Ensuring Africa's growth
THE rise of Africa is in danger of faltering. After years during which the continent's economy grew at an average annual rate of 5 percent, global uncertainty, depressed commodity prices and jittery external conditions are threatening to undermine decades of much-needed progress. Ensuring the wealth and wellbeing of the continent's residents will not be easy; but there is much that policymakers can do to put Africa back on an upward trajectory.
First and foremost, policymakers must secure the financing needed to pursue sustainable development in an uncertain global environment. The World Bank estimates that Africa will require at least $93 billion a year to fund its infrastructure needs alone. Climatefriendly, sustainable infrastructure will cost even more. And yet, as long as global growth remains weak, Africans cannot count on developed countries to fully honor their commitments to help attain the Sustainable Development Goals.
Africa must rapidly develop its own resources, beginning by nearly doubling tax revenues. Across Sub-Saharan Africa, tax revenues account for less than one-fifth of GDP, compared to more than one-third in OECD countries. This means there is plenty of room for improvement.
Another source of domestic resources is the roughly $380 billion in pension assets held by just 10 African countries. Policymakers should be leveraging these considerable sums. At the same time, African countries will have to find a way to diversify their economies.
There are plenty of models to follow: Dubai, Singapore, Thailand, Malaysia, Mexico, Indonesia, and South Korea are all admired by Africans as economies that managed to transform themselves. Dubai, for example, set out more than three decades ago to prepare for a future without oil. The government implemented a step-by-step transformation of the country into a service economy, putting in place the infrastructure and incentives necessary to build up financial services, tourism, medical services, real estate, media, arts, and culture. South Korea and Singapore, which had few natural resources on which to rely, are no less inspiring.
The secret behind these countries' success is relentlessly focused leaders with a shared vision of a broad-based economy. SubSaharan Africa has paths for diversified growth that many of the trailblazers did not: Value-added agriculture and agro industry, the processing of mineral resources, petrochemi- cal complexes, manufacturing of durable and consumer goods, tourism and entertainment and an emerging IT sector.
As the necessary measures for diversification are implemented, policymakers must ensure that the economic growth they are pursuing creates jobs. Sadly, this has not always been the case. Much of the recent growth has benefited only a few, leaving many behind - most notably young people and women. From 2006 to 2013, inequality rose in many of the continent's most important economies, includ- ing South Africa, Nigeria, Ghana, Tanzania, and Rwanda.
These were challenges that we were starting to address in Nigeria when I was finance minister. We knew that we needed not just to secure growth, but also to improve the quality of that growth. To that end, policymakers must ensure that growth is channeled into sectors that create jobs, such as agriculture, manufacturing, and services. They may also have to redistribute income and strengthen social safety nets to protect better those at the bottom of the ladder. Weak health-care systems must also be strengthened in order to tackle the endemic diseases that sap productivity, such as malaria, as well as improving preparedness for outbreaks of deadly epidemics. The stakes are high. The World Bank estimates the Ebola outbreak shrank the economies of Sierra Leone, Guinea, and Liberia by 16 percent.
As the world economy sputters, African countries will have to develop trade with one another. In 2013, African goods and services accounted for just 16 percent of trade within the continent, and just over 3 percent of world trade. One problem is that most African countries produce the same type of commodities and trade them with very little value-added. Policymakers must encourage greater specialization; differentiated goods and services will add value and volume to trade.