Growth without structural transformation has proved to be unsustainable. Africa needs to diversify their economies if they want to become authentic economic lions.
These are promising times for Africa, which has been enjoying almost a decade of stronger economic growth. The continent’s average growth last year was almost five times the Eurozone average growth and some of the world’s fastest growing economies are in Sub-Saharan Africa. Growth this year is expected to average 6 percent and the IMF is projecting a similar average annual growth rate for the next several years. There have been many promising developments in recent years: the oil discoveries, the privatizations reducing the role of the state, and the burgeoning of foreign investment to name a few. Africa is rising, giving it a good chance of following in Asia’s footsteps.
Despite these recent developments, the nations of Sub-Saharan Africa have been far less successful in raising per capita incomes, reducing poverty, and transforming their economic structures. For example, in 2010 the average real per capita income was US$688, just about the same as it was in 1980. In contrast, per capita incomes grew by almost seven times in East Asia during the same period. In 2008 half of Africans lived in poverty, compared to 25 percent in the rest of the developing world. In almost all African countries, the primary sector in either agriculture or minerals still dominates production.
Foreign trade mirrors the production structure: exports are dominated by primary commodities incorporating little application of science and technology, while the bulk of manufactures and knowledge-based services are imported. From the mid-1980s to mid-2000s, Africa’s exports have remained primary production and resource-based, while exports from East Asian countries have diversified to include medium- and high-technology manufactured products. Not surprisingly, the employment structure mirrors that of production, with most people engaged in low-productivity traditional agriculture, services, and the informal sector, which account for the widespread poverty observed in the continent.