11:52 pm
21 October 2016

Africa’s growth needs to be about quality, not quantity

At the turn of the millennium Africa experienced a period of strong growth that would soon lead to the “Africa Rising” narrative. For almost a decade and a half global commodity prices soared, alongside Chinese demand, and African resource-rich economies saw their export bills rocket.

But by mid-2014 oil and other commodity prices began to fall and immediately placed a strain on African current accounts and local currencies. A period of economic slowdown began – most noticeably for resource-rich nations. For example, major oil-exporter and Africa’s largest economy, Nigeria, went from GDP growth of 6.3% in 2014, to 2.7% in 2015, to an estimated 2.3% this year. Likewise, South Africa – a major exporter of platinum and iron ore – saw growth fall from 1.5% in 2014 to a predicted 0.6% this year.

And for the first time in 20 years the International Monetary Fund (IMF) expects sub-Saharan Africa’s growth to fall below the world average this year.

The continent’s waning growth has made its way onto panel discussions at the 2016 World Economic Forum on Africa, held this week in Kigali, Rwanda. One discussion, dedicated specifically to the topic, saw Winnie Byanyima, executive director at Oxfam International, share her views on the matter. Here are the highlights.

It’s not about quantity, it’s about quality

Byanyima argued that too much attention is given to the figure of growth and not enough focus is placed on whether that growth is bettering the lives of the population.

“I think the right question is whether this growth is creating jobs. Is this growth raising the standard of living of all our people? It’s the quality of the growth that is key here.”

She highlighted that Africa’s previous high growth figures generally did not translate into social development.

“Nigeria is the best example of that. Between 2003 and 2009 the country had a positive figure of growth, but the number of poor people increased. And in fact, except for 10%… the rest of the population’s share of national consumption declined. It tells you that growth is there and it’s being captured by a few, but the majority is being left out.”

She added that African economies can do more to translate economic growth into development.

“The IMF likes to compare Mozambique with Vietnam because in the last 10 years they have been achieving almost the same levels of high growth. With that growth Vietnam has been able to create two million jobs in industry. Mozambique [created] 160,000 only. In addition… Vietnam has created millions more jobs in agriculture by modernising it and increasing the productivity mainly of small-scale farmers. So this growth – which we had – we did not spend well. That is the truth,” she emphasised.

“If you take a country like Equatorial Guinea – it has the same per capita income as Spain. It is as rich as Spain but it has a child mortality rate as low as Burundi’s. It’s shameful for us.”

Revenue can be found in taxation

Byanyima believes African economies can still develop today, despite facing slowing growth and shrinking budgets. Rather than cut expenditure on health and education, she argued governments should increase revenue through stronger taxation.

“Africa is losing a lot of money untaxed. The figures are glaring; they are horrible to see… Our recent research showed in Kenya that these tax incentives to foreign firms, which actually pressure governments to lower and lower tax rates, make Kenya lose US$1bn every year – that is our estimate,” she continues.

“So if we can rein in on harmful tax competition and tax dodging, there would be more resources to put in our people. By 2025 we will have a population that is below the age of 25. We are the most under-educated continent in the world. What will these people do with no skills?”