Economic transformation in Africa: where to begin?

Since the mid-1990’s, many Sub-Saharan African countries have seen economic growth driven by institutional reforms, healthier business climates, advancements in democratic governance, and improvements in macro-economic environments.

This growth has delivered clear benefits: a rising middle class; an increase in school enrollment, especially for female children; improving infrastructural systems; and improved access to information, thanks to the global communications revolution. But despite this encouraging growth, poverty remains entrenched. Indeed, the number of Africans living in extreme poverty increased by more than 100 million between 1990 and 2012. Further, recent economic growth has generated few jobs for youth, including the hundreds of thousands graduating from college across the continent every year. Clearly, the growth experienced in the last couple of decades is inadequate.

Most economies in Africa are still based on the production and export of unprocessed agricultural products, minerals, and crude oil with little to no manufacturing or processing. Various organizations have called for African economies to move from focusing on economic growth to more fundamental structural economic change. The United Nations Economic Commission for Africa (UNECA) and the African Center for Economic Transformation (ACET), among others, argue persuasively that policymakers in Africa should pursue a pattern of growth that delivers shared benefits to the masses. Economic transformation is now a key component of long-term strategies endorsed by the African Union, African Development Bank, and UNECA.

Economic transformation is a process that leads to an effectively implemented set of policies pursued by a government with the clear goal of promoting diversified production, export competitiveness, productivity increases, and technology upgrades; thus essentially moving from low-output activities to high-productivity activities within sectors.1 It also promotes human well-being, through higher incomes, well-rounded skills, and private-sector employment, particularly among Africa’s youth population.

Most African economies are based on agriculture, a sector that remains ripe for transformation. An estimated 65 percent of the labor force in Sub-Saharan Africa is employed in the agricultural sector, and the sector contributes about 32 percent to the region’s GDP. Further, agriculture is an important driver of growth in developing countries and can have twice the effect in reducing poverty as growth in other sectors, as it is the single largest source of income and employment on the continent. Increasing agricultural productivity is a powerful way to raise incomes. Aside from providing more food, it will also improve the distribution of incomes and increase manufacturing, which will enhance labor migration to industry as well as other sectors of the economy. Agriculture can therefore be a powerful driver for economic transformation.

There are calls to bring the Agricultural Revolution in a suitably modified form to Sub-Saharan Africa. But there is no need to reinvent the wheel. Many lessons can be learned from the Asian Green Revolution in the 1960s, which contributed to a substantial reduction in poverty and the launch of broader economic transformations in many Asian countries. Africa missed the opportunity for a green revolution due to many factors including low technology adaptation, worsening market failures, low agricultural investment, and insufficient institutional support, especially in the financial and insurance sectors. But the opportunity for agricultural change and economic transformation remains. A supporting economic, institutional, and policy environment should be at the heart of an African agricultural revolution. This includes the need for markets that can handle the production boom; the need to educate farmers about new technology and ensure that they have access to inputs and a fair return on their investment; the need to diversify exports; the need to link production to agro-industry; and the need to ensure smallholder farmers are not left out of this revolution.

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1 Comment

  1. Avatar Dr Michael Frederick Egyir says:

    Though this article was posted almost two years ago, a discussion on the topic is still important since the question of Africa’s economic and social transformation is still relevant.
    It is interesting to note that a continent that has about 65% of its labour force engaged in the agricultural sector imports substantial part of its food requirements and ironically the sector contributes only 32% of its GDP while poverty level is still high irrespective of governments’ interventions. Low level of productivity can be an underlying cause as properly highlighted in this article .
    But equally important factor that African governments should look at is the state of the transport infrastructure. Africa’s transport system inhibits its economic development- mobility of persons and goods is highly impaired. Most roads are inaccessible especially in the rural areas where majority of the rural farmers live and are not able to market their products. Fast moving trains are minimal and air transport cost is also high for most businesses to take advantage of.
    Further energy which may be seen as a propeller of the economy is not very much employed. African countries mainly rely on hydro power with little application of nuclear and solar energy. Africa should take advantage of its abundant supply of energy to produce power especially for its rural communities.
    It is also important that the education system should focus on specialization which will actually increase productivity.

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