By Marina Primorac / IMF Survey online / December 14, 2011
A new optimism is permeating much of Africa. The past 10 years of unprecedented growth in sub-Saharan Africa has helped fuel this positive attitude even when most of the rest of the world faces global economic crisis.
As more Africans move out of poverty and become middle-class consumers, they are increasingly in a position to drive investment, support entrepreneurship, and improve education.
In the latest issue of the IMF’s quarterly magazine, Finance & Development (F&D), articles by a range of African experts confirm the upbeat outlook for the continent and, while acknowledging continued and deep-rooted poverty, spell out what Africa needs to do to further spur opportunities for growth.
IMF Managing Director Christine Lagarde will visit Nigeria and Niger from December 18–22, on her first trip to Africa since her appointment earlier this year. Lagarde will hear from policymakers, the African private sector, and civil society about the challenges facing African countries, and underline the IMF's commitment to further reinforce the IMF’s partnership with sub-Saharan Africa.
Harvard professor Calestous Juma writes in F&D's cover story that a growing middle class—now over one-third of the population according to the African Development Bank (AfDB)—is shifting global perceptions about Africa’s prospects. The traditional focus on eradicating poverty in Africa “distracted both African authorities and international donors from serious consideration of ways to promote prosperity infrastructure development: technical education, entrepreneurship, and trade,” says Juma.
The African middle class still has comparatively little to spend by Western or Asian standards. But better economic policies, governance, and use of natural resources, coupled with more business-friendly policies and stronger demand for Africa’s commodities from emerging economies such as Brazil, China, India, and South Africa have led to Africa’s consistently high growth levels.
The new middle class is young—nearly 70 percent under the age of 40—and in the acquisitive stage of their lives, spurring consumer spending.across Africa, says Juma, change is in the air.
Growth for the poor
The story is not all rosy of course. Poverty will be a fact of life in Africa for a long time: one-third of all Africans will still be extremely poor in 2060, living on less than $1.25 a day, according to the AfDB. While it helps those who are in immediate need, an emphasis on aid does not encourage Africa to aspire to higher economic performance, according to Juma. The change in focus that Africa watchers are noticing—from poverty to gradually growing prosperity—represents a deep shift in the perceptions of Africa’s economic future, with profound policy and practical implications.
Ngozi Okonjo-Iweala, Nigeria's colorful economic czar profiled in F&D's “People in Economics” column, notes that Africa is projected by the IMF to grow faster than Brazil between 2010 and 2015. She cautions that lack of adequate infrastructure is now one of the big factors holding Africa back. Africa’s poor roads, ports, and communications isolate it from global markets, and its internal border restrictions fragment the region into a myriad of small local economies. It is neither regionally nor globally integrated. But with better underlying economic policies, Okonjo-Iweala predicts, a rising middle class in Africa will fuel growth.
It’s one thing to bring prosperity to a region, but Antoinette Sayeh, head of the IMF’s African Department, says what counts is growth that benefits the poor and the young, and growth that lasts. In our Straight Talk column, Sayeh presents IMF research that shows Africa is indeed enjoying inclusive and sustainable growth. She cautions though, that “growth is not enough. . . . For young people in particular school plus experience is essential for true inclusion in society.”
IMF economist Abebe Selassie explains that South Africa is the outlier in the Africa story. The emerging economy that traditionally led Africa's growth has struggled with a hesitant and incomplete recovery since 2008. It suffered serious job losses after a trifecta of shocks--electricity shortages, surging food and fuel prices, and the global economic crisis. Selassie says the government already had implemented appropriate policies in reaction to these shocks but also needs to align productivity and wage increases and encourage increased competition.
Oxford professor Paul Collier says that strengthening the continent’s railway network would encourage the regional integration that Okonjo-Iweala and Juma agree is needed, increasing the potential for further resource discoveries and more efficient use of agricultural land.
The executive director of the United Nations World Food Program, Josette Sheeran, explains that the international community can prevent future famines in Africa and elsewhere by using global risk management to enhance food security.
■ Also in the December 2011 issue of Finance & Development, John Quiggin, the author of Zombie Economics, discusses the pros and cons of privatization; IMF economists look at the impact IMF-supported programs have on social spending; Raghuram Rajan and Rodney Ramcharan draw parallels between today’s booms and busts and those seen in U.S. farm prices in the early 20th century; and Eswar Prasad says newly resilient emerging economies are rethinking the role of capital flows.
Source: IMF Regional Prospects