IT’S a terribly overused cliché: the more things change, the more they remain the same. But Africa in 2016, in many ways, resembles Africa of the 1980s, with many countries looking around in bewilderment as commodity prices seem to have reached a new, long-term low, government revenues shrink and one wonders why the money from the good times (circa 2000-2014) was not saved for a rainy day.
This was precisely the case thirty years ago: an oil and commodity price boom led to borrowing sprees and good times all round, and when prices collapsed in the 80s, it created a fiscal squeeze and IMF intervention that caused much grief (but also, helped create much-needed macroeconomic stability, which lay the groundwork for the “Africa Rising” story in the first place).
Still, it was a painful time; the current depressed growth and uncertainty is something Africa has experienced before.
Since the late 2000s, the African Centre for Economic Transformation (ACET), one of Africa’s leading think tanks, has been calling for a paradigm shift on Africa’s development: a call for Africa’s economies to go beyond growth to transformation.
ACET’s flagship 2014 publication, the Africa Transformation Report, articulated that shift as “Growth with DEPTH”: Diversification of production, Export competitiveness, Productivity increases in all sectors, and Technology upgrades throughout the economy, all to improve Human well-being.
Shaky
The report came just as the ground was shifting, and within months, the unprecedented growth spurt in Africa was starting to look shaky.
ACET isn’t the only voice that has been calling for diversification and deepening of Africa’s economies. But the fact that the current crisis was entirely predictable, raises an important question: why didn’t Africa listen? Why has transformation lagged in most countries? Why does today’s Africa- despite much progress in education, health care and technology- still struggle with the structural issues of the 1980s?
This week ACET held its inaugural African Transformation Forum in Kigali, Rwanda convening leading thinkers, business leaders, policy makers, and civil society to explore these ideas. Most countries have detailed national development plans, and numerous policy documents on the same.
But transformation, ultimately, isn’t only - or even primarily - a technical or policy issue. It’s fundamentally a political one.
“You could have the best document, but its implementation is essentially a political question,” said Ibrahim Mayaki, CEO of New Partnership for Africa’s Development (Nepad), speaking at the conference. “Our institutions are not strong enough to implement plans from a purely technical approach by experts.”
Mayaki argued that a country’s strategy has to be “grounded on a social contract and political reality, so that people feel they have a stake in it. Otherwise, conflicting interests will derail it.”
Still, politics doesn’t always derail. In the African context, when political, bureaucratic, and industry interests converge, rapid growth and even leapfrogging is possible.
Benign neglect
One ODI report written by David Booth, Brian Cooksey, Frederick Golooba-Mutebi and Karuti Kanyinga studying the political economy in East Africa described it as “pockets of effectiveness” – in which political drive, entrepreneurial interest and the relevant bureaucratic support (or, at least benign neglect) come together – and end up being quite significant driving success in certain sub-sectors of some economies of the region.
A notable feature of these success stories is that they arise where politicians happen to have the same interests, or to be the same people, as the entrepreneurs, and not where business is protected from “political interference” thanks to an arm’s length relationship with government.
Examples abound: one pioneering study of pockets of effectiveness in the region highlighted lake fishing and the dairy industry in Uganda, and the sugar industry in Mozambique, as benefitting from these convergence of political and business interests.
The rapid turnaround of the banking industry in Kenya in the early to mid 2000s, and the revolutionary impact of M-pesa as well as ICT sector was arguably driven by this convergence; the ODI report also says it “seems likely” that the dairy sector and supermarkets in Kenya would be equally supportive of this argument.
Some branches of manufacturing and tourism in Tanzania might similarly be considered, and the agro-processing, real estate and construction businesses of Crystal Ventures Ltd. in Rwanda would “clearly qualify”. Crystal Ventures is a holding company or investment arm of the Rwanda Patriotic Front, the country’s ruling party.
Contrary opinion
One challenge of achieving real transformation in African economies is that short term political gains from the electoral cycle often trump the long term momentum needed to entrench change and put the country on an path to prosperity. Reversals are easy, and numerous – which supports those who call for stability in the form of third terms, and scrapping of presidential term limits, in order to consolidate the gains.
But a contrary opinion was offered at the ATF conference by Michael Chege, a former policy advisor in Kenya’s Treasury.
“Kenya is lucky because political parties don’t last long – they collapse with almost every election cycle…this is actually a good thing,” he said, much to the surprise of many in the audience. In essence, there’s less chance of party interests getting really deeply entrenched in the economic cycle.
It’s a cynical form of “competition”, that often has the effect of degenerating into competition over corruption and “eating”. Still, with every new party iteration, there’s an opportunity for re-alignment of political and business interests – so even though it means there’s always some instability, bad policy decisions can also be changed with relative ease.