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Africa `s economic prospects improve amid rising social and economic inequalities




The 2014 African Economic Outlook was launched on the first day of the 49th African Development Bank Group Annual Meeting in Kigali, May 19 – 23 2014. The report that is jointly produced by the African Development Bank, OECD and the United Nations Development Programme was presented to the audience in an interactive session that was animated by Daniel Makokera, the renowned South African media personality.

Among dignitaries present was Dr Donald Kaberuka the president of the AfDB, Pascal Lamy former Director-General of the WTO, Mario PEZZINI the Director OECD Development Centre, Amb. Valentine Sendanyoye Rugwabiza the CEO of Rwanda Development Board among others. In his opening remark Dr Kaberuka noted that African economies are growing but the bit of economy growing fastest is the service sector.

“Industries and agriculture as proportion of GDP are declining everywhere on the continent. That is not unusual in the process of economic transformation”, said the president of the African Development Bank.

Dr Kaberuka pointed out the question of the existing poverty that most people on the continent ask themselves when Africa is mentioned as one of the fastest growing economy in the world. In 2013, Africa`s gross domestic product (GDP) grew on average at 4%, against 3% for the global economy but the majority of Africans haven`t experienced the benefits of economic growth. While the whole continent has economically grown, regional disparities have been noticed and were noted by Professor Mthuli Ncube the Chief Economist and Vice President of the African Development Bank.

West Africa is home to the fastest growing economies on the continent with an average 6.7% GDP growth followed by East Africa 6.2%, Central Africa 3.7%, and Southern Africa 3% and lastly 1.9% in North Africa. Rwanda together with Ivory Coast, Sierra Leone, Liberia, Nigeria, Chad, Ethiopia, Congo Dem. Rep., Angola and Mozambique are the fastest growing African Countries in 2014/2015 with an average gross domestic product of over 7% in 2014/2015 according to the 2014 African Economic Outlook.

Though economic growth is good news to governments, investors and other stakeholders, African citizens have concerns on the rising poverty whereby nearly 50% of the population in Sub Saharan Africa still lives on less than US$ 1 a day. More than 72% of the Youth population in Africa lives with less than US$ 2 per day, in Nigeria, Ethiopia, Uganda, Zambia and Burundi, the incidence of poverty among young people stands at over 80% according to the World Bank.

The 2014 African Economic Outlook presents for the first time detailed researches on the Global Values Chains (GVCs) in Africa. Pascal Lamy the former director general of the World Trade Organization said that the 2014 AEO is an innovation in that it shows the role Global Values Chains can play in social and economic development of the African continent. Global Values Chains (GVCs) offer new opportunities for structural transformation.

The report states that African countries can integrate as “links” into GVCs at a specific stage, usually assembly in manufacturing and commodity production in agriculture, without having to develop entire industries. Although Africa accounts for only 2.2% of global trade in value added, its share has grown much faster than that of many other regions. Southern Africa accounts for 40% of Africa`s GVC Integration. Regional value chains are most important in East Africa with an estimated 25% of the foreign value added included in exports that stem from Africa.

Africa has much comparative advantage that can push it to the next level of development. Mario PEZINNI said that labor force and natural resources are one of Africa`s comparative advantage. “Natural resources can be a passport for development under the condition that African countries avoid their dependence on natural resources. Countries that develop because of natural resources tend to decrease their dependence on theM by developing other industries”, said the director of OECD Development Centre.

He noted that in order African countries to develop on natural resources, they have to avoid the Dutch disease that was born in Africa. He said that Global Value Chains present African economies with an opportunity to diversify their economies.” African economies can integrate the global economies by producing intermediate goods that represents a value of 60% of world trade”, said PEZINNI. Southern parts of Africa have already set a good example to the continent as it is the most integrated in both global and intra-African values chains.

Global Values Chains can also harm Human Development. Ms Angela LUSIGI pointed out that as poor economies participate in global value chains they expose themselves to high level of risks. “Poor smallholders farmers don`t have as much control in the bargaining power of prices compared to multinational companies and this can be detrimental to their participation in the Global Value Chains”, said UNDP Policy Advisor. She went on saying that economic infrastructure such as roads, bridges among others as well as social infrastructures such as schools and hospitals can help poor economies to effectively participate in the Global Values Chains.

So what African governments can do to improve the social and economic well being of their citizens? Question the 2014 AEO. There is no other ways than to attract investors because Africa has a burgeoning domestic markets, abundant natural resources and plentiful supply of labour. African governments should focus on removing the barriers to integration into the global value chains by modernizing infrastructure, enhancing skills, lowering tariffs on the imports of intermediate goods and improving customs procedures.



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