The World Bank has just released the 2007 Africa Development Indicators (ADI) based on more than 1,000 indicators of economic, human and private sector development, governance, environment, etc. The report highlights some important trends. On the one hand, Africa is enjoying a period of good economic growth. As Obiageli Ezekwesili, World Bank’s Vice President for the Africa Region, pointed out, “Over the past decade, Africa has recorded an average growth rate of 5.4 percent which is at par with the rest of the world.” But on the other hand, the growth has been highly uneven and skewed toward oil- and mineral-rich countries. A BBC article discussing the ADI report contains a useful visualization of this unequal growth distribution:
Equatorial Guinea, for instance, topped the chart with over 30% GDP growth during 1996-2005, to a large extent explained by its reliance on crude petroleum exports (over 92% of its total exports in 2005). Other countries that are far from being the paradigms of development, such as Sudan or Angola, also excel at growth. But the foundations of this growth remain shaky, because they are not grounded in good democratic governance and business climate that could facilitate the development of a vibrant and diversified economy.
John Page, World Bank’s Chief Economist for the Africa Region, said he was “broadly optimistic” that a fundamental change is happening in Africa, but emphasized the continent’s remaining hurdles to sustained good economic performance: infrastructure gap and indirect costs two to three times higher than in Asia. But more reforms in the area of governance and institutions are also needed to make the development of the private sector easier.
ADI report highlights, for instance, that the average rank of African countries in the 2006/07 Doing Business indicators was 136 out of 178. It also points out that surveyed African firms name access to finance, corruption, and onerous labor regulations among the top 6 hurdles to conducting business (the remaining key hurdles include reliable access to electricity, high crime, and shortage of skilled labor). Another crucial problem is wide-spread informality. ADI highlights the fact that informal sector in Sub-Saharan Africa accounts for as much as 78 percent of nonagricultural employment and 41 percent of GDP. And more than 40 percent of the continent’s population still lives on less than $1 a day.
The lesson? Economic growth – even very high one – is not enough for successful development unless it’s derived from an economy that is inclusive and productive as a whole. In contrast, most of Africa’s top growth performers derive their impressive GDP growth figures from a reliance on high-priced natural resource exports, the benefits of which bypass the majority of the population. Some countries obviously have made more progress than the others. But even in those economies that do not derive their growth from oil exports plenty remains to be done, since only in-depth economic reforms focused on improving not just physical but also institutional infrastructure can bring about lasting improvements.
Published Date: November 19, 2007