June 25, 2020

Africa Is More Resilient Than You Think

Landry Signé June 25, 2020

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The short-term shock of the COVID-19 pandemic and its economic fallout will have a significant impact across Africa. But the continent has a newfound resilience and will come back stronger, especially if African governments seize the current opportunity for effective leadership.

WASHINGTON, DC – Despite apocalyptic predictions, Africa may be better positioned than many think to weather the combined shock of the COVID-19 pandemic, collapsing commodity prices, and global economic recession, assuming its leaders act wisely. While African economies’ performance has varied, overall progress during the last two decades has made the continent more resilient than ever before.

In my book Unlocking Africa’s Business Potential, I analyze the continent’s ongoing transformations and new economic opportunities. Applying that analysis today, six trends in particular will help to reduce the impact of the current crisis.

First, African economies are becoming increasingly competitive. Although the majority of African countries rank toward the bottom of the World Economic Forum’s 2019 Global Competitiveness Index 4.0, Mauritius, South Africa, Morocco, the Seychelles, Tunisia, Algeria, Botswana, Egypt, Namibia, Kenya, and Rwanda are all in the top 100. In addition, improved macroeconomic policies have enabled countries such as Ethiopia, Côte d’Ivoire, and Ghana to achieve significant GDP growth rates in recent years.

Second, Africans support the ongoing trend toward better and more accountable governance resulting from democratic elections, term limits, and increased civic participation. Over the last five years, Afrobarometer surveys have indicated that 68% of Africans prefer democracy, 75% support two-term limits for leaders, and 62% think that citizens must hold governments accountable, even if it slows down decision-making.

Recent political leadership changes and overall governance improvements reflect not only the vertical accountability that citizens exercise through elections. African countries have also made progress on horizontal accountability, involving government checks and balances, as well as what might be called diagonal accountability, or the effect of personal responsibility on institutions.

The third positive trend is demographic. Sub-Saharan Africa’s population is expected to increase from 1.1 billion to 1.4 billion by 2030, 2.1 billion by 2050, and about 3.8 billion by the end of the century. In 2030, over half of the continent’s population will be concentrated in seven countries: Nigeria, Ethiopia, the Democratic Republic of the Congo (DRC), Egypt, Tanzania, Kenya, and South Africa. The first four will each be home to more than 100 million people.

Africa has declined while fertility rates have remained unchanged, thus creating a demographic dividend. Today, the continent has one of the highest dependency ratios in the world, owing to the large number of children under the age of 15. But by 2030, they will be Africa’s workers and consumers.

Fourth, Africa’s innovative and productive potential has already attracted substantial foreign investment and finance. In the agriculture sector, for example, European, Chinese, Saudi Arabian, South Korean, and Indian companies are investing billions of dollars to buy or lease large areas of farmland. And countries such as Cameroon, the DRC, Ethiopia, Kenya, Madagascar, Mozambique, and Senegal are growing a variety of exportable produce, including flowers, lentils, palm oil, rice, sugar cane, bananas, and corn. Though the COVID-19 crisis may weaken investment in the short run, the continent will attract higher investment inflows in the longer run.

Fifth, Africa continues to diversify its trade patterns. Although trade with China, the United States, and the European Union still accounts for more than 30% of the continent’s total imports and exports, emerging trade partners are taking ever larger shares. For example, Africa’s trade with Brazil, India, Indonesia, Russia, and Turkey more than doubled between 2006 and 2016.

Furthermore, the African Continental Free Trade Area – a single continent-wide market for goods and services, with free movement of capital and people – entered into force last year, with 54 countries on board. The AfCFTA’s operational launch, however, has been delayed, due to COVID-19.

Once fully operational, the AfCFTA will likely transform the structure of African economies by moving them away from low-productivity, labor-intensive sectors and toward higher-productivity, skills-intensive industrial and service activities. And by promoting intra-African trade, the agreement will foster a more competitive manufacturing sector, promote economic diversification, and encourage firms to benefit from continent-wide economies of scale. In short, the AfCFTA will enable countries to reduce poverty and accelerate their development by unlocking business potential and creating desperately needed and better-paid jobs.

Last but not least, African firms and countries are well placed to benefit from the Fourth Industrial Revolution (4IR), which is being driven by new digital technologies such as the Internet of Things, artificial intelligence, biotechnology, and 3D printing. By integrating 4IR technology into their current operations, companies will be able to leapfrog legacy infrastructure, strengthen Africa’s health-care systems and response to infectious disease, revitalize public-sector support, and establish mutually beneficial public-private partnerships.

Africa is also benefiting from the rapid expansion of its mobile broadband networks, which can attract investors to the information and communications technology sector. Kenya and Rwanda, for example, are implementing national strategies aimed at fostering technology adoption and innovation, while countries such as South Africa, Nigeria, and Egypt host a significant number of tech hubs. And creative entrepreneurs are launching a broad range of services to meet the needs of Africa’s citizens, with technology ranging from mobile applications for health care and agricultural finance to 3D printing of titanium metal parts.

The short-term shock of the pandemic and its economic fallout will have a significant impact across Africa. But the continent has a newfound resilience and will come back stronger, especially if African governments seize the current opportunity for effective leadership.

Landry Signé, a professor and co-director at Arizona State University’s Thunderbird School of Global Management, is a senior fellow at the Brookings Institution, a distinguished fellow at Stanford University, a World Economic Forum young global leader, and the author, most recently, of Unlocking Africa’s Business Potential.

The text has been adapted from Project Syndicate website

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