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Is Africa growing too fast?

Shanta Devarajan's picture

Your first reaction to the title of this post may be: “Just when, for the first time in thirty years, Africa’s per capita GDP is growing (see Graph below) at the same rate as all developing countries, why are you asking whether Africa is growing too fast?”  The reason is that we would like to know whether this growth is sustainable. Two colleagues at a recent conference on this topic offered some sobering thoughts. Drawing on his work on growth volatility. Jorge Arbache showed that it was mainly the resource-rich countries that had experienced an increase in growth accelerations and a decrease in decelerations

Per Capita GDP is growing

He also pointed out that investment, often a strong predictor of future growth, had not increased significantly in Africa. Deepak Mishra showed that, despite about a decade of faster growth, manufacturing’s share of GDP (see Graph below) is the same as it was in the 1960s.  Furthermore, African countries have the highest ratio of imports to exports, and the largest trade deficits.

Notwithstanding these important findings, I remain optimistic about Africa’s growth prospects. First, it is not just oil exporters that are experiencing faster growth. Some 17 non-oil-exporters, accounting for a third of the continent’s population, have experienced better than 4 percent GDP growth for a decade. Second, there is no question that macroeconomic management has improved. Whereas 26 African countries were suffering from 20% inflation in the early 1990s, as of end-2007 only one—Zimbabwe—was. Finally, while there remains a huge, unfinished agenda of policy and institutional reforms to sustain growth, nothing succeeds like success. The fact that some of these reforms are generating growth creates a certain momentum—by opening the political space for further, and possibly more difficult, reforms.

Comments

Submitted by Francis Beddington on
Is it really the case that investment has not risen? One of the things I took from the last AfDB Africa report and last WEO was a significant pick up in investment with a good number of countries hitting the 30% mark. I am not a fan of generalizing about all African countries I think it falls into the trap that has bedevilled international perceptions of Africa for years, of lumping the good with the bad and only really seeing the bad.

Submitted by Dezio Banda on
How far has Africa gone in the fulfulment of rural development aspirations? When one considers so much billions of dollars- both grants and loaned money, pumped into rural development one wonders whether we are close to the aspired target. Secondly, who is in control of rural development? Is it the intended target beneficiaries whose soci-economic plight provides the rationale for the rural development interventions, or resource regulators vis a vis project/ programme management team? It is high time rural development programming was left sorely in the hands of the poor to manage their destiny rather than regulators taking the centre stage!

Submitted by Anonymous on
Please tell us something we dont already know... How fast is too fast? How long is a piece of string? How fast does World Bank want Africa grow and why? Conclusions? What's your point exactly? Recommendations?

Submitted by Deeapk Mishra on

I am not surprised that in the midst of rising inflation, financial meltdown and emerging food crisis, Shanta remains optimistic about Africa’s growth prospects—he is an eternal optimist. And in some cases he has proven to been right. In his paper "South Asian Surprises", he successfully argued that many South Asian countries are growing rapidly and succeeding in their poverty reduction efforts despite being afflicted by some of the same factors that stifled growth in other parts of world—Bangladesh (corruption), Sri Lanka (civil war), India (high fiscal deficit) and so on. Is he then correct on his new prognosis on Africa?

I for one remain unconvinced. Here are the three basic stylized facts about the Sub-Saharan African (SSA) economy that makes me a hold-out. First, countries in SSA are finding it difficult to transit from agriculture to manufacturing—in fact their share of manufacturing in GDP is either stagnanting or falling. Second, their gross domestic savings to GDP ratio is low and falling—implying that their dependency on aid may be rising. Finally, about one-half to two-third of countries in SSA continue to be governed by the same political party (in most cases the same leader) for more than two decades—making it harder for these countries to admit the problem and to change course.

Nevertheless, I do hope that I am wrong and Shanta is right in his prognosis!

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