Africa’s Opportunity, the World’s Obligation

It may well be that 2005 will be remembered as the year things turned around for Africa.

In February, 40 donor countries committed at least $34 billion for grants and concessional loans to the world’s poorest countries, the largest expansion in two decades. About half of those resources, channeled through the International Development Association, will flow to Africa over the next three years. In March, the Commission for Africa called on rich nations to double their assistance to Africa as part of a global drive to work with leaders on the continent to reverse the last two decades of worsening poverty, economic marginalization and declining health indicators. These recommendations will be taken up by the world’s richest nations at the G-8 summit this summer.  During this same period, a new generation of African leaders has brought its weight to bear constructively to crises in Sudan, Cote d’Ivoire and Togo, demonstrating that Africans are prepared to take charge of their toughest problems.

It is a time to be hopeful. But it is also a time to be realistic. Africa presents a unique set of development challenges. Half the population lives in poverty. About 40 million children aren’t in school. At least 25 million Africans are infected with the AIDS virus. The quality and reach of Africa’s roads, water supply, irrigation systems, and electric power fall far short of what is needed to support strong economic growth and to improve livelihoods. 

These problems will not be resolved in the year 2005. But this can be the year that African leaders and their international partners set themselves on a path of change. To reduce poverty, Africa needs to grow economically, and poor people need to participate in that growth. By pursuing strategies to advance broadly shared growth, African countries can show real progress in achieving the Millennium Development Goals, including cutting in half the proportion of people living in extreme poverty.  Solutions, if they are to be lasting, must be country-specific and country-owned. The constraints weighing down Malawi are different from the ones that hold back expansion in Mali. Strategies for growth must be tailored to the opportunities and obstacles each country faces.

In every area, Africa’s transformation will depend on leadership by Africans as well as hard decisions by the international community. Africa’s private sector requires meaningful improvement in the legal and regulatory climate, which ensnarls African enterprise in endless licensing and approval processes. At the same time, African business will remain unproductive without a substantial and sustained investment in roads, water and power supply – and on a scale that can only be generated by the Continent’s international partners. It is noteworthy that the Commission for Africa calls for donor countries to provide an additional $10 billion a year for infrastructure till 2010 and $20 billion for the following five years.

Trade reform is another area that cries out for action. African countries can do a lot to boost agricultural exports – through research, incentives and improved rural roads – but these steps will show disappointing  results if rich countries fail to dismantle their own trade-distorting subsidies, tariffs and non-tariff barriers.

Notwithstanding these obstacles, some African countries have seen significant economic growth. In the last ten years, some 16 countries have registered annual growth rates of 4% or higher, and ten have posted annual growth rates of 5% or more. There is much to learn from these experiences that can help other countries in pushing exports, making farms more productive, and encouraging small and medium-sized enterprises.

Mauritius, for example, established incentives for domestic entrepreneurs, particularly those in the export sector. But it also pushed education and social protection to ensure that more people could benefit from, and contribute to, the growing economy.

Because the private sector is the engine for growth and job creation, governments need to listen to business leaders and address the constraints that prevent them from expanding and improving productivity. Investor councils in a number of countries, including Tanzania, Mali, Uganda and Senegal are helping to build a pragmatic and constructive relationship between the state and the business community.

Many countries have increased exports by more than 8% a year since the mid-1990s, despite falling prices in some of their primary commodities. Foreign Direct Investment in Africa rose to $8.5 billion in 2003, from $7.8 billion the previous year, and importantly, South Africa is becoming a significant investor in sub-Saharan production, while China is leading a wave of investment from Asia.

With clear incentives, committed leadership, and expanded international support, African countries can build on these encouraging trends.  Encouraging results can be expected if countries move decisively to encourage regional integration and create larger, more open economic spaces; encourage private sector development—both through African business growth and greater foreign direct investment; advance trade, with a strong export push, and lower trade barriers in OECD countries; build stronger capacity and improve governance.  The World Bank will support them in these efforts and continue to advocate for increased, better harmonized development assistance, while continuing to implement programs to improve service delivery, particularly in education and health.

African countries are at a crossroads. Despite recent progress in some countries, in many others current trends foreshadow an Africa of greater poverty, falling further behind the rest of the world. This year must not go down as another year of unfulfilled promises.  Our African partners have waited for trade barriers to come down and for aid levels to rise in keeping with the commitments made at the Monterrey summit in 2002. Many are reasonably skeptical as a new set of proposals emerges this year. A global decision to increase and improve support country by country is Africa’s opportunity and the world’s obligation.

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This article was published in the Ghanaian Chronicle on March 18th, 2005 and The Monitor (Uganda) on March 13th, 2005.