"A New Africa is Generating Success and Hope"

by Callisto Madavo and Jean-Louis Sarbib
Vice Presidents
Africa Region
The World Bank

Washington — Africa is on the move. From Mali to Uganda to South Africa, hope and real success are transforming the continent.

A new spirit of social and economic progress has energized much of the region. Gradually the rest of the world is beginning to take notice. Africa figures prominently on the Group of seven's agenda this weekend.

Average GDP growth for Sub-Saharan Africa was about 5 percent in 1996, with more than half of the continent's 48 countries growing at rates higher than population growth of 3 percent. African markets are opening, foreign investment is increasing. and economic performance is improving in a wide range of areas. These facts translate into better lives for millions.

Africa's social and economic progress is still fragile: 45 percent of the population still lives on less than $1 a day. A legacy of social unrest and ethnic rivalry continues to slow development. And effective development in the region will require a hefty 8 to 10 percent annual GDP growth.

The challenge of poverty eradication is as large as the continent itself. But recent progress provides a platform on which to build a better future.

Despite recent events in Zaire/Congo and Sierra Leone, significant improvement in political stability and the shift to democracy have underpinned social peace in much of Africa, encouraging the participation of civil society in the development process, and strengthening the legitimacy of governments. Also politically crucial is the new generation of African leaders who are committed, qualified and nonideological. No-nonsense, accountable pragmatism is now the rule.

These political changes have laid a foundation for better economic management. As in other developing regions experiencing impressive growth, the key factor driving economic progress in much of Africa is improved economic policy - liberalizing exchange rates, lowering or eliminating import and investment barriers, and dismantling price controls.

These policies have, in a relatively short period of time, made Africa an increasingly attractive market to investors. The U.S. president and Congress are considering a new policy to promote trade and investment in Sub-Saharan Africa - a strong vote of confidence in the region's future.

Ivory Coast, Ghana, Uganda and South Africa are now moving toward joining Thailand, Malaysia and the Philippines as hot new markets for foreign capital. And in a world economy in which capital, production and information are highly mobile, in which investors live by diversification and identifying untapped markets, Africa is increasingly referred to as the final frontier of global investment.

We at the World Bank can see clearly the benefits of sound economic policies in Ivory Coast, Uganda and Mali, where exchange rate reforms have improved export competitiveness without significant inflation.

Togo, Lesotho and Uganda have averaged 10 percent growth in the last two years. Policy reforms in the CFA franc zone countries have led to export expansion from negative 3 percent (1991 to 1993) to positive 6.6 percent (1994 to 1996).

Private capital is increasingly flowing to Africa, and seeing healthy returns. Private investment has increased more than 10-fold since the early 1990s to $11.7 billion in 1996.

From 1990 to 1994, rates of return on foreign direct investment in Africa averaged between 24 and 30 percent, compared with 16 to 18 percent for all developing countries.

Capital markets are seeing a broader range of investors, greater participation of private sector borrowers, and improved creditworthiness.

This progress is a good sign for many African countries. However, it remains fragile. There is still much to do before the continent secures the broad-based economic growth that distinguishes the most dynamic parts of the developing world.

Governments must diligently set the pace for change by keeping their economies on a sound footing, improving the banking sector, building roads, water and sanitation facilities, and giving people access to basic health and education services. Africa's strengths must be harnessed in order to address the bottom-line human issues of poverty, illiteracy, unemployment and basic health services, which continue to require dramatic improvement.

The World Bank is working with African governments in these and many other areas, providing technical and financial support.

Our recent Highly Indebted Poor Countries initiative seeks to reduce the financial burden - a primary stumbling block for many African nations, which often spend more on servicing their debt than on providing basic social services. Forgiveness of millions of dollars' worth of debt to countries such as Uganda, which has made good economic reforms and is now seeing the benefits of sound policies, is central to assisting Africa's development.

Africa is on the move, The changes we are witnessing, building foundations for prosperity and welfare, are creating a new sense of hope in the future.