Africa, the Land of Hope, plants seeds for sustainable development
Africa, the Land of Hope, plants seeds for sustainable development
Africa, once know as the “lost continent,” is not in the global spotlight thanks to its impressive economic growth during the recent years. Now the continent, with some of the fastest-growing economies, is planting seeds to maintain the momentum in a sustainable manner.
African nations, previously largely dependent on foreign aid to lift national power and pull people out of poverty, are mulling new measures to stand on its own feet to fuel their development, with bestowment of enormous natural resources, abundant young labor and vast landscape among others.
Six of the 10 fastest-growing countries were in Africa over the past decade, according to The Economist in 2011.
The International Monetary Fund projected in October that the economy of the sub- Saharan Africa region is expected to grow at 5.0% in Y 2012 and 5.7% in Y 2013, saying “sub-Saharan Africa is expected to continue growing strongly in the near term.”
The World Bank concluded in a report issued this year, “Africa could be on the brink of an economic takeoff, much like China was 30 yrs ago and India 20 years ago.”
African experts believed that the main drivers of the African development are natural resources and urged the continent to improve its economic diversification to achieve sustainability.
Dr. James Oruko, lecturer on development studies of Egerton University in Kenya, said a sustainable economy is one whose growth is regenerating and which can withstand internal or external shocks.
“It is an economy that is supported by political and social stability. It’s an economy that enjoys demand for its product and services whether demand is external or internal,” he said, adding that management of economies in the continent has improved and Africa is at the stage of building sustainable economies.
Receiving aid used to be the biggest ideas for Africa for development. But,, the aid seemed to only have left the continent more debt-laden, more inflation-prone and more vulnerable to economic shape of the countries where the aid came from.
The recent global economic crisis hit hard the economic giants in the West, forcing them to scale back on aids to Africa. That came as a risk for the continent. However, the region showed resilience against the economic turmoil.
Analysts said African nations have been aware of the importance of sustainable self-development and thus trying to break away from the old development mode. Average external debt on the continent has fallen from 63% of GDP in Y 2000 to 22.2% in Y 2012.
Africa’s nations are looking to better alternatives to sustain their growth, namely rising exports, improved trade and investment conditions and domestic consumption, as the continent is becoming a destination of trade and investment due to its fast growth and rosy economic prospect.
Exports of commodities are partly responsible for the fast economic growth. Around a quarter of Africa’s growth came from higher revenues from natural resources.
James Oruko said one factor of the main drivers of current African development is the resource-led growth. “Commodity prices have been very high for a long time and this has been very crucial for Africa.”
Total trade volume between the United States and the sub- Saharan African region grew 32% from Y 2009 to Y 2010. The United States’ imports from the region increased 39%, the main part of which was Crude Oil and Minerals.
Trade between China and Africa grew from US$10-B in 2000 to US$166-B in Y 2011, making China the largest trading partner of Africa.
Foreign investment has also been on the rise, as investors from the United States, Europe, China, Japan, India, Brazil, Russia, eye massive opportunities in the emerging market with improving stability and growing population. Foreign direct investment in Africa has been on the rise since the early 2000s, increasing 5-fold in Ys 2000-2010.
Data from the Chinese government showed that China’s direct investment in Africa totaled US$15.3-B as of April this year, compared with less than US$500-M a decade ago.
The United States is also rushing to gain access to Africa’s fast-growing markets. Earlier this year, Walmart NYSE:WMT finalized a deal worth more than US$2-B to acquire 51% of South Africa’s leading retailer, MassMart. Currently, about 600 American companies have invested in South Africa.
African countries’ drive toward development has also been accompanied by accelerating regional integration. Sub-Saharan African countries are pursuing partnerships with their neighbors. Cross-border commerce, long suppressed by political rivalry, is growing, as tariffs fall and barriers to trade are dismantled.
As a result, roughly 15% of sub-Saharan African trade is intra-regional, up from just 7% in Y 1990.
Experts held that the current resource-led growth is not a sustainable path as the development may be achieved at the expense of environment and make the continent vulnerable to volatility in the commodities sector.
Aware of the challenge, Africa in May held a two-day Summit of Sustainability in Africa, a first of its kind on the continent, also a landmark effort to establish a new development roadmap and launch partnerships that will chart a path toward sustainable development on the continent. African countries agreed upon a set of concrete principles and development goals that soundly move the value of natural capital from the periphery to the center of development planning.
“The state of the global trade is that countries which depend solely on export of their ‘natural capital’ face challenges in trying to set a conversation agenda,” Liberian president Ellen John Sirleaf said during the summit.
“We recall the unexpected example in Libya in 1970s, when the price of Iron Ore fell from US$600 to less than US$100 ton, and at the same time the price of Crude Oil went from US$15 to US$75 bbl. Faced the realities of the free market system, Liberia had no choice but to dig for more Iron, at the cost of abusing our environment,” said the president.
“In the end, we were left with big craters and artificial lakes on our landscape and not much else to show…The growth of our economy declined even more as the deflation in the price of iron affected our timber, gold, diamond and fishing industries,” she said.
Dr. Gerishon, lecturer on international economics of University of Nairobi, said the main mode of achieving sustainable development is through diversification of the economy. “The continent needs to improve in the area of industrial development in order to add value to its raw materials.”
Nigerian President Goodluck Jonathan said earlier this month that African countries must shift from raw materials export to finished goods in order to achieve economic growth.
In June, the African Development Bank and the World Wide Fund for Nature called on world leaders to invest in Africa’s natural capital, saying to build a lasting prosperity in Africa, a course must be charted for development that conserves and sustains the “Green Infrastructure.”
African nations are in action. In Y 2010, Gabon implemented a total ban on log exports in hopes that it will encourage local industry of processed wood products while stymieing illegal logging, while Zimbabwe stopped shipments of chrome in April 2011 to boost domestic processing capacity.
Meanwhile some nations are looking to a green economy by increasing use of renewable energy.
South Africa plans to add 19 GW of renewable energy to the national grid by 2030, going from nil to 14 percent renewables in its total energy mid in two decades. In July, Kenya launched its biggest investment in geothermal power generation with the commissioning of a 280-MW plant which will enable geothermal to contribute 30 percent to the country’s energy mix.
Africa is now the “land of hope”, still faces many challenges on the way to sustainability, and is subject to internal and external pressures, including poor infrastructure, deficient governance and a dearth of skilled workers, experts said.
Ikiara said funds, availability of skills and governance are the main challenges, with the lack of funds required to invest in order to initiate sustainable development as the biggest challenge.
“Most of the African population is yet access affordable credit in order to expand their small and medium experiences as the banking sector has structural inefficiencies,” Ikiara said.
Africa also lacks skilled manpower in science who are critical to accelerate economic growth, Ikiara said, adding political instability and other governance issues also hinder the development.
Due to lack of infrastructure such as roads, locally manufactured products have not be able to be competitive in the global markets, Ikiara added.
“Our economy is still raw an informal. So there is an opportunity to build it up in a sustainable way,” Oruko said, adding “the opportunity is enormous” with the human and natural resource.
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Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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