"Whither Africa?" Talking points for speech at Georgetown Leadership Seminars

Africa Region VP Callisto Madavo's Talking Points
Georgetown Leadership Seminars
March 22, 2000

I am very pleased to be asked to speak today about the prospects for Africa in the new millennium. I am pleased mostly for Africa. For this is one in a rapidly growing series of requests the Bank has received to talk about Africa’s future. To me, that says that interest is on the rise in a region which already has 600 million people, and which will have 1.2 billion within 30 years. The world now recognizes that in human, cultural and commercial terms alike, the future of Africa matters.

• This has not always been the case. Neither in the world at large nor in the World Bank did Africa always figure so prominently. As recently as 20 years ago, the author V.S. Naipaul pronounced imperiously that "Africa has no future." Many probably agreed with him. It has taken the better part of three decades for people to realize that in Africa lies both vast opportunity and the heart of the development challenge.
• What do I mean when I speak of "Africa’s promise?" After all, this is not a phrase one hears every day. "Africa’s tragedy," "Africa’s burden" or "the lost continent". These are the buzz phrases that are used to paint Africa, especially in the press. So "Africa’s promise" calls for some explanation.
• Yes, Africa has great promise—both in spite of and because of how far it lags behind much of the world. For instance:
• Africa has a wealth of untapped resources which should make great business opportunities. Therefore, partnerships to transform its rich resources, not just to extract them, make good commercial sense.
• Africa trails all other regions in the density of its infrastructure. This poses a barrier. But that barrier also poses opportunities on a sizeable scale to build and maintain new systems, as well as dramatically expanding access to telephones, satellite communications and Internet services.
• Africa offers a potentially huge market—increasingly so thanks to recent efforts in regional integration and reduction of trade barriers. With fair rules of trade, the more Africa takes part in the global marketplace, the more it and the world at large will benefit.

• To understand where Africa is headed, I will first speak briefly about where Africa is and how it got here. I will then present the central challenges that confront it, as well as the substantial—but often unnoticed—progress that Africa made during the 1990s. Finally, I will set out the institutional reforms on which Africa should focus its efforts in order to live out its full promise in the 21^st century.

• At independence, most African countries seemed poised for a period of rapid growth and development. At the time, average income in Africa was twice as high as in East Asia—another reminder that poverty is not destiny. Many of the new nations opted for state-led economic models, in keeping with widely-held beliefs of the time. Vast sums were borrowed from outside to fund this "big push" approach. Foreign aid was plentiful, commodities were booming, and African schools rapidly filled. With abundant natural and mineral resources on top of all this, Africa’s future seemed to promise high trade, investment and growth.

• But the 1970s ushered in a quarter-century of economic shocks and setbacks. Oil prices skyrocketed; commodity prices tumbled. Within African governments, institutional decay set in. The bloat of state enterprises and the suffocation of economic activity crowded out investment, created inefficiencies and opened too many doors to corruption. This made Africa even more vulnerable to external forces. The dark side of the state-led economic model began to emerge in so-called "kleptocracies," capital flight, and authoritarian regimes.

• By the 1980s, most of Africa was in full-blown crisis. After the second oil shock of 1979, the debt burden became unsustainable. Ultimately, non-oil countries would accumulate external debts as large as their GDPs.
• The Cold War also played a role. Viewing Africa as a proxy battleground set the stage for two decades of deeply flawed development policies in countries such as the ex-Zaire, Angola, and Ethiopia.
• The international community, especially the Bretton Woods Institutions, tried to contain this crisis with structural adjustment programs. Such programs have drawn much criticism, and indeed their design did not take sufficient account of their potential impact on the poor. But adjustment was inevitable in many economies, given how severe the distortions were. And it was during the adjustment era that the international community realized that the poor were paying most dearly for those distortions, and that issues of poverty and equitable growth had to be at the center of reforms. So, while the diagnosis was right, the cure still needed some work.

1990s

• The costs of such forces and distortions carried into the 1990s. From 1970-1997, Africa experienced a tremendous loss in terms of trade, equal to almost 120% of its GDP. During the same years, Africa lost half its trade markets to other developing countries, a loss of income of about $70 billion a year.
• But the ‘90s also brought a real shift in the way we look at Africa, as well as in the way Africans have begun looking at themselves. A small but daring African leadership began to emerge, which has pushed reforms and yielded some major political and economic improvements. For instance:
• The region has undergone massive political transformations. More than 30 African countries have held elections; citizens’ participation is on the rise; the media are freer and more numerous. Just last Sunday Senegal’s people elected a new President, Mr. Wade – and outgoing President Diouf graciously conceded defeat and congratulated him on his victory.
• Economic performance has improved. Many countries have seen major gains in macroeconomic stabilization, reducing fiscal deficits, and lower inflation. Thanks to the structural and policy reforms, growth has returned to Africa. Sub-Saharan Africa today has an average GDP growth of 4%. Markets have been liberalized, through devaluation of overvalued currencies, reduction of tariffs and abolition of price controls. Most importantly, exports have been revitalized and have begun to grow at around 8%.
• The commitment to market liberalization is reflected in increasing regional integration efforts in all corners of Africa. Strong sub-regional institutions such as SADC and UEMOA facilitate growing cross-border trade and investment initiatives. Besides, new financial institutions and regional stock exchanges are taking root. Indeed, during each year of the mid-1990s, an African stock market figured among the three best performing stock markets in the world.
• With over 3,000 privatization transactions worth $6.5 billion in the 1990s, privatization in Africa has entered a new phase, marked by private participation in providing infrastructure such as roads, telecommunications, railways and ports. Foreign direct investment also increased fourfold since the mid-1990s. Since 1990, returns to US firms in Africa were nearly 33%—higher than in Latin America or Asia.
• But the most important turning point in the 1990s has been that most African Governments have undertaken such economic and social reforms for their own reasons and not because they were expected to do so by outsiders. And we "outsiders" have started to realize ownership of the development process is a necessary condition for the success of that very process. However great the challenges of poverty, instability and underdevelopment in Africa, they will be met if and only if Africans themselves take charge. In other words, Africans have to be the subject of their own development!
• This reflects no flagging of our support as outsiders but rather a healthy recognition that our proper role is a supporting one.

• You have spent the day talking about the human condition. Sadly, Africa still lags far behind in what matters most—the quality and longevity of life. A child born in Africa today can expect to live only 51 years. Indeed, it could be said that Africans do not age. Only 3% of the African population today is above 65, compared to 15% in high income countries.
• Life is short because too many children die young. In Africa today, one in ten children will die before reaching her first birthday, and one in four before turning five.
• Life is also short because too many adults die young, and in ever greater numbers. As you know, Africa has suffered the worst impact of the global HIV/AIDS epidemic. The numbers are devastating. Of every 10 children infected with HIV/AIDS, 9 are in Africa. Of every 10 women infected with HIV/AIDS, 8 are in Africa. Of every 10 men infected with HIV/AIDS, 6 are in Africa. In total, 37 million Africans have been infected with the virus. 14 million of them have died.
• But HIV/AIDS is not only a health issue. Its implications for development are staggering. In much of Southern Africa today, one in four adults is living with HIV/AIDS. Life expectancy has fallen by 15 years in some countries, reversing decades of progress. And as adults die, they leave orphans behind. Nearly 11 million African children have lost a mother or both parents to AIDS, and the toll will grow much higher. This has disastrous social and economic implications, since orphans are less likely to stay in school, more likely to become ill, and very likely to end up without the economic means to sustain themselves.
• Too many Africans live under conflict. One out of five Africans today is living in a country at war, be it in the Horn of Africa or the Great Lakes region. Millions are displaced and become refugees, which further complicates the development challenge.
• And, of course, life is poor. Forty percent of all Africans now live on less than one US dollar a day. Whereas per capita incomes in Africa were once double those in East Asia, they are now only a fraction. Reversing this figure is Africa’s greatest challenge. Despite improvements in economic performance, per capita income and consumption levels did not rise during the 1990s, and remain the lowest in the world.
• Given the current population growth rate of 2.8%, our economists estimate that reducing poverty will require annual economic growth of between six and eight percent. And the challenge is not only about the quantity of growth. It is about the quality. How fast growth reduces poverty depends on how it is distributed. The distribution of income in Africa is now among the most unequal in the world. The distribution of growth needs to be far more equal. Africa needs growth that is inclusive, broad-based and fairly distributed among social groups, so that it reaches the villages and the slums, men and women, and those on the fringes.
• The private sector—both domestic and international—has a great role to play in helping Africa achieve faster economic growth, create jobs and reduce poverty. Indeed, the private sector has a vested interest in fostering growth and employment in Africa. Because this means that people will be richer, healthier, better educated and live longer. This translates into more consumers, more efficient workers and larger, growing markets.
• One final, overarching challenge is debt. In 1998, the stock of debt for sub-Saharan Africa was about $226 billion. Dividing this number by the number of people living in Africa means that each man, woman and child owes about $360 worth of debt—roughly a full year of income. Paying this debt typically consumes about one-third of fiscal revenues in Africa, which cannot then be invested in schools or clinics or farms or roads.
• Under the HIPC debt relief initiative, Africa has received the greatest share of debt reduction, about $5.6 billion. This, however, comes at a time of acute donor fatigue, so securing further resources for debt may tragically prove most difficult just as Africa is taking bold steps forward.

• Africa needs to choose a path of more inclusive, broad-based development. It needs to invest more in its people, trust more in them, and let the diverse fires of their creativity burn brightly. That would fuel faster and more equitable growth—which, in turn, would create the skills and the surplus to sustain the cycle through successive generations. That is the "virtuous circle" that brought other parts of the world from poverty to prosperity.
• But to start the circle moving, a few key conditions are necessary. Taken together, these conditions make up a program of institutional reforms. Such reforms mean much more than reshuffling ministries or reducing the number of civil servants. Far more important, they are about changing the institutional "culture." Above all, Africa needs to focus on five fundamental reforms: ownership, leadership, capacity building, good governance and participation. Without those underlying conditions, development efforts in almost every realm will fail to produce their intended results. Let me address each in turn.
• First, ownership is the premise for all development success. If we did not know this before, there is no doubt about it now. Like all people, Africans need to own their own solutions and write their own futures. The era of back-seat driving is over.
• One concrete example of how ownership can bring about positive change has been given by Uganda President Museveni’s recent mobilization against AIDS. He has mounted a nationwide campaign of talking loudly and acting boldly about the pandemic, and HIV/AIDS rates in Uganda have indeed gone down. This initiative has paid dividends because it was home-grown.
• Second, leadership converts ideas into action. For Africa to make headway, we need to support its leaders in the efforts that most of them are already making: to resolve the continents’ many conflicts, to stabilize the economy, to fight corruption, and to strengthen the rule of law.
• Third, capacity building. Besides poverty, weak capacity is Africa’s other most daunting legacy. In some African countries, there is only one engineer for every 15,000 people. In others, fewer than half of civil servants have more than a primary education. One government Audit department has 352 managers, only one of whom has a master’s degree.
• Africa needs to invest in its people. Developing skills is key at any time, but all the more so now when knowledge is fast becoming the wellspring of competitiveness. And capacity-building is not just about constructing new institutions of learning. It is about making more room for private and community initiative, allowing Africans to share their knowledge and experience more successfully, and harnessing the Internet and distance learning to meet Africa’s unique needs. European, American and African learning institutions are setting up exciting partnerships. For example, the African Virtual University uses satellite technology to offer specialized courses in 25 universities across 15 African countries, providing first-class training to engineers, scientists, and businessmen. Or the World Links initiative: Thanks to the Internet, high schools in Uganda, Ghana, Mozambique, Mauritania, South Africa, Zimbabwe, and Senegal have established links to schools in Wyoming, Chicago and Toronto.
• But capacity building is not only about the transfer of knowledge. It is also about tapping, using and sharing the indigenous knowledge and skills already latent in society.
• Fourth, good governance is essential. Those who act in the name of the public must maintain the public trust. Free elections, a free press, accountability, the rule of law and a healthy civil peace are all concrete examples of good governance. All contribute to faster and broader development. However, promoting good governance should also aim to:
• Decentralize economic and political power, by:
  • Allowing civil society, including the private sector, to fully participate in designing development strategies
  • Empowering communities to unleash their capacity to write their own future; and
• Support the fight against corruption.
• Fifth, participation must be expanded. The Bank’s president has said that inclusion is the heart of development. It is not enough that the nation supports an idea and the government implements it. Those who have been excluded—the very people who are meant to benefit from the development process—must play an active role in the choices and actions each nation makes. This is the only way to ensure that everyone’s needs are taken into account, and the only way to ensure that implementation will succeed. No nation has become rich by growing from the top. Participation calls for greater consultation, to be sure. But it also calls for something more radical: the empowerment of local communities, by entrusting them with the resources and authority to be the agents of their own change.
• Participation of all stakeholders must include both civil society and the private sector. We see great progress made in areas such as privatization of state-owned industries. But we also see that Africa needs to strengthen its capacity to export, to attract foreign investment and to mobilize more domestic resources, so that ultimately it can generate its own development finance and become less aid-dependent.
• To do this, Africa needs to create more attractive business environments. This has started to happen, but not fast enough. Private investment, both domestic and international, must increase to generate the 6-8% growth needed to make a serious dent on poverty. And, despite the high returns it pays, foreign investment in Africa still amounts to only 3% of total foreign investment in developing countries. For such investors, Africa remains a "hard sell."
• Besides foreign investment, local investment must also grow, which would allow small enterprises to flourish. And Africa is brimming with them—young entrepreneurs who are willing to compete in the international marketplace, and who can hold their own. Today, Ghanaian garment manufacturers sell ready-made clothing to US department stores at prices that beat the Asian competition.

• However, trends in Africa will need to change radically for a miracle to materialize. This will require, first of all, that Africans take charge of their own development agenda, and that a greater number of stakeholders at all levels of society are included. It will require determined leadership in Africa, and better governance. It will require greater investment in Africa’s people, as well as measures that encourage investment in infrastructure and private sector development. And, it will require that donor institutions such as the World Bank support Africa in this journey, through a partnership based first and foremost on the principle of listening, and give Africans the "space" to make their choices.
• Finally, I want to stress that not only Africans can benefit from Africa’s progress. The East Asian Miracle benefited millions outside of Asia as well as Asians themselves. So could an African Miracle. But this progress will require one more change. Specifically, a change of Africa’s traditional image of war, famine, disease or safari park. Such ideas hurt Africa’s prospects for development, discourage potential investors, and entrench the erroneous notion that what is today must always be. But those of us who know Africa also see the Africa that is making headway, the Africa of sweeping promise, the Africa that wants to write itself a new legacy, the Africa that matters.