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World Bank Report Shows Steady Economic Growth in Africa

According to the World Bank, “many African economies appear to have turned the corner and moved to a path of faster and steadier economic growth for the first time in three decades, they are growing in tandem with the rest of the world” [2]. Average growth in Sub-Saharan African countries in 2005 and 2006 reached 5.4%, and analysts project that growth will remain strong. According to the World Bank, the collapses and stagnations suffered by the continent during the seventies and eighties have been reversed due to a mastery of lessons learned, including improvements in macroeconomic management and structural policies, as well as integration with the rest of the world [3].

The World Bank attributes much of this growth to the improvement of policies in many Sub-Saharan African countries. While they concede that luck may have had some influence, the World Bank claims that “inflation, budget deficits, exchange rates, and foreign debt repayments are more manageable. Economies are more open to trade and private enterprise. Governance is also on the mend, with more democracies and more assaults on corruption” [4].

However, the World Bank warns that the volatility of growth in Sub-Saharan Africa, a result of conflict, poor governance, and world commodity prices, is greater than in any other region of the world. This volatility “has dampened expectations and investments—and has obscured some periods of good performance for some countries” [5]. Also troublesome is the discrepancy in growth rates between African countries. In 2005, performance varied substantially across the continent, from -2.2% in Zimbabwe to 30.8% in Equatorial Guinea [6].

The World Bank organizes countries into three distinct categories along this continuum: the big oil-exporting countries, countries with expanding and diversified economies, and those countries that have few natural resources, are conflict-prone, and experience slow or no growth. Uneven growth rates between these three groups risk sharpening the divide between countries that become affluent and successfully eradicate poverty, and those who continue to suffer. For example, 60.5% of total net foreign direct investment in 2005 went to the oil-exporting countries. Even more disturbing is the fact that two countries, South Africa and Nigeria, account for more than half of the Sub-Saharan region’s gross domestic product [7].

However, the World Bank asserts that some of these resource-poor countries have done as well, if not better, than some of their oil-producing neighbors [8]. Still, their own numbers illustrate the large and ever increasing development gap between African countries on opposite sides of the continuum. According to the World Bank, crude oil comprises more than half of Africa’s total exports. In 2005, the richest 10% of all African countries had 18.5 times the GDP per capita of the poorest 10%, compared to 10.5 times the GDP per capita in 1975. Gaps in non-economic development indicators are also evident. In Swaziland more than one in every three 15-49 year olds has contracted HIV; the rate is only six in every 1000 in Mauritania. Mauritania has the highest life expectancy at 73 years; Botswana has the lowest at 35. The Seychelles have the highest literacy rate at 92%; Mali and Burkina Faso have the lowest at 24%. Mauritania has the highest gross enrolment rate in secondary education at 92%; Namibia has the lowest at 7%. In South Africa, only 2.5% of the population is below the minimum dietary energy consumption; in Eritrea, a staggering 75% are below [9].

The World Bank says that growth in Sub-Saharan Africa appears to be fast and steady enough to “put a dent on the region’s high poverty rate and attract global investment,” but the sobering statistics above indicate a significant and disturbing gap in development between countries in the region [10]. Furthermore, while the World Bank claims that “Africa has learnt to trade more effectively,” it also recognizes that “exporting from Africa is high cost compared to other trading countries” [11]. For example, the indirect costs of exporting from Africa comprise 18-35% of total costs, which are significantly more than the costs of exporting from China (only 8% of total costs) [12].

The World Bank asserts that sustained and equitable economic growth can be achieved by accelerating productivity and increasing private investment. In order to accomplish this, it says that the business climate and infrastructure in Africa countries must be improved. Furthermore, it adds that efforts must be made to encourage innovation and build institutional capacity [13].

As laid out in the IIJD-sponsored 2006 International Conference on the State of Affairs of Africa Conference Report, the root causes of Africa’s development crisis are dysfunctional systems of governance, supported by poor leadership and inept economic and political institutions established during the post-colonial period [14].

The IIJD agrees with the World Bank recommendations, but advocates an additional focus on improving governance, leadership, and institutions, as well as strengthening justice systems and the rule of law across the continent. Only through institutional reform can we combat corruption, demand accountability, secure investments, and thereby create stable economies that benefit the people. The root causes of the collapses and stagnations of earlier decades must be fully addressed. Strong institutions, good governance, and a stable political environment are essential for attracting investment. Africa cannot rely solely on the export of oil and other raw materials to spur growth and development. Africa needs companies on the ground, and the only way to attract them is to guarantee security and stability.

While the growth rates in Sub-Saharan Africa are encouraging, we must be careful not to assume that a positive average growth rate is representative of development progress and economic prospects on the continent. The situation is more nuanced. We must not only look at overall rates, but at the impediments to growth in countries that are not faring as well. Why are some countries developing faster or slower than others? Which policies seem to encourage growth? Which policies are failing? Careful examination of root causes is needed.

The IIJD urges the World Bank, other analysts, and government and civil society leaders in both African and non-African countries to read the ADI report and explore the causes behind the trends. In particular, governance and institutions should be examined. The responsibility for advancing African development is shared. African government and civil society, NGOs, IGOs, and other members of the international community all have roles to play in the successful development of the continent.

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[1] World Bank, African Development Indicators 2007

[2] Ibid

[3] Ibid

[4] Ibid

[5] Ibid

[6] World Bank, “Spreading and Sustaining Growth in Africa”

[7] BBC, “‘Fast Economic Growth’ in Africa”

[8] World Bank, “Africa Achieving Healthy and Steady Growth Rate”

[9] World Bank, “50 Factoids about Sub-Saharan Africa”

[10] BBC, “‘Fast Economic Growth’ in Africa”

[11] World Bank, “Africa Achieving Healthy and Steady Growth Rate”

[12] Ibid

[13] AllAfrica.com, “States Headed for Faster Growth”