Africa: Towards Sustainable Growth and Economic Diversification
Today’s post is contributed by Karim Dahou, Executive Manager of the NEPAD-OECD Africa Investment Initiative. Click on the logo to go to the Initiative’s website.
There is a new mantra in this post-crisis world: the road to global growth and development is now officially a two-way street. In this changing world order, the so-called “advanced” economies are more dependent than ever on developing countries’ growth for global economic stability. For Africa, analysts are now predicting that even the poorest countries have a role to play in global recovery. But to make the most of these new prospects, Africa will need to diversify its economies, reduce reliance on natural resource revenues and encourage sustainable growth in key strategic sectors for sustainable growth and development, such as telecommunications, agriculture and tourism.
These issues will be at the heart of discussions on Africa at the UN headquarters in New York on October 11, when three key partners for Africa’s development will launch new analysis on how African governments can make the most of their growth and development potential. Led by the NEPAD-OECD Africa Investment Initiative and the United Nations Office of the Special Adviser on Africa, the work aims to improve recognition of the increasingly important contribution of Africa to global economic growth while providing advice on how to reduce vulnerability to external shocks and food price instability.
In addition to releasing a joint report on economic diversification in Africa, the UN, NEPAD and the OECD will present policy briefs on issues including foreign direct investment, infrastructure, debt, and aid in the continent. Economic diversification requires physical infrastructure, technical skills, knowledge of outlet markets and access to finance. But Africa suffers from inadequate infrastructure, weak regulatory frameworks, expensive credit and a lack of risk-mitigation instruments. While more foreign direct investment could bring much of the missing finance, knowledge and skills, regional co-operation may help provide economies of scale, reduced costs and improved market access.
There is unlikely to be much room for dissent on the study’s findings on the benefits of economic diversification for Africa. The continent’s dependency on the exportation of natural resources and primary commodities has been bluntly exposed by the global financial and economic crisis. The decline in demand and prices of oil and minerals was largely responsible for reducing Africa’s growth rate from 5.7% in 2008 to 1.9% in 2009. As a result, many of the continent’s economies have suffered a severe setback in their efforts to meet the Millennium Development Goals by 2015. Economic diversification could reduce Africa’s vulnerability to external shocks and contribute to achieving and sustaining long term economic growth and development in the continent. Only broad-based economies, active in a wide range of sectors, and firmly integrated into their regions, can develop robust growth that is less dependent on the vagaries of the global markets.
The OECD Factblog gives more details of investment flows to Africa