If we want to transform African economies, we must look beyond relying on governments

The headquarters of the African Union (AU) building in Ethiopia’s capital Addis Ababa
The headquarters of the African Union (AU) building in Ethiopia’s capital Addis Ababa
Image: REUTERS/Tiksa Negeri
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For decades, African leaders have envisioned a prosperous future for their nations.  And yet, these visions have not been realized.  And now, as African governments seek to rebound from the devastating effects of the Covid-19 pandemic, it is more important than ever to understand how to achieve a long-delayed transformation agenda, even as emergency measures are implemented in the short-term.

The best way to plan for the future is to know as much as possible about the past. That way, we are more likely to avoid previous mistakes, break unproductive patterns, and benefit from lessons learned. For Africa, a massive region of unrealized economic might, the past is particularly instructive.

One of the most critical lessons I have learned in my career—spanning five decades that has taken me to the World Bank, the United Nations and back home to Ghana, where I founded the African Center for Economic Transformation—is that when it comes to transformation, governments alone cannot get us there.

Indeed, while governments must ensure, through various policy actions, that the economy is managed well, 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.

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. 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. Neither can be effectively tackled by governments alone.

At the same time, governments of African nations must work together to integrate their economies.  For instance, many African 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 can be overcome by becoming competitive in global export markets, which requires collaborative effort.

A welcome harbinger of the future is 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.

None of these can be achieved without massive financial help.  The numbers for infrastructure investment alone illustrate the challenge. The Africa Development Bank 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, official development assistance accounts for more than 30 percent of those investments; the private sector has contributed just 9 percent. For Africa to secure the resources it needs to transform, such a split is untenable.

It’s not that overseas development assistance is no longer necessary. Aid is still important to Africa, in particular for fragile states and to address strategic priorities in middle-income countries. But it is increasingly important for countries to prioritize policies, such as tax reform, that will boost domestic resource mobilization.

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. At the same time, it must be noted that successful transformation will span 20 or 30 years or more—a period that is often at odds with transfers of power. Therefore, a transformation vision must be long term, enduring even as political leaders and policymakers come and go, or as new or varied needs arise.

The road in front of us may be much harder to navigate than it was a few months ago, before the global health emergency, but Africa’s journey will not stop.

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