We shouldn’t be bearish about Africa’s economic prospects. Yes,
on average, the continent is growing more slowly than in the first
decade of this century.
But growth is forecast to accelerate again to around 4% a year over the next two years. And many countries – particularly those in East Africa – continue to grow very fast indeed. One should also remember that regional average is pulled down by slow growth in the two largest economies, Nigeria and South Africa. Nigeria is capable of much faster growth if the oil price picks up -
and South Africa could also grow much faster once the current policy uncertainty has been resolved. So there is absolutely no need for continental gloom.
Moreover, Africa’s sustained economic growth over the past two decades has made a big difference in ordinary people’s lives. For instance, primary school enrolment rose from 52% in 1990 to 80% in 2015, and life expectancy rose by 8.8 years from 2000 to 2015. On current trends, by 2025, 65% of African households will be in the “discretionary spending” income bracket, earning more than $5,000 a year.
However, there is also no question that poverty levels are still disturbingly high. 74% of sub-Saharan Africa’s rural population lives in serious poverty, as does 31% of the region’s urban population. Inequality remains a massive challenge, particularly in southern Africa, which contains the most unequal countries in the world.
So what do we need to do better? First, an obvious – but very important – point: faster growth is almost always more inclusive than slower growth. So our top priority should be to increase the pace of growth. A close second priority should be to nudge the style of that growth in the direction of inclusion.
The factors that will support more both more rapid and more inclusive growth in Africa are not unique or mysterious. They apply to economies around the world and they can be summarised very simply as follows:
I believe that that we should try to follow the whole of the growth and inclusion recipe I’ve described. But if we could do only one thing, it would be this: Let’s unleash the power of digital entrepreneurship itself to create new generations of digitally-skilled young Africans.
But growth is forecast to accelerate again to around 4% a year over the next two years. And many countries – particularly those in East Africa – continue to grow very fast indeed. One should also remember that regional average is pulled down by slow growth in the two largest economies, Nigeria and South Africa. Nigeria is capable of much faster growth if the oil price picks up -
and South Africa could also grow much faster once the current policy uncertainty has been resolved. So there is absolutely no need for continental gloom.
Moreover, Africa’s sustained economic growth over the past two decades has made a big difference in ordinary people’s lives. For instance, primary school enrolment rose from 52% in 1990 to 80% in 2015, and life expectancy rose by 8.8 years from 2000 to 2015. On current trends, by 2025, 65% of African households will be in the “discretionary spending” income bracket, earning more than $5,000 a year.
However, there is also no question that poverty levels are still disturbingly high. 74% of sub-Saharan Africa’s rural population lives in serious poverty, as does 31% of the region’s urban population. Inequality remains a massive challenge, particularly in southern Africa, which contains the most unequal countries in the world.
So what do we need to do better? First, an obvious – but very important – point: faster growth is almost always more inclusive than slower growth. So our top priority should be to increase the pace of growth. A close second priority should be to nudge the style of that growth in the direction of inclusion.
The factors that will support more both more rapid and more inclusive growth in Africa are not unique or mysterious. They apply to economies around the world and they can be summarised very simply as follows:
- First, a stable macroeconomic and regulatory environment that gives investors’ confidence that they will be able to earn, and – if relevant - repatriate a competitive return on their investment. This supports both growth and inclusion. Large and influential investors are less sensitive to macro and regulatory environment than smaller ones, so good policy settings help smaller investors more.
- Second, clear property rights within a fair and reliable legal system. Well-defined and easily defended property rights – and courts that render justice without favouring the powerful – are far more valuable to ordinary people and to start-ups than to large corporations and wealthy families.
- Third, better public infrastructure, to support improved productivity and ease of access to services, markets, and business opportunities. Large corporations and the wealthy can afford to buy private replacements for public infrastructure. Less well-off people can’t, for example, afford a generator that kicks in when the public electricity grid fails.
- Fourth, regional integration to enable expansion of markets and easier movement of goods and people.
- Last – and most important of all – high-quality, relevant education.
I believe that that we should try to follow the whole of the growth and inclusion recipe I’ve described. But if we could do only one thing, it would be this: Let’s unleash the power of digital entrepreneurship itself to create new generations of digitally-skilled young Africans.
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