A New Chapter in Africa’s Economic History

In the first years after many countries obtained their independence, governments tended to be visionary and demonstrate leadership but did not focus on developing market systems and private sector value addition. And state institutions were nascent or broken. Africa’s economies grew, but not inclusively or sustainably. Debt and inflation soared in the 1970s, and Africa ground to a halt. The extractive industries survived, but little more.

Then came the era of structural adjustment: a period of limited government vision and leadership and still no focus on private sector value addition. Economies opened up to liberalised global trade, but with industrial strategies discouraged by development partners, only imports boomed. Growth stagnated. With gridlock came large-scale debt relief. On the plus side, technical capacity—such as for macroeconomic policy—improved.

In the 2000s came the hopeful Africa Rising era: a recovery through resource-driven growth, led by the extractive industries, the ever-lucrative import business and the diffusion of technology. State capacity continued to improve, but when commodity prices dropped in the mid-2010s, the major weaknesses of many African economies reappeared and debt rose again.

Now, in 2018, we might well be on the cusp of an exciting new chapter. For the first time since the 1960s, there is government vision and leadership, a focus on private sector value addition and market systems, and the launch of the Africa Continental Free Trade Agreement, all of which are underpinned by greatly improved state capacity. Twenty years ago, Ethiopia, Mauritius, Tunisia, Rwanda and Morocco were the only countries in which the government was playing—or started to play—its role in creating the right conditions for job creation. Today there are convincing signs that many more countries are getting there.

As our Institute’s executive chairman, Tony Blair, tours West Africa this week visiting our Governance programmes and the leaders we work with, job creation is the number one agenda item that presidents want to talk about. In Abidjan and Freetown, Mr Blair has been leading discussions on economic transformation and diversification with development partners and local stakeholders.

As our Institute outlined in the report The Jobs Gap: Making Inclusive Growth Work in Africa, published last year, what needs to happen to write a successful chapter is becoming increasingly clear. The focus should be on developing competitive and job-creating sectors in a market-oriented way—through an agenda owned and driven by the government and its leadership, complementing and shaping efforts to improve the business-enabling environment overall. It is only through this approach, which provides governments with the tools they need for coordination, for listening to the right investors, for policy coherence and for delivery, that a politically savvy and economically robust strategy can take hold. And only such a strategy will allow the economic transformation of a country to become reality.

In our work, we see many such visionary heads of state setting economic transformation and job creation as their top priority. In Ghana, President Nana Akufo-Addo launched the Akufo-Addo Programme for Economic Transformation as a major intervention for job creation, infrastructure development and accelerated investment in agriculture. In May, Ghana signed a $60 million deal with the Chinese government to build its first major cocoa processing plant—a decided shift away from the export of raw cocoa. Côte d’Ivoire has done the same, with a target to process half of its cocoa locally, up from a third at present, and Cemoi and Olam both opened large-scale chocolate factories in 2015. Ivorian President Alassane Ouattara said, “Increased agricultural output is a key pillar of our National Development Plan aimed at guiding the country into emerging nation status by 2020.”

In Senegal, President Macky Sall said in 2015, “For most African countries, the key challenge nowadays is structural economic transformation: simply put, their economies must be able to create enough good jobs to employ growing populations.” His Emergent Senegal Plan prioritises regional growth poles backed by transport, agriculture, tourism and education as key elements to diversify the economy.

Similarly, Togo is stepping up its emphasis on economic transformation, with a focus on manufacturing and agricultural development, driven by a clear vision and increased delivery capabilities.

Likewise, Sierra Leone and Liberia, both with newly elected presidents, have adopted pro-poor agendas focused on job creation and youth empowerment through sectors like agriculture, fishing and tourism.

It will be ten years before observers can look back and write the latest chapter of Africa’s economic history. Time will tell if it will turn out to be the real Africa Rising. The transformation of economies towards inclusive growth is no easy process. What is clear is that many African countries now have a unique window of opportunity to do so—a window that may not last long, warn those studying the impact of automation. Leadership, governance and a focus on market-oriented sectors will determine which countries can seize the opportunity for change and which cannot.

Now is the time to rally behind Africa’s visionary leaders and fully back their strategies to develop the job-creating private sector. Africa’s development partners need to respond in kind. The priority now should be to put in place appropriate support structures that can genuinely support these efforts, ensuring Africa achieves inclusive growth.

The Tony Blair Institute for Global Change is currently supporting the economic transformation agendas of 13 countries in Africa by providing long-term embedded management support to government leaders.