make rapid and enormous advances in controlling HIV/AIDS, tuberculosis and malaria. The tragedy of mass deaths from infectious diseases, nutrient deficiencies and unsafe childbirth can be brought to a rapid close by investment in public health. Family planning can reduce high fertility rates and ensure that each child has a solid chance for success. The high percentage of children out of school can be reduced quickly through increased investment in classrooms, teacher training, school meals and computers. Secondary education should be near universal no later than 2020.

Targeted investment in these five areas would

double sub-Saharan Africa’s growth rate. When targeted investments are made as a package, as they are in the Millennium Villages project, the results are even more powerful because the success of each investment helps to support other sectors. The coming decade can be Africa’s historic breakthrough: the escape from the trap of extreme poverty.

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