Panel Discussion: Key transformational challenges in Africa

Professor Tony Venables opened the session, posing a rather ambitious question to the panellists: what are the key transformational challenges in Africa?

H.E. Ato Newai Gebreab said the two main challenges are, first, graduating from subsistence agriculture, and second, jump-starting industrialisation. The tricky part is that the two must happen side by side.

Luka Biong Deng (South Sudan) said that four traps would haunt Africa. The first is that 73% of Africa has been at war. Second, 29% of countries are dealing with natural resources. Third, others are land-locked with bad neighbours. And fourth, yet more suffer from bad governance. South Sudan has suffered all of these and overcoming them, or finding ways around them, will be key. In Asia, rule of law, open markets, macro-economic stability, plus strong human capital, played a key role. In South Sudan, oil has disrupted these and the economy more broadly. Regional integration, he opined, may help South Sudan develop a stronger government and broader economic base.

Alan Hirsch noted that although we are looking at economic issues, security still remains a significant challenge given the rise of terrorism. On the economy, though: Fiscal challenges are most prominent; when commodity prices rise and fall, African countries struggle to restructure their economies. Looking to the longer term, emerging economies in Africa need to focus on the shift from access to quality across a range of services, especially health and education. This is a theme of the SDGs, which replace the more quantitative targets of the MDGs. Another core challenge is to improve productivity across the board – in agriculture, services, and manufacturing. Related to this is higher education and vocational training; these areas are neglected in many African countries which are trying to transition to higher productivity and growth.

Hirsch also noted successes to be applauded, including world-class poultry and maize production and fantastic opportunities from regional trade. In Zambia, non-traditional exports grew as fast as commodity exports during the boom. Within East Africa, we should applaud the progress made in regional integration, which is improving peace, efficiency, and knowledge sharing.

Peter Ajak (South Sudan) tackled the question by opining that the key issue for Africa is building institutional capabilities. The most fragile states are all in Africa, whereas bringing about economic transformation requires effective government. A second key issue is trade infrastructure, which will improve efficiency and welfare and is still severely lacking. Thirdly, will Africa get better at managing natural resources? At present, assets are being depleted without productive investments to show for it. Finally, populations are growing faster than GDPs, so there is a major demographic challenge for welfare and stability. In South Sudan, there are strong opportunities to exploit, from regional integration to developing the state and the economy, and from importing technologies and lessons from around the world.

Herbert M’cleod (Sierra Leone) noted that a group of African countries are emerging that have quite different interests from those countries struggling to achieve stability. IGC should consider how to prepare and serve the different interest groups likely to emerge. Secondly, when we talk about transformation in African economies, we really talk about industrialisation. In the global economy, we cannot talk about industrialisation using the paradigm of the past, we are so low down in the value chain that focusing on local content is not enough: we need to identify links in the global supply chain and aim to be competitively globally.

John Spray noted that the question of achieving economic transformation is enormous, and can only be addressed by being broken down. He gave an anecdote, that the cost of importing a container is hugely more expensive in Rwanda ($5000) than neighbouring countries with access to ports, and even than land-locked developed countries. He argued that this highlights three key challenges Africa faces: First, infrastructure- if a country can’t get its goods from the market where they are to be sold, it can’t grow. The second is a lack of export growth: one reason it costs $5000 to import a container into Rwanda is that it costs $3000 to import the container, and $2000 to export this back to Dar es Salaam. More broadly Africa cannot move forward without export-led growth. Financial services, transport services, and tourism are all opportunities, with significant value added, which suggest Africa’s growth needn’t take exactly the same form as that in other regions.

Tony Venables, the session chair, then highlighted that many of the challenges above have been on the table for decades, and asked the panellists, how do we really move beyond these? The panellists opined that there are new opportunities to grow because of stronger prospects for regional integration and the ability to import technologies around the world. Some said that a stronger appetite for a competitive private sector and understanding of its needs would also be crucial. H. E. Ato Newai said that each country should have at least two or three products or services at which it can be competitive at an international level, and the governments should protect these. Peter Ajak and Luka Biong highlighted that countries must consolidate when they make gains- countries where leaders think of the longer term and of national needs have consolidated gains to build a stable base for growth, but states like the Democratic Republic of Congo and South Sudan have been unable to consolidate, but rather slipped far back after initial gains.

Floor comments were then welcomed. The first floor speaker believed that earlier discussions had made the mistake of assuming macroeconomic stability and then chasing sectoral and micro developments; macro-stability remains crucial and deserves more attention. Richard Newfarmer highlighted that expectations were rising, especially with globalised media and cheap communication, and that growth must catch up with these expectations; new technologies (physical and organisational) will also play an important role in meeting those expectations, for example through manufacturing efficiencies. A third contributor said that Africa will only truly transform once countries open borders and recognise comparative advantages. A fourth noted that almost every presentation at the AGF had stressed productivity, but there are fewer than ten institutions on the continent that are well-designed to drive productivity; in Asia, effective national institutions set up to drive productivity were key. One commentator highlighted the growing challenge of a burgeoning youth population, where over 50% of the countries in many African countries are under 18. He also highlighted that energy consumption is forecast to grow at 6% per annum, yet there’s no foreseeable way to meet that demand with the financing that’s available or forecasted. All of the issues that have been discussed- and industrialisation especially- depend on energy. The last contributor said that in Africa’s case, agriculture is the key challenge. Considering the global experience, industrial development followed only after agricultural transformation created large surpluses.

The final question posed by the chair was to the panel: If there was one policy, and one area for IGC research, the panellists could recommend, what would they be?

John Spray: Integrate integrate integrate! IGC has excellent research capacities in integration and trade.

Herbert M’Cleod: Integrate, with the aim of setting up competitive industries.

Peter Ajak: Prioritise investment properly. It’s tempting to try to catch up all at once, but without priorities, policy fragmentation will stall real progress. IGC has enormous capabilities in research, but the challenge will be to get leaders to think and commit to long-term visions.

Alan Hirsch: There isn’t enough research into productivity in Africa or the quality of government services. IGC should produce research to guide this.

Luka Biong: Make the most of scarce land through agricultural research.

H.E. Ato Newai agreed with the panellists, but noted that urbanisation was also key as it has been a proven lever of productivity and growth.

Summary was written by Sally Murray, Country Economist – IGC Rwanda