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April 27, 2015

Responding To: Week 13: Responding to Tony Blair

Governance & Development: Africa's Progress and Prospects

O. Felix Obi

Former Prime Minister Tony Blair acknowledged in a conversation hosted by the Global Futures Initiative that "there is a sense in Africa today of possibility." Development practitioners are just as bullish about sub-Saharan Africa's economic progress and prospects.

Most of the 54 member-states of the Africa Union now have multiparty constitutional democracies. Its most populous and largest economy, Nigeria, will soon experience a first democratic transfer of power between political parties and presidents. On the heels of increasing political liberalization have come greater Foreign Direct Investment (FDI) and Gross Domestic Product (GDP). According to the World Bank Group's (WBG) Africa’s Pulse, this year's FDI inflows of $US54 billion represents a 5.5% increase from 2012's $US37.7 billion. Although an updated Africa's Pulse report estimates a pullback in GDP average growth to 4 percent in 2015, from 4.5 percent in 2014. A slide in commodity price largely accounts for the slower growth.

But there are broader challenges. The 36 African countries with expected terms-of-trade deterioration are home to 80% of the population and 70% of the region's economic activity. The wealth of Africa's richest has increased by 8%, while the poor have seen theirs increase by only 1%. The WBG's Chief Economist for Africa Region, Mr. Francisco Ferreira, cautions that “while growth is essential for poverty reduction, it is not sufficient.” Poverty reduction requires that growth translates to job creation, especially for youth and women. 

Many of these economic headwinds, especially commodity-market price-volatility, are not unique to Sub-Saharan Africa. But unlike many regions, sub-Saharan Africa's growth prospect is broadly considered bright. Yet this requires that governments improve their terms of trade benefits through economic diversification, technology and infrastructure upgrade, and improved regional and international trade. The Africa Centre for Economic Transformation recommends these five economic transformation categories to help realize Africa's prospects:

  1. Diversification of production and exports: countries need to purposively learn how to produce new goods and services. As diversified export base minimizes terms-of-trade deterioration
  2. Export competitiveness: expands production, boosts employment, reduces unit costs, and increases incomes
  3. Productivity increases: enable more goods and services to be produced from existing resources and technology
  4. Technology upgrading: capability to introduce new and improved technologies enables countries to sustain productivity growth over time
  5. Human economic well-being: when GDP per capita is rises, and remunerative employment opportunities expand, economic transformation will result in shared prosperity, and income inequality will be reduced, or at least controlled

Georgetown University's upcoming focus on the Global Future of Governance next semester will frame conversations that address these governance challenges.  As Mr. Blair cautions, “the quality of governance is as important as any other single issue in determining whether developing countries succeed or fail.”

O. Felix Obi is an Alumni Board Member at Georgetown’s McCourt School of Public Policy. His professional background is in economic and international trade development in Africa, especially innovation and entrepreneurship.

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