ED­I­TO­RIAL

The Africa Report - - CONTENTS - BY PA­TRICK SMITH

Con­se­quences of a crunch

Should any African pres­i­dent suf­fer from a bout of ir­ra­tional ex­u­ber­ance, the lat­est re­ports from the IMF and the World Bank make for sober­ing read­ing. The mes­sage, less var­nished than usual, is that the eco­nomic and tech­no­log­i­cal gulf be­tween Africa and the in­dus­trial economies, and many de­vel­op­ing ones, is widen­ing. With­out a strat­egy, the chasm will grow. One set of rea­sons are about strat­egy: low in­vest­ment in ed­u­ca­tion and slow adop­tion of new tech­nol­ogy at the macro level lead­ing to a ris­ing pro­duc­tiv­ity gap. So it’s more than the gloomy head­line fig­ures, al­though both the IMF and the Bank have down­graded their GDP growth pro­jec­tions for Africa this year to 3.1% and 2.7% re­spec­tively. On av­er­age, growth per capita will rise 1% this year; then it is pro­jected to rise 1.5% a year for the early 2020s. On that ba­sis, it would take un­til 2063 for per capita in­comes to dou­ble across the con­ti­nent. There are a raft of global fac­tors re­spon­si­ble, in part, for this sta­sis: deep­en­ing ef­fects of cli­mate change on pro­duc­tiv­ity and liveli­hoods; the lag­gardly mar­ket for many com­modi­ties; the fi­nanc­ing squeeze and lack of ac­cess to in­ter­na­tional mar­kets; a stronger US dol­lar and ris­ing debt ser­vice costs to which can be added the in­di­rect costs to Africa of the trade war be­tween the US and China. Be­tween the lines the Bret­ton Woods re­por ts ac­knowl­edge such con­straints but fo­cus on the pol­icy and strate­gic ac­tions that gov­ern­ments could take to mit­i­gate these pres­sures. And in most cases that isn’t hap­pen­ing. Slow growth and weak com­mod­ity mar­kets are caus­ing a cap­i­tal crunch, squeez­ing in­vest­ment in in­fra­struc­ture and so­cial pro­grammes. The con­se­quences of this are spelled out in the Bank’s new ‘Hu­man Cap­i­tal In­dex’ which mea­sures per­for­mance in terms of health and ed­u­ca­tion out­comes. Re­port­ing some of the low­est scores for Africa, the Bank ar­gues that lack of in­vest­ment there is de­press­ing the pro­duc­tiv­ity of its economies. The IMF’S anal­y­sis of the ef­fects of the ‘Fourth In­dus­trial Rev­o­lu­tion’ sketches out two sce­nar­ios for Africa. First, an up­beat as­sess­ment that the tech­no­log­i­cal leapfrog­ging achieved by mass use of cell­phones and in­ter­net ac­cess could be ex­tended to other sec­tors, to com­ple­ment and speed up eco­nomic de­vel­op­ment. A grim­mer sce­nario is that robotics and AI will re­place much of the cur­rent work­force, lead­ing to many of the man­u­fac­tur­ing and ser­vice in­dus­try op­er­a­tions set up by for­eign firms in de­vel­op­ing economies re­turn­ing to their coun­tries of ori­gin. That would mean vast swathes of Africa would not get on that first rung of in­dus­tri­al­i­sa­tion, at least via in­ter­na­tional in­vest­ment. The IMF boffins of­fer caveats for both sce­nar­ios, but the dan­gers in their analy­ses are as clear as the Bank’s as­sess­ment of Africa’s progress on ed­u­ca­tion and health. With the com­bined re­search ca­pac­ity of the AFDB and UNECA, it must be time for these in­sti­tu­tions take up this gaunt­let, fo­cus­ing on strate­gies to ad­dress the eco­nomic tra­vails

The lack of in­vest­ment in health and ed­u­ca­tion in Africa is de­press­ing pro­duc­tiv­ity

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