Why is it difficult for Africa to sustain growth without structural transformation?

Hundreds of transformation’s movers and shakers will gather next week in Kigali for their first African Transformation Forum two-day conclave, aware that the continent is is being shaken by the recent fall of commodity prices. Ever since commodity prices started to fall (and they are falling!), China’s economy started to cool driven partly by a rebalancing to a more consumer-driven economy, and their appetite for natural resources waning, many pundits have been suggesting that Africa’s growth revival is under threat and that 2015 marked the beginning of the end of the so-called “Africa’s Chinese-led boom”. Indeed, the prices of oil, gas, solid minerals, and other commodities are plunging, creating severe havoc to many African countries, especially the oil exporting ones. These external headwinds will in the short to medium term affect negatively the continent’s growth prospects, most obviously in commodity dependent countries. This has uncovered the limitations of an “extractivist” development model based on high-commodity prices. The commodity price fluctuations exposed our countries to exogenous shocks, producing macroeconomic instability, which many of us are ill-equipped to master. Certainly, we should learn lessons from what is happening! Certainly, this should make clear to all of us that our economies need to be structurally transformed to reduce our dependency on commodities and exposure to their associated vulnerabilities and uncertainties. We need diversified economies! To generate the quality of growth that brings about prosperity for all, we need to ensure that we capitalise on the potentially more sustainable structural drivers of Africa’s growth, namely, rising demographics, the youth bulge, a burgeoning middle class with increasing purchasing power, rapid urbanisation and growing infrastructure needs as well as an expanding intra-Africa trade. All of this needs a modern agriculture sector, globally competitive service sectors, expansion of our manufacturing base-which is vital for the jobs agenda-, significant improvements in our productive capabilities in all sectors, investments in our human capital, as well as strong and functional institutions. Without structural transformation, especially through industrialisation, it will be difficult for Africa to sustain its growth and create jobs, when the easy ride provided by high-commodity prices seems to have reached an end. The question to ask is which foundational factors will deliver the Africa we want, the change that needs to happen for us to be able to create “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena”? No longer a passive bystander of an ever-evolving world! A continent where we harness to the full the creative energy and potential of all of its citizens, at the centre and at the periphery, the formal and informal, in urban settlements or in rural areas. I would like to posit that institutions are key to transformational change and to building a cohesive, resilient, competitive and transformed Africa. When we talk about institutions, it does not only entail organizational structures. It includes formal rules (constitutions, laws, property rights, etc) and informal norms, customs, beliefs, traditions, practices, and codes of conduct that govern political, social and economic interactions, shape behaviours, condition societal expectations, structure the design and the content of decisions, and determine development outcomes. The conveyer belts for collective action! As such, I will focus on institutions for structural transformation and for promoting social cohesion. In his interesting book “Kicking Away the Ladder”, Ha-Joon Chang suggests that we need to move away from the “blue print” approach and develop innovative institutions, effective processes and flexible mechanisms for successful industrial policies. This is a view we share at UN Economic Commission for Africa (ECA) . In fact, we are quite categorical and emphatic about the need for a paradigm shift in Africa. We advocate for a developmental state. We call for the renewal of development planning. In our new policy document on “Smart Industrial Policies for Africa” we say that successful industrial policy requires a government with “embedded autonomy”. That is, a government that has its roots in the society, but also has the power to chart and implement its way forward. For long, several scholars have indicated that meta-structural factors were responsible for Africa’s growth tragedy emphasizing that tropical climate, landlockedness, weather-related and other environmental hazards, or the history of colonialism had hindered the sustainable development of the continent. The meta-structural arguments have since been countered in many African countries, including several in Eastern Africa. For example, despite being landlocked, Ethiopia and Rwanda have achieved rapid growth and development for more than a decade now. And, in general, Eastern Africa has been among the best performing sub-regions in Africa in boosting employment and productivity in manufacturing and modern services. Such success stories can be found in Ethiopia, Kenya, Tanzania or Uganda, just to name a few. Overall, the region has scored an impressive performance with an average GDP growth of 6.6 per cent per year, rapid urban development, new sectors emerging and innovative technology being introduced. So, this demonstrates that we are capable of taking charge of our development. However, notwithstanding the significant progress made, we still have serious development challenges. The current pattern of growth still leaves large segments of the population in poverty and vulnerability, particularly in rural and peripheral areas in urban centers. In several countries in the region, income inequality has increased. Persisting inequalities have economic, social and political consequences including a decline in social cohesion, more likelihood of conflicts and violence outbursts. Today, Africa is in need of inclusive growth where no social category, gender or age is left behind. Economic growth should not be sought at the expense of gender equality, quality of education and health provision or social cohesion. We aspire to good governance and democracy to give citizens a voice. We want a development that is people-driven. We need cohesive societies. Those that “work towards the well-being of all its members, fight exclusion and marginalization, create a sense of belonging, promote trust, and offer its members the opportunity of upward mobility”. In addition, it is important to note that the continental change we are aiming for cannot be achieved by governments alone, nor by large multinationals. Instead, transforming our societies will necessitate broadly shared visions where voices of all stakeholders are heard and accounted for. It will be indispensable to harness the potential of our citizens and give opportunities to the younger generations, thus creating a renewed social capital for change, shared activity, initiative and collective leadership, at all levels! We should shape the present and build the future together, a compact for growth and prosperity for all! We need to move away from heavily centralized societies to embrace development pathways based on a network model, where leaders and followers, the governed and the governor co-exist symbiotically in an ever dynamic ecosystem. To paraphrase Manuel Castells, “In a network society, the state is no longer a nation state... it is a network state, where power is shared and negotiated among several social actors, at local, national, international and other levels. Thus, political institutions become bargaining agencies rather than sites of power”. He continues to say that “Power, however, does not disappear. It resides in the networked relationships and cultural codes through which people and institutions communicate”. The need for personal and collective ownership and collaborative decision making should be recognised. Thus, the policy space for transformative thinking and platforms for effective and creative multistakeholder participation in decision making and policy formulation and implementation must be created. These must take into consideration locally-based and contextually sensitive responses to problem solving, which would certainly generate better public service. Last, to improve our implementation capability we certainly must strengthen policy cohesion, institutional cohesiveness and interdepartmental coordination, an elusive goal in many jurisdictions in our sub-region. Antonio M.A. Pedro is the Director of the Eastern Africa Office of the UN Economic Commission for Africa

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Why is it difficult for Africa to sustain growth without structural transformation?