The African Development Bank (AfDB) board of governors as compelled by law and custom are meeting this week for their Annual Meetings in Kigali, Rwanda. Running under the theme, “The next 50 years: The Africa we want”, it is fitting that this year`s meetings are being held in the East African nation. Rwanda, East Africa`s fastest growing economy most likely has been the poster child of the “Africa rising” narrative over the years.
Africa largely remains a continent of paradoxes. Basing on the continent`s resource endowments, Africa is very wealthy. Yet the levels of poverty on the continent are appalling. According to the latest World Bank Poverty Headcount Ratio (which measures the number of people living under US$1.25 per day as a percentage of the total population) about 48.5 per cent of people in sub-Saharan Africa still live in poverty. For a continent which boasts of 6 of the last decade`s 10 fastest growing economies, this is a statistic that goes against the grain. This obviously raises questions as to the importance if any, of GDP figures, when they fail to translate positively into people`s lives as evidenced by better living standards.
One gets the sense that overall, the sad realities of growth that has not been inclusive have struck the right chord among Africa`s top decision makers. Recently, the World Economic Forum on Africa ran under the apt theme of, “Forging Inclusive Growth, Creating Jobs.” Perhaps this signals the recognition that mere GDP statistics as indicative measures of development on the continent are not adequate and more needs to be done.
In a statement on the AfDB website, the President Donald Kaberuka commenting on the seminal Annual Meetings said, “Now is the time to think out of the box, time for a step change. Fifty years after independence it is time for that step change- a step change with Africa taking ownership.” This sums up what needs to be done. It need not be left to chance to create the Africa we want in the next 50 years.
Estimates show that by 2050, the African population is forecast to rise to at least 2.4 billion and will continue to grow to 4.2 billion; four times its current size in the next 100 years. This population growth must happen in a society that is free from the threats of terror. The underlying structural issues such as political instability in the Sahel region and socio-economic inequalities fomenting extremists need to be adequately addressed. If Africa is to deliver on its promise, an enabling environment for citizens and enterprises to operate in must be promoted by eliminating security threats such as those posed by groups like Al-Shabaab and Boko Haram.
A 2012 World Bank report titled, ‘Financial Inclusion in Africa’ revealed that only 23 per cent of the adults in Africa have an account with a formal financial banking institution. In some countries such as the DRC, the same report revealed that as much as 95 per cent of the country`s population is still unbanked. Mobile money platforms like Kenya`s Mpesa need to be expanded to include more people in the financial system, particularly the rural folk. Though several reforms have been made in deepening Africa`s financial services sector, more still needs to be done. Small enterprises need access to finance in order to grow; and access to financial services is vital in ensuring sustained development. Credit-to-GDP ratio (a main indicator of financial depth in an economy) stands at around 61.4 per cent in Africa compared to 135 per cent in East Asia and the world average of 128.8 per cent. Access to lines of credit for small businesses is thus essential for Africa`s development going forward and must be increased.
Intra-African trade is vital in Africa`s development drive and will be boosted by closer regional co-operation and integration between countries. At present, the levels of Intra-African trade remain suppressed because of numerous structural bottlenecks. A joint report by the AfDB and the World Economic Forum notes cumbersome and non-transparent border administration, limited use of Information Communication Technologies (ICTs) and persistent infrastructure deficits as the major impediments of regional integration. On average, African citizens require visas to visit 60% of African countries, with only 5 countries (Seychelles, Mozambique, Rwanda, Comoros and Madagascar) offering visa-free access or visas on arrival to citizens of all African countries. This obviously speaks to the need for African countries to open up their borders to facilitate domestic trade between African countries more so now that there is a surge in intra-African travel.
Receiving up to 36 per cent of aid annually, the largest share of global aid than any other part of the world, Africa still remains heavily reliant on aid. Though a lot of aid has come into Africa in various forms, the effectiveness of that aid in combating poverty on the continent still remains subjective. For instance, real per capita income is lower than it was in the 1970s, and African countries still pay up to $20 billion in debt repayments annually underlining the point that aid is never free. No country has ever made the leap to being a developed economy, fuelled solely by aid money. While developmental aid may be necessary for a season, African economies cannot depend on aid to induce growth and development in the long run. Hence, moving forward, it is desirable that Africa be weaned off its reliance on aid, such that governments begin to focus on developing investor friendly policies that lure investment in their countries.
The overtones of these and many more crude statistics about Africa, all point to the need for Africa to leverage its vast resource wealth and create sustainable development for posterity. With an increasingly youthful population, it is imperative that adequate jobs are created for Africa`s youth going forward. Physical infrastructure and the necessary soft infrastructure (in the form of favourable tax laws, and respect of rule of law) need to be developed.
As policy makers are meeting in Kigali, one hopes that these fundamental issues are considered and steps taken to root out extreme poverty and set Africa on a path of growth and development for the next 50 years and beyond. Ultimately, the Africa we all want is one that is prosperous; people centred; integrated; at peace and globally influential.