Chief economist calls for structural change in Africa

Dar es Salaam. African Development Bank’s Chief Economist Célestin Monga has called for structural change in Africa, following the release of the new African Economic Outlook report.

The report’s findings, released on Friday January 26 in Addis Ababa Ethiopia show that Africa’s infrastructure is still behind those of other regions in terms of quantity, affordability, and quality due to lack of investment.

Monga who is also ADB’s Vice President for Economic Governance and Knowledge Management said the report has been presented earlier—in January—to give policy-makers enough time to reflect on the recommendations for economic planning and transformation.

It puts average real Gross Domestic Product (GDP) growth in Africa at 3.6 percent in 2017 − a good recovery from the 2.2 percent recorded in 2016. The 2017 figure is projected to grow by 4.1 percent a year in 2018 and 2019.

Beyond the observed increase in GDP, however, Monga called for structural change in Africa.

It was presented to delegates at the African Union Summit on Friday and it is AfDB’s flagship analysis of the state of African economies.

The report further reveals that African economies have been resilient to negative shocks, but poor infrastructure is a serious impediment to inclusive growth.

The report is expected to be translated into key African languages and engaging with policy-makers and civil society organizations to ensure its operationalization, he said.

The Commissioner for Infrastructure and Energy at the African Union Commission, Amani Abou-Zeid, described the report as highly relevant and useful for Governments and other stakeholders.

Africa is still experiencing jobless growth due largely to limited structural change. Consequently, sustained high growth has not had substantial impact on job creation. About two thirds of countries in Africa have experienced growth acceleration.

“Basically, a growth acceleration period is one in which the average growth rate of GDP per capita over a period of eight years is at least 3.5 percent per annum,” the report notes.

The Commissioner for Economic Affairs at the African Union Commission, Victor Harrison, endorsed the report, urging African countries to adopt the recommendations for inclusive growth.

“These studies present the behaviour of African economies in the face of difficult external conditions and announce the revival of growth with an estimated rate of 4.1 percent in 2018. We all know that growth is not yet inclusive in Africa, and unemployment affects more women and young people,” he told the audience.

It observed that Africa needs higher growth and investment rates, but debt levels must be monitored closely. Public debt ratios are rated to be on the rise, stocked by appetite for infrastructure spending.

Details provided by the Outlook indicate that 40 countries in the region recorded increases in external debt from 2013-2016. Nine countries experienced a decline.

Though there are growing concerns about the debt levels in Africa, the report indicates that if used productively, debt may be necessary to unlock long-term growth potential.

“Tackling poverty will need efforts to increase employment elasticity of growth. The employment elasticity of growth of 0.41 in Africa is below the desirable 0.7 for all developing countries. Pressing policy concern is therefore to ensure that growth is reflected in creation of high and quality jobs,” according to the Outlook.

The report notes that Africa could be the next investment frontier and recommends three options for the international financial community to resolve the savings glut: the adaptation of a policy of more negative real interest rates in high-income countries; the use of excess savings to finance public investment in rich countries; and the facilitation of the flow of capital to developing countries.

Estimates show that investment needs for infrastructure will be in the range of US $130–$170 billion a year.