development_economy

Economic Diversification: A Must for Inclusive Growth

The beginning of the 21th century has shown promising figures regarding the economic growth of the African continent. The World Bank’s 2013 Economic Report on Africa; with the theme- Making the Most of Africa’s Commodities: Industrializing for Growth, Jobs and Economic Transformation- rightly tells the continent’s notable economic performance with its own remarks on limitations of the growth to be translated into jobs and social development.

In the years from 2002 through 2008, Africa’s economy had witnessed an average growth of 5.6 pct, according to the report. In 2009, Africa’s economic growth slashed down to 2.2 pct, which is mainly attributed to the global economic crisis of 2008. Unlike economies in the rest of the world, which have struggled with slow economic recovery, Africa’s economy was quick to get on its feet registering a 4.6 pct of growth in 2010.
The continent’s economy remains performing well, a 5.0 pct growth in 2012 and a projected growth of 4.8 pct and 5.1 pct for the years 2013 and 2014 respectively. The growth, the report says, however, remains- mainly primary commodity driven.

Increased incomes and urbanization; huge public investment, especially that in infrastructure; satisfying harvests in some African countries; strong trade and investment bonds with emerging economies and faster post conflict political comeback are said to have backed the growth all along the way. However, youth unemployment; social development and diversification in export commodities remain to be a challenge for the economy. Youth unemployment for instance, despite all the improvements the continent has been able to register, remains stubbornly high. Similarly, improvements regarding social development in terms of child and maternal mortality, education and gender inequality are not fast enough for the continent to meet its Millennium Development Goals.

Lack of commodity diversification, has hindered the continent from translating its economic growth into meaningful and tangible changes on the livelihoods of the multitude. In the years 1980 through 2010, Africa’s average share of manufacturing in aggregate output declined from 12 pct to 11 pct, according to the report. Limited diversification of commodities and primary products export is indeed costing the continent. More than 90 pct of the income generated from coffee export, for instance, is given away back to the rich economies in exchange for processed commodities, the report states.

The key challenge for the continent remains to be policy reforms. The flag policy of many African governments immediately after independence- import substitution- did not last long. The policy was substituted by regional policy reform programs which forced the continent into deindustrialization. Policy reforms regarding industry, regional and intra-African trade agreements and governments’ support for industries to add values to their commodities and stay competitive at a global level, among others, should pave the way forward for the continent, the report recommends.

Africa is endowed with considerable natural resources reserves. It has 40 pct of world’s gold, 12 pct of world’s oil; 80 to 90 pct of world’s chromium and platinum group metals and 60 pct of world’s arable land. – Africa can do better!

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