Friday, June 10, 2011

Africa: New Insights into Beleaguered Africa

By Jaya Ramachandran
IDN-InDepth NewsReport

BERLIN (IDN) - "Africa has gone through a remarkable decade of economic transformation. The continent is abuzz with talk of new investment, new cities, new airports, new refineries: The new African Lions," says a new study offering an upbeat insight into the continent and expanding South-South relations.

Titled African Economic Outlook 2011, while highlighting sustaining economic expansion in Africa, the report warns that the continent is marching into serious headwinds, notably caused by high food and fuel prices and political upheavals in a number of countries.

Pointing to an encouraging aspect, the Outlook says: "Before, the talk was how many billions of dollars Africa needs. Now, leaders speak equally of Chinese yuan, Indian rupees, Brazilian reals, Korean won and Turkish lira – the currencies of the emerging economic powers drawn to Africa whose sustained growth played a key role helping the continent weather the global economic crisis of 2008-09."

The report adds: The dramatic decade opened a new era of opportunity for the continent. Trade between Africa and its new partners is now worth USD 673.4 billion a year. It describes and analyses Africa's surge in relations with their "emerging partners", who are now on the top table of economic decision making alongside the "traditional partners" from Europe and North America. The study also looks at what can be expected in the future.

Drawing on milestone studies on Africa and South-South relations, the report provides a new insight into Africa's expanding partnerships after the 2008-09 crisis dramatically shifted the centre of the world's economic gravity away from OECD members towards the east and south. "Africa is benefiting from investment, trade and aid, but also from the macroeconomic, political and strategic advantages that the rise of emerging countries has produced," states the report.

The Outlook casts new light also on the diversity of Africa's changing relations. China takes centre stage, but other emerging partners together make up a larger share of many of the dealings. Africa's top five emerging partners are China, India and Brazil – along with Korea and Turkey, finds the report.

"Europe and North America's trade share has quickly eroded, but they still account for more than half of Africa's trade and foreign investment stock, and their economic health remains key to Africa's growth performance," the Outlook authors say.

"Nevertheless, Africa's rebalancing act turns the page on 50 years of over-reliance on the West, a period sometimes dubbed the post-colonial era. Links with the traditional partners face profound changes," the authors note.

Outlook experts also give a cautiously positive verdict on Western concerns about the impact of the emerging partners on Africa's development. "Prospects are good for the transfer of technology and access to finance. There is no evidence to suggest that the new players are hindering Africa's industrialisation, debt sustainability or governance, but Africa needs a clear engagement strategy and all sides must show greater transparency."

But the authors advise: To maximise development benefits from the new partnerships, African nations can draw lessons from their dealings with traditional partners and the successful experience of the rising economic powers.

"Vision and ownership turn global opportunities into sustained and shared growth. The economic independence that African economies are gaining from globalisation can be sustained if countries draw up their own development policies and co-ordinate them at regional and continental level to better negotiate with their traditional and emerging partners," the study adds.

The study makes a strong against calling economies such as India or China "new partners", as they have had long-lasting relations with Africa. The notion of "emerging partners" used in the report tries to capture two characteristics:

- They are considered “emerging” economies in the global context;
- Their economic relations with Africa have been marginal until the last decade but are rising fast and are expected to grow further.

For this study, "emerging partners" are economic partners of African countries which did not belong to the club of traditional "donors", the OECD Development Assistance Committee (DAC), at the outset of the millennium. Korea is the only country to have joined the committee since then, in 2010, thereby aligning its development policy and practices with DAC norms and manifesting its intention to comply with its principles and guidelines.

Of course, this category brings together partners at markedly different stages of engagement with African countries, the Outlook experts note. One of the contributions of this report is to document, analyse and draw policy conclusions from this heterogeneity.

It also shows that any typology of Africa's global economic relations is doomed to be short-lived, given the pace at which they change in nature and magnitude.

The report points out that Africa's economies have weathered the global crisis relatively well and have rebounded in 2010. But political upheaval in North Africa and high food and fuel prices are likely to slow the continent’s growth down to 3.7 percent in 2011.

The study, launched on June 6 in Lisbon and three days later in Lisbon, expects sub-Saharan Africa to grow faster than North Africa in 2011. The new report predicts a rebound to 5.8 percent in 2012.

"Africa is growing but there are risks. Urgent attention is needed to foster inclusive growth, to improve political accountability, and address the youth bulge," said Mthuli Ncube, Chief Economist and Vice-President of the African Development Bank (AfDB).

Co-authored by the African Development Bank (AfDB), the OECD Development Centre, the United Nations Development Programme (UNDP) and the United Nations Economic Commission for Africa (UNECA), the report emphasises that governments' efforts need to include measures to create jobs, invest in basic social services and promote gender equality.

"Prioritizing health, education and basic services is key to ensuring that the most vulnerable are not left behind," said Pedro Conceição, Chief Economist at UNDP's Regional Bureau for Africa. Growth alone is not enough for human development. Growth must be broad-based and bring down high levels of inequality.

However, new routes opened between Africa and emerging countries are promising, states the report. "New partners bring new opportunities for African countries. Defining national development priorities, trade, aid and investment is key to reaping the benefits of this new configuration," said Mario Pezzini, Director at the OECD Development Centre.

The report underlines that Africa is becoming more integrated in the world economy and its partnerships are diversifying, revealing unprecedented economic opportunities. In 2009, China surpassed the U.S. and became Africa's main trading partner, while the share conducted by Africa with emerging partners has grown from approximately 23 percent to 39 percent in the last ten years. Africa's top five emerging trade partners are now China (38 percent), India (14 percent), Korea (7.2 percent), Brazil (7.1 percent), and Turkey (6.5 percent).

While traditional partners, as a whole, still account for the largest proportion of Africa's trade (62 percent), investment (80 percent) and Official Development Assistance (90 percent), the report notes that emerging economies can provide additional know-how, technology and development experiences required to raise the standard of living for millions of people on the continent.

Putting people first must go hand in hand with efforts to accelerate regional coordination and integration. Trade agreements that benefit the continent as a whole unleash the full potential of the private sector and develop regional investment opportunities are the way forward.

"A race to attract the largest amounts of investment or aid from emerging partners at any cost should be avoided," said Emmanuel Nnadozie, Director of the Economic Development, UNECA. "Africa needs more progress towards regional integration and bigger markets to improve the bargaining power of African countries and improve economic growth."