Africa, a European Priority

By Mario Pezzini, Director of the OECD Development Centre, and Romano Prodi, former president of the European Commission and former United Nations special envoy for the Sahel

How should Europe view Africa? One day the headlines are optimistic: it’s the fastest growing region of the world, with an expanding middle class. The next day, tragic news about terrorist attacks and uncontrolled pandemics paints a far more sombre picture.

It is these two sides of a single, quickly evolving reality that we must understand in order to find an answer.

Thanks to world demand for its raw materials, to its demographic dynamism and to the growing demands of its middle class, the African continent has been becoming wealthier since the start of the 2000s at an average annual rhythm of 5.1%. This is double the rate of the previous decade and three times greater than in the countries of the Organisation for Economic Co-operation and Development (OECD) over the last 10 years.

The oil-producing nations are the first to benefit from this favourable context: forty years after becoming independent, Angola is thus in a position to propose aid to its former colonial power, Portugal, which has been weakened by the economic crisis. But other countries less rich in raw materials, like Ethiopia, are also seeing their situations improve. The continent’s new fortune is largely due to the re-emergence of China over the last three decades, which has carried 83 developing countries to per capita growth rates at least two times superior to those of the OECD countries.

STRONGER, MORE INCLUSIVE GROWTH
Still, even if we can salute Africa’s improved performance, we would be wrong to be satisfied: it needs stronger, more inclusive and more durable growth. With very low income levels as a starting point, most African economies are progressing at a rhythm that lags far behind the 30 years of 10% growth that China has just experienced. Their savings rates remain far below those of Asia’s economies at the time when they took off, and the economies of many African countries are still dependent on external financial flows.

Furthermore, growth in Africa is still creating too few jobs. On the eve of the Tunisian revolution of January 2011, all of the economic indicators were very strong; none managed to tap into the frustration of a population lusting for freedom, and especially of young, educated people without jobs, excluded from the benefits of growth. On the continent as a whole, fewer than 10% of young people have decent jobs, the rest working either in the so-called informal sector or without pay on family farms.

The continent’s institutions, first and foremost the African Union, have made the correct diagnosis: current growth is not sufficient; what Africa needs is economic and social transformation. This will not flow naturally from the current episode of growth. Public strategies and policies will be necessary to encourage economic diversification, enhance competitiveness and promote activities that are better able to create jobs and value on African soil.

DIVERSIFICATION OF INDUSTRY

Governments are gradually putting in place these strategies, in which the considerable natural resources of the continent have an essential role to play. But there is still much to be done: on average, spending on exploration for these African mining resources is 13 times less per square kilometre than in Canada, Australia or Chile.

Moreover, the exploitation of these resources and the revenues they generate should serve to trigger a diversification of African industry and exports. Here again, the challenges are considerable, notably due to the small size and fragmentation of the internal markets of numerous African countries.

We can applaud the surge in African trade – which has increased more than fourfold over 10 years – but African participation in the global trade in intermediate goods, a good indicator of the ability of countries to reap the benefits of international trade and global value chains, is barely more than 2%. Africa remains largely a provider of raw materials, which will go on to gain added value in Asia or the countries of the OECD.

Finally, nascent economic wealth does not automatically translate into well-being for the population. The establishment of stable and efficient institutions that can guarantee peace and prosperity is a long-term process. Thus public services on offer – in health, education, security, justice, etc. – do not follow growth curves, in Africa or elsewhere. An illustration is the inability of the countries affected by Ebola to respond to the health crisis – including Sierra Leone, which according to recent predictions should experience double-digit growth in 2015. It would be wrong to view this as merely the effect of poor governance and misappropriation of funds. These phenomena exist, but even when efforts are sincere, progress takes place only slowly.

The taxes collected by African states, which must finance these public services, are in many cases derived mainly from royalties paid by multinational companies in the energy, agriculture or mining sectors. As for the taxation of local business, all too often it strangles small and medium-sized enterprises, while too many ‘informal’ transactions, including large ones, go untaxed. This is not a solid foundation for a social contract between a state and its citizens.

The economic transformation should enrich African businesses, workers and consumers so that they become, through fair taxation and efficient public policies, the first providers of their own well-being.

Europe cannot be content merely to hope for these changes. It must dig into its financial, human and technological resources to adapt its capacity for co-operation to Africa’s new strategic and economic circumstances. More than financial aid, what is needed is the sharing of experience, technology and knowledge. Europe must assume its solidarity with the project of transforming the continent: Africa is far too close to us to be considered a foreign affair.

This article first appeared in Le Monde on October 14, 2014. Read it anew here in French http://www.lemonde.fr/idees/article/2014/10/14/l-afrique-une-priorite-europeenne_4505633_3232.html and above in English.

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