AU at 50: the economic journey

I have been asked to focus on the economic side of your proclamation. This is the most exciting time in Africa. Africa’s economic journey over the last fifty years has been a tortuous one. Many achievements, but numerous setbacks. In our quest for a prosperous Africa, which is a dynamic force in the Global arena we need to take note of three things; First, the World is now different from what it was in the last fifty years Economic Power is no longer concentrated in Western Europe and North America.The concept of North and South is no longer very meaningful.The Rise of the South, from Asia, the Gulf, and Latin America now makes for a multipolar economic World. And since 2000, Africa has joined that momentum. Second, there is unfortunately a very large flux in the Global Governance Organs and Institutions with global mandates, supposed to provide multilateral solutions, say on trade or climate are constrained by global politics. That means for the solutions, Africa needs to trade her way out of poverty or deal with climate change, have to be largely internal.Thirdly, a number of key megatrends will influence the trajectory of Africa’s economies in the next half a century which we need to be aware of Africa entered the new Millennium in 2000 with a stride of Confidence.With the exception of countries at war, or emerging from war, economic performance has remained very strong.Indeed Africa’s Economic performance is now back to the level it was in 2008 before the near collapse of the Western banking system.At the turn of the Millennium Africa’s GDP was 600 billion. Today it is 2.2 trillion. Adjusted for inflation, Africa’s GDP has doubled in 10 years.Adjusted for inflation, Sub Sahara Africa’s economic size has doubled. Per capita GDP has tripled, or up 40% if you adjust for inflation. As they say, “The sleeping giant is on its way”.The World is slowly abandoning that sometimes patronising look at Africa. The debilitating narrative of Africa and her whole litany of problems have given way to a Rising Africa.Our continent now offers the highest risk adjusted return on investment. And our economic managers are doing a reasonably good job navigating the difficult global economic slowdown. Even on human development indicators such as infant mortality, the outcomes continue to be encouraging.At this moment the Global economy still shows no signs of recovery.Some regions are in recession, The world needs growth. But where will it come from? It will be Africa and the emerging markets. For now, the emerging markets supporting the World economy But as their markets for exports to Europe mainly shrink they are looking at stimulating domestic demand. China, in particular, is pulling no stops to stimulate the internal consumption. Africa too cannot do otherwise, unlocking domestic demand; this market of a billion people must be a primary objective.As we look to the next half a century, I cannot imagine a more important agenda for Africa, unlocking its internal market. That is what will lay a basis for industrialisation, and for jobs.That is what will enable the economies of scale for some of the large infrastructure projects Africa needs. Lest I am asked whether I am painting too rosy a picture, let me say clearly that from whatever angle you look at it, Africa still faces myriads of problems - the journey is long. In some countries, absolute poverty is not declining fast enough.Millions of our youth are entering the labour market each year, 14 million to be exact and cannot find a decent job. The reason for that is straight forward. Yes, economic growth is strong but economic transformation remains a challenge. We celebrate that Africa now has more mobile phones than North America and Europe combined but as Mo Ibrahim reminded us, none of the hundreds of components in those phones is made in Africa. That is why there are not enough jobs. That now must be the next AGENDA As we celebrate today, looking to the next 50 years, three factors must be carefully observed; 50 years is of course quite a long way, and predictions are not very helpful. But what is important is to identify big trends that will have large impact and build scenarios around them.Together with Dr Zuma and Mr Lopes, we are preparing such an analysis for you, on those megatrends which will have a significant implication for the economic trajectory of Africa in the next half a century. In the limited time available, I can only mention them briefly, pending an opportunity to discuss them in more detail. Demographics With one billion people, closer to India and China.Africa›s population grows at 2.2%, compare to Asia which is 0.9%, there will be around 2.2 billion Africans in 2050.Not only more but younger. The median age in Sub Sahara Africa is 18.5 years. Provided the right investments are made in education, this is the basis of the so called demographic dividend - more people in the labour force than dependents, a wider consumer base for almost everything from food, housing and infrastructure. Urbanization Africa will not only be having more people and a youth bulge but most of them will live in cities and towns. Now the figure is 40%.By 2050 it will be anywhere between 60 to 80 percent.This will not only happen in existing large cities but also smaller cities and towns, which will grow in size. This has very large implications for planning, for infrastructure, for food supplies, etc. The Growing Natural Resource Industry Over and above our existing mineral wealth, precious and base metals, oil and gas, there are now new findings almost everywhere, sometimes a multiple of the country’s economic size. And much more will be found as capacity for geological mapping increases.These are resources which invested in education; in infrastructure is what will enable us realize the demographic dividend. The key will be pursuit of sound management, including negotiating contracts that ensure Africa gets what it deserves for her wealth.Let me close my remarks by referring to the issue of how we fund our development in the coming years. It is crystal clear that now the effort will be primarily internal, with international donor finance coming to support that internal effort.Already today approximate figures indicate various forms of domestic finance account for 3/4 of all expenditures. International Cooperation has played a major role in the last fifty years to finance Africa’s development.No doubt it will still be needed and much appreciated especially by the countries with limited resources. The last fifty years have been a remarkable, eventful journey for Africa.Africa, faces in the next fifty, a complex landscape, but she also has many opportunities. Provided we do the right thing, this could truly be Africa’s hour. Dr Donald Kaberuka is the President of the African Development Bank. He presented this analysis at the 50th Anniversary of the African Union in Ethiopia on Saturday.

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AU at 50: the economic journey