If We Want To Transform African Economies, We Must Look Beyond Relying On Governments Alone: 7 Concrete Actions

By K.Y. Amoako

Africa is positioned to undergo dynamic change in the decades ahead. Thanks to abundant resources, a burgeoning youth population, and growing attractiveness to industry and investors, the time is ripe for Africa to transform its economies, set itself on a path toward sustainable and inclusive growth, and realize the potential that has eluded it for so long – if the transformation process is managed the right way. But what exactly constitutes the right way? And how do we get there from where we are now?

As African governments reorient national strategies and priorities to account for the impact of the COVID-19 pandemic, it is more important than ever for policymakers and development partners to keep the economic transformation agenda on track for the long-term. Africa needs more than growth to improve livelihoods; it needs diversified production, modernized processes, and investments in technology and other forward-looking sectors to create more and better jobs. These are the types of priorities that drive transformation.

Through a career spanning five decades that has taken me from Ghana to the World Bank to the United Nations and back to Ghana, where I founded the African Center for Economic Transformation, I’ve learned what it takes for countries to implement a successful transformation agenda.

For example, governments alone cannot get us there. We need a shared vision and collaboration between public and private sectors and civil society. We also need an unwavering commitment and political buy-in to a national development strategy that is adhered to across administrations. We need coordination within government agencies and among regional economies. We need domestic resources that must be mobilized and managed fairly, effectively, and transparently. And above all, we need transformational leadership to drive the process.

Taken together, these attributes form a framework of seven concrete actions that will put countries on a path to sustainable development.

 

Countries must develop a shared vision and plan.

A national vision and strategy – developed through broad consultations with the private sector, civil society, think tanks, and regional forums – with clear, attainable goals, is imperative to guide economic transformation. Stakeholder buy-in should be earned, not expected.

Ethiopia sought extensive input from outside government before launching its initial five-year Growth and Transformation Plan in 2010, holding countrywide consultations led by senior government officials. The meetings included business leaders, religious leaders, university professors, youth associations, women’s groups, and development partners. One of the key issues that arose, civil service reform, became a pillar of the plan.

Actually, it’s encouraging how many African countries have put in place long-term strategies centered around transformation and informed by a broad public discourse. Kenya’s Vision 2030 “aims to transform Kenya into a newly industrializing, middle-income country.” Like many long-term strategies, it’s comprised of a series of medium-term plans. Preparations for the most current of those plans began in August 2012 with country consultations and business, professional, and other stakeholder forums. Uganda Vision 2040 was launched in April 2013 to transform Ugandan society into a “competitive upper-middle-income country within 30 years with a per capita income of $9,500”– aspirations arrived at following a national consultation process. And in 2016, Botswana launched Vision 2036, a “transformative blueprint” led by a presidential task team comprising stakeholders from across the country and including additional outreach from UNDP, UNICEF, and other UN agencies working in the country.

Simply having a well-informed and inclusive development plan is by no means enough to guarantee results. But a transformation strategy cannot get off the ground without one – and it’s unlikely to stay on track without a broad sense of collective ownership over its objectives and outcome.

 

2. Governments must focus on core state functions.

Economic transformation can take place only when the economy is managed well, which in turn enables businesses to thrive and transformation to flourish. This may seem obvious, but it’s not easy; policy action is required on many fronts. Indeed, the list of state functions that could help provide an environment conducive to business can be very long – too long, given the capacity constraints in most African countries. For that reason, it makes sense for the state to focus on a core set of priority functions that it can perform effectively. Chief among them are sound macroeconomic management that avoids high inflation and excessive public borrowing; a streamlined regulatory environment to encourage innovation and investment; and an exchange rate that keeps exports competitive. The good news for Africa is that decades of reforms have highlighted the importance of these functions, which are now generally well understood and accepted by policymakers in the region – even if actual policies in many countries have yet to catch up.

There are other central functions at which governments must excel in order to transform. They include: planning and managing public investments, particularly infrastructure; improving public procurement to make processes transparent and reduce corruption; administering customs, seaports, and airports honestly and efficiently to facilitate more trade and tourism – and in turn boost government revenues; and building statistical capacity to make more informed decisions.

 

3. Government agencies must coordinate their actions.

One of the biggest challenges that many Sub-Saharan African countries face in promoting transformation is coordination within government to implement realistic plans. Often, plans are produced by planning agencies using outside experts, resulting in a disconnect when it comes to implementation. That’s because if planning and finance operations are separate, as they often are, the planning agency may have little influence in ensuring that expenditures in the plan are actually reflected in the budget.

Since almost any serious transformation initiative cuts across several ministries and agencies, close coordination is imperative. It’s the only way to work toward shared goals rather than operating as individual units, a process under which long-term strategies are sure to wither. Ideally, such coordination is carried out by a single agency whose authority is accepted by other ministers and staff. It may be overseen by a powerful minister, or it may be performed by an agency directly under a president, prime minister, or top deputy. Regardless of the coordinating agency’s place in the government hierarchy, it must be empowered to convene stakeholders, assign tasks, monitor progress, and lead course corrections when necessary.

It’s difficult to find powerful agencies filling that need across most of Africa. But some countries at least are taking steps to improve coordination of economic policy and implementation in government. Botswana has achieved impressive economic growth over the years, moving from one of Africa’s poorest countries in the 1960s to an upper-middle-income country, largely on the strength of strong institutions and its flourishing diamond sector. More recently, it has moved to diversify with economic hubs for transportation, agriculture, health, education, innovation, and, of course, diamonds. These efforts have been coordinated by the National Strategy Office, created in 2010 to oversee the performance of all government growth and development entities – and to ensure coherence.

 

4. The public and private sectors must work together.

There is perhaps no more direct way to say this: successful economic transformation is wholly dependent on a productive working relationship between government and business. Each has a role to play and each is dependent on the other holding up its end of the bargain; otherwise specific and isolated initiatives are unlikely to lead to transformation.

Having an environment in which businesses can thrive is critical because the private sector should spearhead the creation of jobs and be in the best position to upgrade technologies and processes. Governments, meanwhile, must invest in basic infrastructure such as roads and power supplies to boost trade from the local level up and enable firms to expand. And as mentioned previously, they should streamline regulations to encourage entrepreneurship and cut unnecessary red tape. As a matter of standard practice, the public–private relationship must be symbiotic. In relation to Africa’s transformation, two areas tower above the rest for public–private partnerships: closing the education and skills gap, and building infrastructure, in particular power and electricity.

By 2050, Sub-Saharan Africa is expected to have a larger and younger workforce than India or China – more than 1.2 billion people. Currently, most countries are grappling with endemic underemployment for a youth population that is already surging. Education is the key to making the labor force an asset. But governments and their development partners must work together to improve education quality and access. Businesses clearly have a role to play here. And to leverage Africa’s labor market, it’s in their best interests to do so. Technical and vocational education is helpful, but it is expensive – up to six times the cost for general secondary education. The private sector can help offset these costs through practical training programs, fellowships, and curriculum design.

In addition to skills training, infrastructure is the other key area where government and business must work closely to lay the right foundation for any transformation strategy in any country to be successful. Roads, bridges, dams, and facilities are one thing, but Africa cannot transform until it addresses its power problem. Approximately 680 million Africans lack access to reliable power, representing only 56 percent of the population. According to the African Development Bank, per capita consumption of energy in Sub-Saharan Africa (excluding South Africa) is 180 kilowatt hours, compared with 13,000 kwh per capita in the United States. Africa’s energy potential, especially for renewables, is enormous but underutilized.

Powering up the continent will cost tens of billions. It simply can’t be done by governments alone.

Altogether, even as Africa’s millennium boom raised its profile among foreign investors, the reality of doing business there has not yet caught up with its potential as an enviable destination for the private sector. In almost all countries, the regulatory and operational environment is not conducive to starting and running a business, a precondition that must improve to enable transformative public–private partnerships.

 

5. Governments must integrate African economies.

The need for regional integration – and the lack of progress toward it – is a recurring theme in Africa’s development history. The importance of governments working together is only heightened when talking about economic transformation.

For instance, many Sub-Saharan economies are small and have to import most inputs to manufacture. They also lack a large domestic market, which hampers growth and limits employment. These challenges to the manufacturing industry ultimately can be overcome by becoming competitive in global export markets. But in the early stages of industrial development, they make it very difficult for any one country to gain traction in production efficiency, export competitiveness, or any of the growth with DEPTH attributes.

In general, Africa’s regional and demographic profile would seem to compel leaders to integrate the continent economically. Kwame Nkrumah certainly called for it, when Ghana was still the continent’s only independent country. The limitations of going it alone have always been evident. Among Africa’s 54 countries, 37 have GDPs less than $25 billion, and 16 are landlocked. Most have low population densities, poor physical infrastructure, and thick borders. Intraregional trade is a mere 15 percent, higher only than South Asia among developing regions. According to an AfDB report, these constraints make it difficult for African firms to reach competitive economic scales to move up regional – and global – value chains.

I see three key areas of focus for Africa to seize the opportunities that regional integration offers for economic transformation.

The first is financing and building regional infrastructure, including roads and other transport networks, power and energy solutions, and information technology. The second is trade facilitation, including customs and other cross-border regulations. African leaders in recent years have taken the biggest step yet toward true economic unification with the African Continental Free Trade Area agreement, which will establish a single continental market for goods and services. Though COVID-19 has delayed implementation plans, almost all African countries have signed on. The third is an unwavering political commitment to agreed-upon regional projects. For example, the Programme for Infrastructure Development in Africa is a continental initiative that aims to bring some momentum and order to numerous regional projects. It is a long-term plan through 2040 with an ultimate intention to “realize the building of the African Economic Community,” first outlined in the 1991 Abuja Treaty.

 

6. Countries must mobilize and manage their own resources.

For African countries to transform their economies, they will need massive financial help. For example, the AfDB estimates that through 2025 its High 5s agenda will require annual investments of about $300 billion, while the UN’s SDGs will require more than $600 billion, roughly 12 times the annual financing deployed for development in Africa over the past decade.

Where will those resources come from? The numbers for infrastructure investment alone illustrate the challenge. The AfDB estimates a $100 billion annual need over the next decade, but continent-wide, investment in infrastructure has averaged only half that over the previous decade. More telling, over 30 percent of those investments have been sourced from the ODA; the private sector, meanwhile, has contributed just 9 percent. For Africa to secure the resources it needs to see its countries transform, such a split is untenable.

It’s not that ODA is no longer necessary. Aid is still vital to Africa, in particular for fragile states and the poorest countries and to address strategic priorities in middle-income countries. But as I described in the last chapter, circumstances are very different than they were for the better part of my career. Issues of debt relief, budget support, and mutual accountability are not at the center of Africa’s development financing story going forward. Rather, it’s the need for countries to be more effective at mobilizing and managing their own resources.

 

7. Political leadership must drive the process.

Above all else, effective political leadership is fundamental to a country’s pursuit of transformation. Time and again, we have seen evidence that direct engagement from the very top of the political hierarchy is the key driver in a successful transformation agenda. And based on decades of successes (and failures), we can also identify the common attributes in transformative political leaders: having a clarity of vision, inspiring others to greater heights, implementing smart policies, governing selflessly, and building trust.

Extending beyond individual attributes or abilities, however, is the need for sheer political will. Successful transformation will span 20 or 30 years or more – a period that is often at odds with transfers of power. A transformation vision, however, must be long term, so support for it must be consistent over time and endure even as political leaders and policymakers come and go, or as new or varied needs arise. Without committed political leadership at the top and without the political will to stay the course, transformation will not take root.

This is an adapted excerpt from KNOW THE BEGINNING WELL:  An Inside Journey Through Five Decades of African Development by K.Y. Amoako, published by Africa World Press.  © 2020.

About the Author

K.Y. Amaoko is the President of the African Center for Economic Transformation (ACET), which he founded in 2008 in Ghana. He previously worked at the World Bank and served as the Executive Secretary of the United Nations Economic Commission for Africa (ECA) at the rank of UN Under-Secretary-General. He is the author of Know The Beginning Well: An Inside Journey Through Five Decades of African Development, published by Africa World Press © 2020.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.