Emerging Powers and Africa’s Development Agenda in the 21st CenturyBy leadership project // Monday, December 3, 2012
By Dr. Mzukisi Qobo
There continues to be a growing interest in Africa’s development challenges and the continent’s future prospects. The commodity boom that took place from 1997 to 2007 accounts for much of this positive commentary.
Coincidentally, Africa’s new emerging partners, China and India, have also helped to spur its growth, due to the vast amount of vital resources found within the continent that are seen as strategic necessities to power their own growth and modernization. Beyond natural resources, the involvement of these new partners in Africa spans diverse sectors, such as infrastructure, agriculture, and finance, with state-driven capital fueling acquisitions in the case of China, and intensifying private sector engagement in the case of India.
In the last decade or so, Africa has turned a corner, both politically and economically. Conflicts have ended in several countries, such as Mozambique, Angola, and Rwanda. There is a renewed wave of democracy, with 30 countries thus far putting in place democratic processes in the period between mid-1990 to 2008 whereas in the 1980s, there were not more than four democratically elected governments. Coups are not as frequent as in the post-independence period. Overall, Africa’s future looks better than the past.
Various assessments published by international financial institutions, global consultancies, and global think tanks have emphatically confirmed that Africa’s future economic outlook is positive. A research study by Global Mckinsey Institute in 2010 titled Lions on the Move points out that “During the past decade, Africa’s poverty rate and child mortality rate declined, primary school enrollment increased, and a great share of the population gained access to clean water.”
On the economic front, much has also changed for the better. Africa’s collective GDP in 2008 is said to have been roughly equal to Brazil’s or Russia’s at US$1.6 trillion, nearly doubling the figures of a decade early. With a combined consumer spending of around US$860 billion during the same period, and projected to rise to US$2.6 trillion by 2020, there is no doubt that Africa is on an upward trajectory. The fast rate of urbanization, although likely to generate more infrastructure-related challenges and increase the burden on inadequate health facilities, water supplies, and road infrastructure, is a sign of future dynamism on the continent, especially if the growth rates keep up and more investment flows into the continent.
It needs stating, though, that much of the recent growth has not necessarily been felt uniformly across all African countries. With the exception of South Africa, much of the investment has been funneled into the resource sector. According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report published in 2010, Angola, Egypt, Nigeria, South Africa, and Sudan are first-tier magnets of investment, receiving investments above US$3 billion each from non-African developing countries. Egypt experienced a hiatus as a result of the Arab Spring, and witnessed roughly US$2.7 billion in capital outflows.
For many African countries, foreign capital inflows have recovered in the post-crisis period, reaching a high of US$72.1 billion in 2010, but still below the pre-crisis peak of US$79billion. Despite these improvements in Africa’s economic structures, the fundamental conditions that assure long-term growth, including a proper infrastructure of governance and well-functioning legal, bureaucratic, and market institutions, are still lacking or are weak in a number of countries. Even South Africa is no longer standing on firm ground, as the September 2012 credit downgrade by Moody suggested that the country’s institutional weaknesses may undermine efforts to achieve socio-economic cohesion in future.
There are still a number of other constraints to Africa’s development: corruption, issues related to weak governance, limited space for civil society, a weak business climate, infrastructural bottlenecks, dependence on a narrow range of products, reliance on traditional markets, underdeveloped human capital, and weak social infrastructure. These could be summarized as: 1) poor hard infrastructure, encompassing the economy and including productive capacities and infrastructure; 2) weak social institutions, including a lack of serious democratic discourse and the absence of a strong civil society voice, as well as weak rule of law and regulatory environment; and 3) low social infrastructure, such as health, education and other social services. The cost of doing business on the African continent is still high, and there are generally weak supply-chains that are key for manufacturing and distribution related businesses.
No doubt, Africa’s resource wealth can be a boon for the continent. Political and economic relations involving resources and development continue to develop between many African countries and emerging powers, such as Brazil, India, Russia, Turkey, and South Korea. However, African leadership needs to manage these partnerships responsibly and with the objective of developing Africa’s people. If Africa were to realize its bargaining capacity, it could better leverage relations with these and other emerging powers, such as China, to achieve much more for its growth and development. Although resources represent a core competitive advantage, the real long-term value is in exploring ways to help Africa diversify its production structure and add value to its resources. African leaders have a responsibility to mobilize the rents extracted from natural resources towards maintaining infrastructure, diversifying their economies, and developing their people.
The high capital intensity of the extractive sector means that there are limited broad-based developmental benefits to be gained in the form of employment creation. The multiplier effect into other sectors of the economy is limited as well, unless African leadership re-invests the rents generated from resources to develop other sectors, in particular to promote knowledge development, agriculture, industry, and services. Importantly, African countries would need to define, in precise terms, what their development interests are, and how to better leverage relationships to ensure optimal outcomes. This requires that Africans increase their agency, and articulate their interests in relation to external actors more clearly.
There are a number of ways Africans can reorient their relationship with emerging powers to generate greater benefits for economic development in the long-term. First, African leaders need to define their core long-term interests in these emerging partnerships. They should look beyond the rhetoric of solidarity, and realize that today’s world is extremely mercantilistic, and the relationship with China and others is primarily a business relationship. The resource endowment of their own countries should give Africans the confidence to bargain for better returns rather than selling their countries’ trophies on the cheap. Apart from gaining advantages in infrastructure deals, African countries need to set out clear conditions that are linked to technology transfer, value-addition, skills development, and institution building. Granted, Africa’s impoverishment and weak institutions could limit the extent of technology absorption and skills formation. However commitments need to be made clear from the start, with long-term agreements, in order to facilitate such benefits.
Second, China and other key investor countries should support Africa in its integration into the global economy, but not on the basis of commodity dependence. Supporting regional integration initiatives and promoting development by using existing processes such as SADC, EAC and COMESA could have a substantial effect on building cross-border infrastructure, improving customs administration, and addressing some of the bottlenecks that limit intra-regional trade. Regional integration is one of the key pillars of Africa’s development: this holds great potential for expanding scale economies, increasing trade within Africa, and enhancing overall export competitiveness.
Third, African countries should share, amongst themselves, knowledge and expertise on how to negotiate better supplier contracts with external actors. They need to develop finesse in conducting commercial diplomacy. Countries such as South Africa could play a pivotal role in providing technical capacity and shaping a common African response to trade deals with emerging economies.
Finally, African governments need to be serious about accelerating reforms, investing in education, and increasing the opportunity for private sector-led growth in their countries. Ultimately, leadership and a sense of urgency are key to Africa’s long-term prosperity.
Dr. Mzukisi Qobo is deputy director at the Centre for the Study of Governance Innovation at the University of Pretoria, South Africa. For his views on South African current affairs follow him on twitter: @mzukisi_qobo
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