Africa’s Economy: The Gloomy Past and Its Bright Future

In recent years, Africa has undergone major changes and these positive economic changes are humbling those who thought otherwise.

The heydays

The 1960s and early 1970s are relatively the thriving years for African economies. The period has utilized the inspirations and dynamism which has gained momentum in most African countries following their independence from colonialism and the beginning of nation building.

According to a study by the United Nations Economic Commision for Africa (UNECA), undertaken in 1975, Africa’s economic performance during 1960-1975 has shown better results compared to the decades to come. Although it did not meet the targets set, Africa as a whole has performed well and certainly better than the subsequent 25 years – 1975-2000.

During this period, Africa’s GDP growth rate was 4.5 pct; its export growth 2.8 pct; its agricultural growth 1.6 pct and its manufacturing growth 6 pct. Adebayo Adedeji, a renowned African scholar has once stated about the era, “…In retrospect, the period 1960-75 has, tragically, turned out to be Africa’s golden era!’’

The era witnessed the remarkable economic prosperity of the west European countries following the Marshal Plan and the start of the Asian economic miracle.

Despite this levelheaded economic performance, there was a huge infrastructural gap. This in combination with various civil wars, political instability and economic mismanagement put the continent’s economies in a down ward spiral starting in the late 1970s. The continent was facing a serious economic crisis. The strong optimism of the 60s and early 70s, slowly gave way first to uncertainty then to cynicism and by the end of the 70s to a consensus of gloom.

Twenty years of chaos

In the early 80s, the World Bank became convinced that African economies, particularly Sub-Saharan Africa, were facing a “dim economic prospect” and virtually no growth or in some cases, negative rates of growth.

The OAU, in collaboration with the UNECA, mobilized African intellectual and political resources to discuss the crisis on the table and came up with a vision and a plan of action.

These efforts led to the Monrovia Declaration (1979), which articulated Africa’s vision were incorporated in the Lagos Plan of Action, and the Final Act of Lagos (1980).

However this doesn’t bring an immediate and meaningful halt for the waning African economies. World Bank data from 1975-2000 reveals that about 24 Sub-Sahara African countries including South Africa, Nigeria, Ethiopia, Cameron, Senegal, Cote d’Ivoire and Zambia registered a negative GDP growth. Whereas seven of the most relatively stable and naturally rich countries of the time such as Kenya, Ghana, Zimbabwe, Sudan and others registered less than 1 pct of GDP growth during the period. Only Botswana and Equatorial Guinea were the exception of the dooms day.

The reasons for this are complex and includes internal and external forces. Conflicts (civil war, coup d’état) and instabilities, lack of well articulated and workable policies and strategies, dire political and economic administration, drought, famine, diseases among others have played their share for this reprehensible demise were internal factors affecting growth.

Twenty–eight African countries have been at war in the three decades since 1980, dictatorships have been the prominent feature of the period and sub–Saharan droughts and famine of the 1970s and 1980s have taken their toll.

The Cold War, during which many African countries were forced to take sides have damaged the economies of the continent. Dependant economies, distorted structures, divided people, undeveloped human resources, weak and undemocratic state structures which are the residuals of colonialism also played an imperative role in creating the basic conditions for the crises. Moreover the international commodity market, financial system, intervention by the Bretton Woods institutions (the World Bank and IMF) and the Donor countries in African economies through Structural Adjustment programs (SAPs), ostensibly to help Africans overcome the crises, simply perpetuated the unequal and exploitative relationship between Africa and the global system.

It was during this economic despair and melancholy, African states committed themselves to the creation of an African Economic Community (AEC) through the 1991 Abuja Treaty, using the Regional Economic Communities (RECs). These RECs such as Economic Community of West African States (ECOWAS, 1975); Southern African Development Community (SADC, 1980); Economic Community of Central African States (ECCAS/CEEAC, 1985); Common Market for Eastern and Southern Africa (COMESA, 1994) and Community of Sahel-Saharan States (CEN-SAD, 1998) were meant to establish grounds for mutual economic development among the majority of African states. The stated goals of the organizations include the creation of free trade areas, customs unions, a single market, a central bank, and a common currency thus establishing an economic and monetary union. Focus has been also given to growth, investment, export promotion and trade-related national and cross-border challenges.

Ideally, regional economic integration implies integrated national economies. Unfortunately, in Africa the establishment of nationally integrated economies with close inter-sectoral linkages and adaptations, especially between agriculture and industry is yet to be attained. Poor inter-state infrastructural links such as transportation, energy and telecommunications and economic dualism especially between the traditional and modern sectors limit dynamic and multiplier effects of economic integration.

A bright future

At the beginning of the millennium Africa started preparing itself to make a transition of its continental organization from the OAU to AU. Four decades ago the OAU was founded in an era of militancy and confident optimism – Africans believed that having achieved sovereign independence, the world was at their feet. The leaders of that era, including Nkrumah, Nasser, Nyerere, Emperor Hailesilassie I and others had acquired the status of giants and visionaries.

By contrast, the launch of the AU in 2002 in Durban South Africa was sober and muted with little incendiary rhetoric or passion. Critics can point to the weakness of the AU institutions and their inherited arrears. But much of the Summit was “businesslike and realistic” as Abdalla Bujra a renowned African scholar recalls it. “Africa has learned much.”

The first decade of the 21st century can be surnamed as the inauguration of the African renaissance. The African economic growth is no more a mirage; it is rather becoming more tangible and present.

The 2001 New Partnership for Africa’s Development (NEPAD) and the 2002 Constituent Act of the Africa Union rekindled the spirit of Pan Africanism. NEPAD has redefined and prioritized regional programs in key sectors such as transport infrastructure, information and communication technology (ICT) and environment and energy.

Relative peace and security, the emergence of more development minded leaders and the rise of the BRIC, especially China as an alternative economic partner have given the continent the basics to go forward.

In the middle of April this year, Africa’s Pulse, the World Bank’s bi-annual analysis of the economic trends and latest data on the continent, revealed that 25 percent of the countries in Africa notably Sierra Leone, Niger, Cote d’Ivoire, Liberia, Ethiopia, Burkina Faso and Rwanda, grew at 7 percent or higher putting them in league with the fastest growing countries in the world.

Shanta Devarajan, The World Bank’s Chief Economist for Africa, and lead author of Africa’s Pulse says, “The broad picture emerging from the data is that Africa’s economies have been expanding robustly and that poverty is coming down.”

At the end of 2012, Institution of International Finance (IIF) known for its consultancy and negotiation services, (it has been negotiating the Greece bailout program with EU) issued a report on the state of Sub-Saharan Africa declaring it a decent bet for investment. This can show the changing attitude that the West is having towards Africa. Africa finally is staring to be seen as a viable investment destination, not just a problem to be dealt with.

A 2012 Earnest and Young survey about African investment attractiveness revealed that investors doing business on the continent were overwhelmingly positive ranking Africa’s relative attractiveness above every other region except Asia ,and even then marginally so.

One of the findings of the survey indicates that Foreign Direct Investment (FDI) has shown a compounded growth of 20 pct since 2007 and a tremendous 27 pct growth between the years 2010 and 2011.The survey indicated broad based progress is underscored in the mindset and activities of Africans themselves with increasing self-confidence and continued Intra-Africa FDI expanding by 42 pct since 2007.

Africa has been through a lot and even the fragile progress that is present at the time is not continent wide. A lot of things can go wrong that can derail Africa from this path of growth. A lot has to be done for this growth to be more inclusive and sustainable, and yes the continent has one of the biggest youth unemployment rates, but probably for the first time in its history the continent is more or less going in the right direction.