Africa’s Development Challenges ECON 3510 Jan 12, 2017

I. Africa’s Recent Development Experience OK news: the 1960s, reasonable performance Bad News: Economic Contraction, 1970s to late 1990s Minus 0.9 % per capita per year, 1975-2000 27 countries with declining GDP pc, 1975-2000

Good News: Rapid Recovery, 2010 - 2016: + 4.4 % per year or about Growth Recovery late 1990s to 2008 1999-2007: + 4.7 % per year or about + 2.4 % per capita per year, Mildly Negative News: 2009: caught in global recession Rapid Recovery, 2010 - 2016: + 4.4 % per year or about + 2.2% per capita per year

GDP Map of the World, 2010 Source: The New Worldmapper

Population Map of the World, 2050 Source: The New Worldmapper

Result: Poverty levels decline; Personal & family incomes rise; Tax revenues and social expenditures (health & education) rise General improvement But: problems remain; - some countries are in trouble; - peace and stability are tenuous in a too many cases.

Why has Africa’s Economic Performance Improved since +/- 2000 ? A Conjuncture of Favourable Circumstances 1. Buoyant world economy promoted recovery new drivers of growth:China and India. 2. Some debt reduction and relief from servicing the debt 3. Increased development assistance 4. Direct foreign investment increased; 5. Increasing “remittance” payment inflows 6. Reduced conflict in the region? Declining, 1990s to early 2000s; Now perhaps worsening: Boko Haram, in Mali, Chad, N. Nigeria, South Sudan,Somalia 7. Improving Governance? In some cases. 8. Improved public policy

Economic Prospects: Positive Elements 1. Human resource development has been improving quickly and should continue with Sustainable Development Goals. Entrepreneurship Improved macroeconomic management in many countries; Business climate indicators have been improving steadily, Resource potential is significant “Technological Backlog” should lead to productivity improvements in many areas Africa is not ‘insulated’ from the crisis. but it is much better prepared than it once was 9

The Technological Backlog Gershenkron: The Advantages of Being a Latecomer. The “Technological Leaping” phenomenon Rapid technological adoption: example recently: the Cell Phone

Africa’s Human Capital Rapid improvements during Millennium Development Goals era Still a fair distance to go To be continued under Sustainable Development Goals era, one hopes One Abundant Resource: Entrepreneurship

Source: The Economist “Pocket World in Figures” (2016 p. 64) Of the top 10 countries in the world for entrepreneurial activity, seven are in Africa: [A listing of the countries according to the proportion of the population between 18 and 64 who are owner-managers of businesses.] The Economist World Ranking of Entrepreneurial Activity Country Owner-Managers of Businesses 1. Nigeria 39.9% Zambia 3. Cameroon 37.4% Uganda 35.5% Namibia Botswana 9. Malawi 33.3 32.8 28.1 Source: The Economist “Pocket World in Figures” (2016 p. 64)

Economic Prospects: Positive Elements 2. Increasing foreign investment inflows are probable; Increasing Remittance payments as Diasporas expand; Migration of Industry from China to Africa for international markets? Africa is not ‘insulated’ from the crisis. but it is much better prepared than it once was 14

Economy Prospects: Negative Elements Governance remains problematic in too many countries Failed states continue; Boko Haram-type civil disturbances may intensify; Corruption has not been brought under control; Civil disturbance continues and may intensify in some countries Rapid population growth generates challenges Pressures from rapid urbanization and rural to urban migration Environmental Stresses will intensify Climate change will worsen agricultural stresses; Africa is not ‘insulated’ from the crisis. but it is much better prepared than it once was 15

In Summary: Africa’s Economic Prospects Strong positive elements: Human resources improvements, Technological catch-up International economic interaction Improved Policy Challenging negative elements: Political; Climactic; Demographic All elements will unfold and interact in unpredictable ways. Africa’s Economic Future: OPTIMISTIC hopeful, encouraging and positive but also challenging, uneven, and confusing.