Africa in 2012: A Foresight
For Africa, a Gordian knot, how to maintain growth momentum (built since a decade) at a time when the room for manoeuvre, the shock absorbing capacity, is lower than it was, at the height of the financial crisis.
Add to this the famine and mayhem in the Horn of Africa, the birth of Africa’s newest nation South Sudan and the post-election violence in Cote d’Ivoire.
The long-term trajectory of some of these events cannot be fully fathomed at this time.
As one would expect, North African economies are going through a delicate phase.
They are dealing with the combined effect of changes and the turbulence in the eurozone, and this at a time when social expectations are high, fiscal positions weak, the risk profile higher and investors, still very much with a “wait and see” attitude.
Much will depend on the policy clarity of the new governments in creating space for wealth creation, in fighting crony capitalism and corruption, and in creating level playing field.
No doubt, there will be temptation for populist tendency for easy solutions.
But there will also be reasonable expectations for better opportunities and more equitable, open society.
But that takes time.
On the other hand, most Sub-Sahara African economies continue to perform quite strongly, 5.6 percent growth in 2011 and probably six percent in 2012, on average.
There are, of course, regional and country differences but the broad picture is an encouraging one.
Commodity demand has played a major role.
However, we need to bear in mind the role played by domestic demand, buoyed by a growing urban consumer class.
Thanks to the sustained robust performance of the emerging economies, whose trade with Africa has almost doubled, from 20 percent in 2000 to 40 percent in the last decade, demand for African commodities has remained strong.
Going forward, much will depend on what happens in the BRIC economies in 2012. Analysts seem divided.
Some believe there could be a hard landing while others see a manageable slowdown.
Either way, it is a cause for concern.
Whichever way the BRIC economies move in 2012, the turbulence in the eurozone cannot but be a major cause for concern, not only for North Africa,but also for other emerging markets like South Africa, Mauritius and Namibia, with strong links through exports, tourism, investment and financial flows.
AfDB economists estimate that a one percent drop in GDP growth in the OECD countries translates into a 10 percent fall in demand for our exports. African economies have shown strong staying power, but immunity from the crisis in the global economy is not possible.
Information available at this point indicates that already some of the smaller countries are beginning to experience problematic access to trade finance, and several frontier markets have postponed the launch of sovereign bonds.
There are heavy, dark clouds on the horizon – the lagged effects of slowdown in Europe, the uncertainty about how the BRICs will fare in 2012 and what that means for investment flows and demand for our exports.
In 2008, when the financial crisis was at its apex, Africa was in a much stronger position.
This time around, the resilience is not as robust, and the shock absorbers and fiscal space are weaker.
In some countries, double digit inflation is back.
In others reining in subsidies and counter cyclical spending is proving to be politically challenging.
The task is heavier this time around.
However, as if this were not complex enough, let me refer to another hill to climb: the veritable “Damocles Sword”: inability to translate the strong headline growth into jobs, lower poverty headcount, create opportunities for the young and make visible improvements in people’s lives.
Statistics show that over the past 30 years, inequality has worsened, especially in resource-rich countries.
In such economies growth is an enclave in nature; it is concentrated and capital-intensive, and inevitable to the infamous “resource curse”.
Broad sections of the population are excluded from the benefits, and the result is massive poverty amidst plenty, feeding sometimes into the hands of extremists, who take advantage in order to advance their agendas.
Oftentimes, governments have attempted to go around this conundrum by providing subsidies, on such products as petroleum, or major food products.
The untargeted welfarism has not only undermined public finances but has also bred corruption, capture by the elites and not benefited the poor.
A broad consensus exists, therefore, which maintains that managing our finite natural resources, avoiding the resource curse, ensuring broad- based benefits, building forward and backward linkages is the sure way to translate inherited wealth into real wealth.
The world as a whole will face an unemployment problem, but Africa will face unemployment of its most important asset – its youth.
This is more than a social, political or economic problem.
It is at the heart of the future Africa we want and we should build.
The African Development Bank remains as ever alert to its obligation to be at the forefront of that endeavour.
We know what it takes; we have our feet on the ground and eyes on the horizon.
We know our priorities of the day: economic integration, the private sector, infrastructure, governance, energy, high level skills: all things which, every day, make a continent attractive for investment.
There are dark clouds on the horizon but together we must be determined to prevail.
We can be proud of our achievements – and those are common achievements.