African Economies: Growing Quickly But Transforming Slowly

This is a guest post by Diptesh Soni. Diptesh is a master’s degree candidate at the Columbia University School of International Public Affairs (SIPA) studying economic and political development. You can read more by him at: https://dipteshsoni.contently.com/.

Poor countries traditionally become more developed by expanding their manufacturing bases and increasing employment, moving from subsistence farming and the exportation of primary commodities to producing a greater share of services and manufactured goods. The African Transformation Report, released by the African Center for Economic Transformation (ACET) on March 3, provides a useful gauge of the successes and failures of African countries in moving up the development ladder.

African economies, the report claims, need more than growth—they need growth featuring the five elements of DEPTH: “They need to Diversify their production, make their Exports competitive, increase the Productivity of farms, firms, and government offices, and upgrade the Technology they use throughout the economy—all to improve Human well-being,” claims ACET president K.Y. Amoako. Commodity prices are lower, growth in China is slower, and less easy money is coming from developed economies. Transforming economies  along DEPTH lines will mitigate the risk of shock for African countries and ensure more equitable and sustainable growth in the long term.

The report compares a group of fifteen African countries to the performance of sub-Saharan Africa at large, as well as eight comparable countries that have already undergone economic transformations, six of them in Asia and two in Latin America. Overall, it shows how countries that previously transformed exhibited higher savings rates, higher levels of output per worker, greater diversity in exports, and higher levels of technology than is true in Africa today.

The African Transformation Index, a ranking of countries based on the progress made in the five elements of DEPTH over the last decade, lists Mauritius, South Africa, the Ivory Coast, Senegal, and Uganda as the top five transformers. Among the twenty-one countries which have data, Burkina Faso has made the least progress, with Burundi, Nigeria, Rwanda, and Ethiopia following.

But the debate surrounding economic transformation in Africa is contentious. Optimists cite rising wages in China and recent decisions by large firms such as H&M, Primark, and General Electric to set up factories in Africa as signs of change. They point to India’s economic boom on the back of services as a potential model for Africa. Others are less cheerful: Thandika Mkandawire of the London School of Economics and Dani Rodrik of Princeton believe there is much more work to be done.

In line with their doubts, the African Transformation Report is a welcome check on the exuberance of the “Africa rising” narrative. To presume sustained growth in a weak and changing global economy is dangerously misguided. While better economic management, new technology, debt relief, and reduced conflict across the region have abetted growth in Africa, fully transforming the continent into a healthy, productive, and attractive destination for investment will require much-needed structural transformation.