Africa’s economic reality check

The global commodity slump and China’s economic slowdown have pummelled several African economies, making clear that the continent’s “rise” was a myth.

Now is the time to re-examine the basis of Africa’s recent “boom” and move from feel-good rhetoric to action that will drive genuine economic transformation.

Commodity exporters such as Angola, Ghana, Nigeria, South Africa and Zambia are reeling, with their currencies crashing since the prices of commodities such as oil and copper began falling sharply.

Moreover, fiscal and monetary policies are in disarray, with the risk of social unrest rising if the trend is not reversed in the near to medium term.

The heart of the matter is this: African countries mistook a commodity supercycle-fed boom for a sustainable economic transformation.

But a boom connotes transient good fortune — enjoy it while it lasts, or save the proceeds for a rainy day. Most African governments opted for the former.

To be sure, Africa benefited from higher gross domestic product growth and expanded opportunity over the last decade.

But hundreds of millions of Africans have yet to be lifted out of poverty in the manner China has accomplished — a path that other Asian countries, such as India and Vietnam, are following as well.

Without question, many individual Africans have become stupendously wealthy and are playing more assertive roles in the world of business.

Entrepreneurship is on the rise, especially among young Africans, gradually replacing the dead end of foreign aid.

But the vast majority of Africans lag far behind.

Despite the spread of formal democracy on the continent, the nature of domestic politics in most African countries has hardly changed.

Real leadership involves not just mobilising citizens to vote for candidates, but also effective management, strategy and execution of public policy.

And yet power often is sought for its own sake or to secure control of state resources on behalf of ethnic kin or co-religionists.

Politics is not yet, as it ought to be, a contest of ideas and programmes affecting all citizens. Corruption thrives in such an environment.

Moreover, a proper understanding of economics is necessary.

The continent and its leaders have so far failed to understand — or, where they have understood, to apply — historical lessons concerning how the wealth of nations is created.

Instead, we often see uncritical acceptance of the received but self-interested conventional wisdom of globalisation.

Achieving prosperity in the overarching context of globalisation requires creating a competitive economy based on value-added production and export.

But it also requires selective engagement with international treaties that favour today’s competitive good producers but put at a disadvantage the developing countries that are increasingly the markets for these goods.

Some of these treaties take away the very possibility for African countries to join global value chains, impeding their development.

This is precisely why Africa’s biggest folly is to believe that mineral resources and other raw commodities are automatically a source of wealth.

This misconception is why Africa is the world’s richest continent in terms of resource endowments, but at the same time the world’s poorest in terms of income per capita.

Africa’s future competitiveness and prosperity lie in the opportunities afforded by science, technology, and innovation. From Nairobi to Lagos and Johannesburg, innovation hubs are springing up.

This is not surprising. It is the modern rebirth of Africa’s ancient talents in science, evidenced in the pyramids of Giza, the astronomy of the Dogon tribe in ancient Mali, and the Caesarean sections of 19th-century Uganda.

Africa’s leaders in the public and private sectors have an opportunity to clear the policy bottlenecks that have prevented the commercialisation of African inventions, especially in large economies such as Nigeria, South Africa (which has a more advanced innovation policy than the rest of the continent) and Kenya.

Innovation must be deployed to cost-effective, competitive manufacturing and service industries.

The commodity downturn need not stop Africa’s development. But if lasting prosperity is to be achieved, today’s challenges must be regarded as an opportunity to reset the trajectory of the continent’s economies on a truly transformational path.

The writer, a former deputy governor of the Central Bank of Nigeria, is professor of practice in international business and public policy at The Fletcher School of Law and Diplomacy at Tufts University, and is the author of “Emerging Africa: How the Global Economy’s ‘Last Frontier’ Can Prosper and Matter”. ©Project Syndicate, 2016. www.project-syndicate.org