01/18/2023 | News release | Distributed by Public on 01/18/2023 08:17
The African Union Commission (AUC) and the African Development Bank Group have a concluded a technical session on how to conduct an upcoming joint study on driving development in Africa. The goal of the study, titled Key Actions to Drive Inclusive Growth and Sustainable Development in Africa, is to identify key actions that will allow Africa to rise and remain at a growth level of 7% GDP.
The meeting, held from 12 -13 January 2023, brought together global experts in economic development theory and practice. They included Professor Jeffrey D. Sachs of Columbia University, as well as former economy, finance, and trade ministers from across Africa.
The study was commissioned by Moussa Faki Mahamat, former chairperson of the African Union Commission and Dr. Akinwumi Adesina, President of the African Development Bank Group, in 2020. It aims to draw a transformational roadmap and identify key actions to deliver high-quality growth across African countries for the period 2023 - 2063. Growth of up to 7 to 10% in Gross Domestic Product (GDP) would include high levels of inclusion and progress in global sustainable development goals, the Bank Group's High 5s strategies and Agenda 2063.
Acting Chief Economist and Vice President for Economic Governance and Knowledge Management of the African Development Bank Group, Professor Kevin Chika Urama told participants that Africa needs a new path to inclusive growth and sustainable development over the next three to four decades if the continent is to transition from low to high-income status.
"A minimum economic growth rate of 7% annually for a period of 4-5 decades is needed to facilitate a transition of African economies from low to high-income status. This is known to pull people out of poverty and achieve social, economic, and environmental sustainability goals," said Urama.
He told the experts that Africa has the potential to achieve these goals and has a lot of strategies and policies to achieve them but has not been able to sustain growth rates at the levels required to sufficiently create decent jobs for citizens and achieve the structural transformation required to eradicate poverty in countries.
Urama noted that Africa has been a victim of short-term perspectives and checkered growth: "We have a lot of failed take-offs on the continent. The research needs to focus on where Africa has done well and, in those areas, where countries' have failed to understand and find options and actions to address them."
Before COVID-19, Africa had realized a modest growth rate (with an average GDP growth rate of 4.6% up to 2019), but it was not high enough to break the vicious circle of poverty. With COVID-19, Africa's real Gross Domestic Product (GDP) growth has contracted by 1.6% in 2020, the first recession in over 50 years. After an impressive recovery to 4.8% in 2021, Africa's average growth is estimated to have slowed to 3.8% in 2022. Since independence, Africa's growth story has been marked with volatility, said Urama.
In comparison to the rest of the world, Urama stated that Africa has not benefited from the existing global financing architecture, with the continent's GDP levels remaining almost as low as it was in the 1960s when most countries attained their independence despite its enormous natural resources, potential for growth, intelligence, and knowledge.
Albert Muchanga, AUC Commissioner for economic development, trade, tourism, industry and minerals said that the AUC envisages that the study's report will be presented to the African Union Summit for consideration and implementation as one of its upcoming flagship programmes of Agenda 2063.
Sachs, a world-renowned professor of economics and director of The Earth Institute at Columbia University, commended the leadership of the African Union Commission and the bank group for commissioning the study, which he described as "the right thing" Africa needs now. "A growth rate as high as 7% continuously for 40 years is feasible and is the right target for Africa," he noted.
Africa could replicate experiences of other countries such as China, which achieved a growth rate of about 8% between1980-2020, with an economy and a population similar to that of Africa today - 1.4 billion people.
"For Africa to achieve that level of growth rate, investments in Africa need to be much higher. China has averaged about 40% of GDP in investment per GDP and has been consistently high. Africa's investment rate has been roughly 20%," said Sachs.
For another incremental of 20 percent of GDP per year to be invested, he emphasized that there is need for more financial resources from domestic and international fronts.
Financing this investment-led growth is significant and Africa needs investments in human capital, infrastructure capital that includes digitization and electrification, business capital and natural capital, all of which require significant investment and targeted policies at all levels.
"Our work is to lay a roadmap for growth and not just a historical analysis of what has been happening. It should be a roadmap that governments and particularly the Africa Union, can deploy," Sachs said.
Intra-regional growth in Africa is still low while its share in global trade is minimal, considering the size of the market and the potentials for production on the continent, Urama said.
Despite the many challenges - structural, governance and sectoral issues that need to be addressed- Urama remains optimistic that the study results, backed by the leadership of the African Union Commission and the Bank Group, will lead to the desired outcomes.
"There are several examples of successes in Africa and elsewhere to draw on as case studies to inform actionable, implementable, and transformative recommendations from the study," Urama said.