IMF Survey : Optimism Meets Realism as Africa Seeks Ways to Maintain Growth
April 11, 2014
- Conference stresses importance of jobs to Africa’s rapidly growing population
- Event’s focus includes finding financing for Africa’s infrastructure gap
- Reduce rural poverty through suitable technology in agriculture sector
Sub-Saharan Africa’s economic achievements over the past decade have sparked optimism about a continent on the rise, but those gains also have prompted caution about the challenges that remain, a Washington conference heard.
IMF-WORLD BANK SPRING MEETINGS
That combination of optimism and realism was at the heart of the conference, entitled “Africa Rising: Polices for Sustained and Inclusive Growth” that was held during the 2014 IMF–World Bank Spring Meetings.
Participants discussed some of the core issues that must be addressed if sub-Saharan Africa is to continue building on the strong growth that has transformed its economic prospects. Several speakers noted that Africa faces the task of sustaining its growth momentum while industrial countries try to pull out of recession and despite slowing growth in emerging markets, whose demand and investment flows have been supporting Africa’s growth.
The event addressed three of the key issues on Africa’s agenda: inclusive growth, structural transformation and economic diversification, and scaling up public investment. Panelists included academics who specialize in the priorities facing the region, and officials involved in defining economic policies in sub-Saharan Africa.
“Africa will continue to rise in the next decade and the next 100 years,” said IMF Deputy Managing Director Min Zhu in remarks opening the seminar. “Now it is our job to ensure that ‘Africa Rising’ is a sustainable story.”
Sense of self-confidence
Benno Ndulu, Governor of the Bank of Tanzania, offered a succinct view of the current perspective on Africa’s achievements and hopes. The strong growth “experience over the past 19 years has changed attitudes and given a sense of self-confidence,” he said. “Hopefully this is not complacency.” Some African governments are undertaking fiscal consolidation after a period of counter-cyclical spending in response to the 2008 global financial crisis. “The question is how fast we can proceed on consolidation,” Ndulu said.
The inclusiveness of growth is an issue underlying many of the core policy challenges facing sub-Saharan Africa. It is also expected to feature in the IMF’s forthcoming Regional Economic Outlook for Sub-Saharan Africa, to be released on April 24. Francisco Ferreira, the World Bank’s Chief Economist for Africa, highlighted a distinction between the economic growth of the region over the past 15 years and its per capita growth performance, which has been roughly in line with the rest of the developing world over the same period.
Muthoni Ngatia, Assistant Professor of Economics at Tufts University, noted that poverty reduction in sub-Saharan Africa remains slow in part because of shortcomings in the effort to emphasize agricultural development. With rural poverty so ingrained, she said, it is essential to provide appropriate technology to the sector, boost agricultural productivity, and “improve the links of farmers and markets to enhance income streams.”
The seminar also highlighted many other elements of the needed structural transformation such as infrastructure development; upgrading agro-processing and other manufacturing and raising the quality of exports; providing more jobs to the region’s rapidly growing population, particularly university graduates; and finding ways to meet the needs of household enterprises, many of which operate in the informal economy.
Bartholomew Armah of the United Nations Economic Commission for Africa said that Africa’s growth has been driven by high commodities prices, strong domestic demand, and infrastructure investment, and this suggests that “the issue of sustainability is real.” With a limited number of primary commodities leading growth, he added, it will be very difficult to create new employment opportunities. “Structural transformation hinges on a productive labor force,” he said, “so policies must be people-centric.”
Sean Nolan, Deputy Director of the IMF Policy and Strategy Review Department, pointed out that raising agricultural productivity and promoting structural transformation can complement each other. He also noted that good economic fundamentals and policies, trade liberalization, and agricultural and banking sector reforms were important elements to promote structural transformation and economic diversification more broadly.
Scale up public investment
The discussion of scaling up public investment struck a cautionary note for the day. Speakers flagged the inevitable constraints on expectations because of limits on available financing; the need for fiscal sustainability and budgeting for operational and management costs from infrastructure investment; technical and political obstacles that can undermine returns on social investment; and spending inefficiencies, among other issues.
There was some pushback from the audience during the discussion. One questioner suggested that the speakers needed to “be forward looking” and acknowledge the significant remaining infrastructure gap of the continent. Both speakers and the audience agreed that there was a role to play for public-private partnerships in closing this gap.
At the close of the conference, IMF African Department Director Antoinette Sayeh spoke to the tension between optimism and restraint. She suggested that it is important to avoid over-exuberance even as Africa seeks ways “to channel that energy to take advantage of assets” that can enable the region to build on its recent economic gains.
â– The discussion of Africa Rising will next be taken forward at a high-level international conference on sub-Saharan Africa to be held by the IMF and the government of Mozambique in Maputo on May 29–30. The two-day event will bring together policymakers from throughout Africa and from development partners, business, and civil society, and will focus on how the current growth path can be maintained while sharing its benefits among all Africans.