Growth poles can help create jobs for Africa's one billion citizens (Credit: World Bank)
We were asked the other day by our senior management to be outrageously aspirational when we engage with growth poles. I have been reflecting on what this means for our work on this topic in Africa, especially in light of the findings of the Africa Competitiveness Report. I think we need to be aspirational in three broad directions: (i) developing the capacity to get things done in Africa, (ii) ensuring all stakeholders benefit from growth, and (iii) mobilizing as much capital as we can, whether it be private, philanthropic or public.
Several people, from The Economist to this blog, have been highlighting Africa's accelerated GDP growth of about 5 percent a year for the decade before the 2008-9 global economic crisis, and the two years since the crisis. But has this growth served to reduce poverty?
The latest globally consistent estimate of poverty rates has an answer: Yes.
Using the measure of people living on $1.25 a day or less, the World Bank's poverty measurement team, led by my colleague Martin Ravallion, estimates that the percentage of poor Africans fell from 58 percent in 1999 to 47.5 percent in 2008. This rate of decline of about one percentage point a year is a welcome change from the previous decade when growth was much slower and the poverty rate increased.
In a recent interview on the Canadian Broadcasting Corporation, I reacted to statements by Patrick Bond on Africa’s export of raw materials and on structural adjustment policies. I said that the problem with natural resources was not that Africa exports them, but that many African governments have not used the revenues from these resources productively. On structural adjustment, I said that policies followed by the better-performing African countries over the last 15 years were quite similar to
My colleague and good friend, Ngozi Okonjo-Iweala, gave an inspiring speech at Harvard where she described Africa as the next BRIC (Brazil, Russia, India and China). Everything she says in the speech is music to my ears (confession—I provided some background materials to her staff)—that Africa’s growth prospects are strong, that reforms seem to have taken hold—and her idea of African Development Bonds is innovative and worthy of discussion.
My only concern is the labeling of Africa as the next BRIC. First, Africa is not a country, whereas each of the BRICs is. Africa is 47 countries, some of which are quite small (20 countries have populations less than 5 million). The distinguishing feature of the BRICs is that they are both middle-income and large. So it’s not clear how any individual African country can aspire to being a BRIC. Countries such as Malaysia or Chile may be more appropriate models for most African countries.
At the recent Africa Economic Conference, UN under-secretary general and executive secretary of UNECA, Abdoulie Janneh, said "[Africa’s] previous growth, while benefiting from improved macroeconomic management, was largely dependent on commodity exports and resources flows from outside the continent."
A recent paper by my colleagues Humberto Lopez and Luis Serven entitled “Too Poor to Grow” asks whether, controlling for other factors, countries with higher poverty rates grow more slowly. Their answer is “yes”. The implication is that countries with high poverty may be caught in a poverty trap—they grow more slowly, so poverty rates stay high or even increase, which means they grow even more slowly, and so on.
The idea echoes the one in Martin Ravallion’s post on this blog about why poverty rates are not converging.
The two papers got me thinking about the large number (20) of fragile states in Africa. These states have lower per-capita incomes and growth rates than non-fragile states. More importantly, many of them have remained fragile states for a long time.
Could it be that these countries are caught in a low-level equilibrium trap? And if so, should aid policy—which treats them as worse-performing versions of non-fragile states—be adjusted to take into account the possibility that these countries are “stuck” in low growth, high poverty and poor governance?
UPDATE: August 27, 2009:
Thanks to all who are taking the time to share their views on this post. Many of you seem to think that education can offer a way out of this vicious cycle. Some don't see hope for Africa until corruption can be successfully tackled. A few others advocate for more individual responsibility. I was particularly impressed by the story David Kamulegeya shared with us (see the comment titled "it is about the attitude that people have about themselves") in which he describes his own experience navigating out of poverty.