This post was written in collaboration with the team at C³. Learn more about C³ at the end of the post.
Our work is not meant to serve as an all-inclusive summary on the topic, but instead is meant to serve as a starting point for thinking and learning about it. We outline important factors to consider as you form your own opinion rather than trying to push you in one direction or another
Structuring the topic
- Understanding the past: Theories for why Africa is lagging?
- Understanding the region’s history is central to thinking about its future. In particular, it is important to assess a range of arguments that look at different periods in time.
- Many historians and economists will focus their attention on historic or ‘destiny’ factors that have hampered growth including geography and climate.
- More recently, the impact of colonization as well as poor post colonial institutions cannot be underestimated in the role they have played in Africa’s underdevelopment.
- Analyzing the present: Where is Africa today?
- In the present day, one will often read about the explosive growth happening in the region, particularly in relation to the economies named the African Lions.
- It is important to take a more careful look at the progress in the region and whether the lives of people are really materially improving in the way that GDP growth figures would suggest.
- Looking at the future: Where might Africa go?
- When looking ahead to the future there are a few important distinctions to make:
- What are key trends that will, or most likely will, shape the continent’s future? These are trends such as the imminent population explosion, urbanization and reduction of arable land due to climate change.
- What are strategies that governments should deploy in order to navigate the existing challenges which may potentially be compounded by these new trends of the 21st century.
- When looking ahead to the future there are a few important distinctions to make:
Key issues and implications
Looking at the past: Theories for why Africa is lagging?
Before jumping into a range of theories for why Africa lags other regions historically, it is worth emphasizing that the below are only theories and that there is no consensus within the field of economics regarding the below arguments.
- Evidence in favor of the geography argument
- The ‘geography’ argument refers to the idea that Africa’s historic underdevelopment is due to its location which resulted in poor outcomes across topography, climate, disease, arable land, optimal rainfall and navigable terrain amongst others.
- “Simply put, Africa, unlike Eurasia, did not possess the environments conducive to indigenous food production and the domestication of animals; both of these factors are critical for the development of advanced societies and explain the different paths taken by Africa and Eurasia.” (Shattering Myths about Africa)
- In general, the region faced many challenges such as:
- Lacking large plains with high quality soil needed for farming. This would inevitably slow down development.
- Higher levels of disease in the tropical areas versus more temperate regions such as Eurasia. This meant lower life expectancies and spending more time treating the ill versus other more economically productive activities.
- Landlocked population – this is well understood to make commerce more challenging as transport of goods by land is more burdensome and costly than by sea.
- Evidence against the geography argument
- Africa cannot blame everything on a poor geography and climate.
- Of course, the inhospitable topography and other environmental problems may have made the region’s development more challenging, but many of the arguments in the literature make these challenges appear insurmountable.
- Japan and switzerland overcame tough geography
- A tough geographical position is not an absolute barrier to development and building efficient infrastructure; for example, good governments in Japan and Switzerland demonstrate the ability of countries to overcome serious geographic limitations and environmental problems.
- Not all arable land is even used
- Blaming underdevelopment on a lack of arable land would make sense if all the arable land had been exhausted. However, up to 60% of the world’s uncultivated arable land can be found in Africa. (World Economic Forum – Two truths about Africa’s agriculture)
- Differing climates
- Much of the geography argument claims that the entire region is very similar if not exactly the same, however, the region consists of a highly diverse set of climates from rainforests in Uganda, Rwanda and the Congo to the Serrenghetti in Tanzania and more temperate climates down in South Africa. Surely not all these climates can be inhospitable to crops.
Ultimately, it is clear that Africa’s natural set of circumstances played at least some role in its historic underdevelopment. It is true that the conditions were not as pleasant as in most of Eurasia, but it is also true that the challenges were not insurmountable.
Impacts of Colonization
Beyond the very obvious detrimental impacts of colonization on the region, below are a few often overlooked impacts that hindered the development of the region.
- Colonial education was essentially literary and emphasized skills that would allow the colonizers to exploit resources rather than focusing on training technological capabilities that could one day see self-sufficient states.
- Selective industry development
- The only industries that were allowed to develop during colonization were those that would facilitate the extraction and export of raw materials. Hence, no strong manufacturing capabilities were ever developed in the region.
- Extraction based transport routes
- Transport routes developed in the ex-colonies were built in a way as to optimize for the export of extracts, rather than to facilitate the movement of people between urban centers which would have served countries better post-colonization.
- Surplus from extracts not re-invested, but instead sent abroad
- When most economies develop, they benefit from a multiplier or accelerator effect, whereby profits reaped within the economy are reinvested into it through the purchase of additional goods.
- Example, the baker uses his profit to go to the barber who uses his profits to go to the grocery store etc. This allows the economy to grow faster.
- However, during colonization, all profits from the extracted minerals were taken back to the colonizer’s own economy, hence colonies never received this accelerator benefit.
- Fragmented societies
- Post colonization, the colonies had to deal with highly fragmented societies. In many cases they had to deal with the aftermath of the creation of fictitious socio-economic classes by the colonizers which was done to facilitate control.
- Colonial powers created and institutionalized classes of cultural and socio-economic groups to help them control the large populations of the colonies.
- However, the struggle between these fictitious groups continued long after the end of colonization. The conflict between the Hutu’s and Tutsi’s that led to the Rwandan Genocide in 1994 is a prime example.
- Poor governance
- It is widely known that strong institutions and governance is a crucial determinant of a country’s economic performance (Acemoglu, Johnson, Robinson, 2001). It is in this category that Africa’s nations performed poorly in the post colonial era.
- Poor governance or weak institutions can include corruption, lack of rule of law, little to no protection of private property rights and low constraints on the executive. All of these themes were highly prevalent in post-colonial Africa.
- Although part of ‘governance’, corruption is so prevalent in Africa, it deserves a separate mention. It can be argued that the source of Africa’s post colonial corruption stemmed from their colonial rulers, however, more important than the source, is the impact it has had on the region: it is estimated that Africa loses over $50 billion annually to corruption.
- Most attempts at a war on corruption in Africa have failed, primarily due to:
- being compromised by the appointing authority – i.e. the corrupt person also picking the anti-corruption team.
- compromised judiciaries being ineffective in the adjudication of corruption cases.
- Role of IMF and World Bank
- In the post-colonial period these development institutions played a formative role in Africa’s development or rather lack thereof. Although many argue that these institutions were ill-intentioned in their policy recommendations to African governments, this is up for debate.
- Failed Washington Consensus
- More importantly, it is clear to many that the policy recommendations known as the Washington Consensus that were forced upon any country receiving aid from these institutions did not do them well.
- Simply put, in order to receive assistance, African nations were forced to open their economies and introduce liberal economic policies. This forced these economies to compete internationally when their economies were clearly not yet ready to do so.
- The Chinese way
- On the other hand, China followed an entirely different model. They did not open their economies during the same period, but instead pursued strong internal growth first, developing many critical sectors such as manufacturing before joining the WTO in 2003.
- At this stage, they were ready to join international trade and hence not walked all over. They benefited from joining international trade in contrast to their African counterparts.
Looking at the present: Where is Africa today?
- Poverty in Africa
- Although strong marketing by institutions such as the United Nations may make us believe that the number of people living in poverty is rapidly falling, that is not actually the case. Instead it is only the rate of poverty that is declining.
- However, due to the population growth in the region, the number of absolute people in poverty in Africa has actually increased in recent decades. This surprising fact is true at multiple measures of poverty – $1.90, $3.20, $5.50 per day thresholds (World Bank).
- Africa has seen huge GDP growth
- Nonetheless, Africa has seen immense GDP growth in recent decades.
- However, here we will once again dispute the use of GDP as a metric for the wellbeing of the people. Many indicators suggest that this GDP growth is not shared by all and is heavily driven by the exports of minerals.
- Huge lack of infrastructure
- The overwhelming majority of Africans today have access to a mobile phone service, but less than two thirds have access to piped water.
- Sewerage, on the other hand, has remained relatively stagnant, with availability growing by just 8%. Less than one third of Africans currently have access to modern wastewater systems.
- What do the numbers say?
- A few select statistics below to show that the rapidly growing GDP figures may not fairly reflect the lives of the people in the region.
- Perspective to numbers:
- It may also be interesting to note that these numbers are likely upward biased in that only 35 countries are included. The countries without available statistics on these figures would likely also have at least lower than average outcomes across these metrics, if not close to the lowest.
- Similarly, these numbers may be biased downwards in that these figures are from only the second most recent Afrobarometer survey, hence significant progress will have been made since then.
- Although we will get to strategies for success later, it is worth noting that a few years ago, Africa invested only 4% of collective GDP in infrastructure versus China’s 14% (African Development Fund).
- Why no manufacturing?
- Africa, versus East-Asian counterparts, manufacture very little. Most articles one reads about booming African economies will cite oil exports, or the booming mobile payments ecosystem. However, almost all fail to mention the absence of African manufacturing.
- Almost all economies that have developed have done so because of manufacturing. It is not yet known whether the digital age can allow an economy to skip this step in its development. However, just from a logical standpoint, it is hard to imagine how an economy may develop without at any stage producing value-added goods.
- MVA (Manufacturing Value Added – a measure of manufacturing exports) is stagnant or on the decline in most African nations. If one believes in manufacturing being key for growth, this stat alone makes a great case against the African rising narrative.
- African ‘growth’ is mostly coming from a limited number of extractive industries which do not generate much employment or allow for the majority of the population to share in the benefits. This is entirely in contrast to the Asian experience, where the growth of labor intensive manufacturing has lifted hundreds of millions of people out of poverty
Looking at the future: Where might Africa go?
When we think about the future of the continent, an interesting approach is to first think about the challenges that will be faced, the trends that will unfold and then think about the strategies countries can use to navigate the complex landscape.
- In terms of main challenges, most of those have already been mentioned above, but it is important to remember that these challenges will continue to shape the continent’s narrative for the foreseeable future. These include, climate, disease, lack of education, healthcare, brain drain and the need for strong institutions.
- What are the key hurdles to overcome for success?
- World Economic Forum: “By 2030 one in five people will be African. Combine the continent’s soaring population with technology, improvements in infrastructure, health and education, and Africa could be the next century’s economic growth powerhouse”. These are big ‘if’s’ – Africa has so far not been able to achieve these outcomes, what makes us think we will now achieve them?
Key trends shaping Africa’s future
- Population explosion
- By 2100, Africa will be home to 4.1 billion people, 4 times its population today.
- “High fertility and improving child survival rates mean that by 2050, 40% of under-fives and more than a third of all children under 18 will be African. In 1950, only about 10% of the world’s children were African.” (World Economic Forum – 6 Numbers that prove the future is African)
- Many naive optimists take this explosion of youth as a positive outcome without question. We challenge that: Africa’s expected demographic changes can be a blessing or a curse depending on the policies put in place to take advantage of the immense population growth.
- When we consider Africa’s exploding population and the increasing amount of the global population it will comprise – we realize it is in everyone’s best interest that Africa succeeds.
- For more details on the rising population in Africa, see this interesting piece in The Telegraph
- An interesting phenomenon that people are not talking about enough is the potential scenario in which the population explosion unfolds as shown above, and simultaneously almost all manufacturing and many service jobs are automated and enshored back to western nations during the same period.
- This scenario will present unprecedented challenges to governments who are already failing to deal with the challenges already at hand.
- Urbanization will accelerate
- Urbanization will increase to the extent that 65% of the population are expected to be city dwellers by the year 2060.
- What does this mean for urban planning?
- This means that governments need to pay special attention to the sustainable development of cities with particular focus on electricity and hygiene. Without hygiene as a priority, these mega-cities may simply become mega-slums.
- Impacts of climate change
- In the coming decades, we will see a severe decrease in suitable rain-fed land not only in Africa but globally. Overall economic growth in Africa is expected to decline by about 3% per annum solely due to the impact of climate change on agriculture.
- Furthermore, the loss of arable land could result in even greater conflict in an already conflict ridden area.
- Africa has historically been a region hindered by conflict. As population growth and climate change both play a role in making land more scarce, conflicts could spiral out of control making any sort of governance impossible.
- Migration will increase
- As climate change continues to impact regions and income/ wealth differentials become more material, people will migrate. This migration may be between African cities, or later migration may be away from the continent itself. With billions of people potentially looking to migrate elsewhere, this is an issue that deserves full attention.
- Several of the aforementioned trends may make success in Africa tougher than it already is, however, the global trend of improving technology or digitization may make progress in Africa substantially easier.
- We have already seen Kenya’s M-Pesa, a mobile-payments company, essentially leapfrog the traditional consumer banking industry.
- Other leapfrog gains can be made if governments and the private sector exploit the latest technologies rather than following traditional development paths.
- High-level strategies to ensure Africa rises
- Overall, it is important to emphasize that success will be achieved through many small steps over decades rather than one master plan of changes implemented at once. Some important strategies (not too surprising) for success that we have identified, include:
- Strong governance and rule of law
- Strong institutions and governments will be a prerequisite for success for Africa.
- Those countries in Africa that succeed in the war on corruption will win handsome returns by way of economic growth in this century.
- Localization of politics for increased political involvement by the youth.
- Grass-roots anti-corruption to build trust in the system. All prior anti-corruption campaigns have seemed to fail, maybe a bottom up approach may be worth exploring.
- The education of Africa’s youth will be critical to the continent’s success. An uneducated exploding youth population will be disastrous for the region. It should be a priority for all national and local governments.
- Fortunately, with the use of the internet, scaling education should be easier than it has ever been before.
- A focus on infrastructure
- In addition to the basic infrastructure needs of water, sewerage, roads and electricity, the following are worth emphasizing:
- Transport – high speed rails and underground systems
- Allowing people to move swiftly within and between cities will be a vital part of the region’s economic success.
- Electricity via Solar
- With a technologically feasible way to now store the energy, the continent finally has the potential to unlock its solar potential, and leapfrog millions of consumers from having no power at all straight to renewables.
- Strategic use of foreign aid
- The debate on whether foreign aid is beneficial or detrimental is a discussion on its own. However, it is vital that countries use any foreign assistance strategically because it would be infinitely more difficult to achieve success in isolation.
- Earlier we noted the potential importance of manufacturing for a country to truly achieve growth for its people. However, has Africa potentially missed the boat with the imminent rise of automation? Many manufacturing jobs may now be onshored by the west if machines are able to complete jobs faster and more reliably.
- When it comes to manufacturing jobs, Africa will ultimately have to compete with automation as well as other regions.
- Tackling Brain Drain
- As problems in Africa fail to be resolved, many of Africa’s talented youth seek better lives elsewhere. If the region is to succeed over the coming decades, keeping talent at home should be a high priority.
C³ – Critical Creative Collaboration
This post was written in collaboration with the team at C³.
Who: We are a diverse community based in New York City.
What: At its simplest form, C³ functions as an idea club. Every month we dig into a curated list of books, journals, articles, podcasts and documentaries focused on a core idea. We come together for a day of fruitful conversation and collect all our most insightful discoveries in a single post that we share here with you.