Johannesburg - A leading academic economist says if high commodity prices have driven the advance in sub-Saharan Africa in the past two decades, the prospects for further gains seem dim.
Steven Radelet, the director of the global human development programme at Georgetown University’s Edmund A Walsh School of Foreign Service, said the region’s future depended on much more than swings in commodity prices.
Read: IMF sees slow growth in Africa this year
Writing in the June issue of Finance & Development, a quarterly journal of the International Monetary Fund, Radelet said that in the last two decades many countries across Africa changed course and achieved significant gains in income, reductions in poverty, and improvements in health and education.
“But the recent optimism seems to have swiftly given way to a wave of pessimism. Commodity prices have dropped, the world economy has slowed, and economic growth has stalled in several sub-Saharan countries. If high commodity prices alone drove recent advances, the prospects for further gains seem dim,” he wrote.
Radelet said the reality was more complex, and the outlook, especially over the long run, was more varied than many now suggested.
A report this month by AT Kearney, a global consultancy, found that despite numerous reports portraying Africa as one of the preferred frontiers for investment opportunities, its attractiveness for foreign direct investment (FDI) has lowered. Not a single African country appeared in the top 25 countries on AT Kearney’s 2016 list of attractiveness for FDI.
In February, the UN Conference on Trade and Development found that FDI to Africa dropped last year, reflecting the plummeting prices of the continent’s principal commodity exports.
“The view that Africa’s surge happened only because of the commodity price boom is simplistic. It overlooks the acceleration in growth started in 1995, seven years before commodity prices rose; the impact of commodity prices, which varied widely across countries (and hurt oil importers); and changes in governance, leadership, and policies that were critical catalysts for change.”
He said many countries were confronting some of the most difficult tests they had faced for a decade or more, and even with sound management, progress was likely to be slow in the next few years.
“But for others – especially oil importers with more diversified export earnings – growth remains fairly buoyant. At deeper level, although high commodity prices helped many countries, the development gains of the past two decades – where they occurred – had their roots in more fundamental factors, including improved governance, better policy management, and a new generation of skilled leaders in government and business, which are likely to persist into the future,” Radelet said.
The recent slowdown, wrote Radelet, followed two decades of strong progress, at least for many countries, that began in the mid-1990s and included faster economic growth, higher incomes, declines in poverty, widespread improvements in health and education, and other development gains.
Radelet said since 1995, gross domestic product (GDP) growth across Africa averaged about 4.3 percent a year, fully 3 percentage points higher than the previous two decades.
But he said it would be misleading to suggest that rapid growth rates were universal across the continent.
“They varied widely, with about half the countries in the region moving forward and others changing little. In the 20 fastest-growing countries – excluding oil exporters – GDP growth averaged 5.8 percent for two decades, and real incomes per person more than doubled.
“But in other countries growth was much slower, and in eight countries, income per person fell. Some of the differences are stark: in Rwanda real income per person more than doubled; in Zimbabwe it fell 30 percent,” he wrote.
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