To join the globalised world, Africa must reform human development, governance structures

Tuesday April 2 2019

Poverty remains the most pressing concern, and

Poverty remains the most pressing concern, and prevents Africa from effectively contributing to its share of globalisation. ILLUSTRATION | JOHN NYAGA | NMG 

JEAN-LUC STALON
By JEAN-LUC STALON
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It has been slow but invariably steady. Globalisation of goods and services has continued to drive the spread of capitalism and neoliberalism to all corners of the world.

Only 30 years ago, exports comprised of less than 18 per cent of the world’s gross domestic product. That has risen to more than 36 per cent impacting nations at both the micro and macroeconomic levels.

Indeed, the past two decades have been characterised by the emergence of big giants who have tipped the classic global economic patterns, with more than one billion people out of poverty in Asia, mainly in China, and an annual poverty reduction rate of six per cent since 2000.

The truth however is that this model as it exists today has had negative environmental and social effects.

Carbon-intensive industrialisation continues to damage the environment, exacerbating the vulnerability of people around the world.

On the social front, the current levels of wealth and its distribution has caused an unprecedented levels of increased inequality among humans.

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In fact, globalisation has only benefited a minority. The 2018 Global Inequality Report shows that 1 per cent of the richest captured 27 per cent of total global growth between 1980 and 2016 whereas it only benefited 13 per cent for the 50 per cent poorest for the same period.

Average income inequalities between countries has however decreased, with the rise of emerging countries driven by East Asia, particularly China, which has experienced unprecedented growth of its middle class.

China has contributed more than 50 per cent to the growth of the global middle class and that is expected to rise from 48 million to 134 million households between 2010 and 2020.

In the case of advanced economies, inequalities have increased significantly with the “trapped" middle class phenomenon.

Only a tiny rich minority has captured a large portion of the advantages of globalisation.

In Africa, development has been hampered by exacerbated poverty. Poverty remains the most pressing concern, and prevents Africa from effectively contributing to its share of globalisation.

Statistics shows that Africa’s contribution to world trade, production, and investment remains at the margins, with less than two per cent on average.

If the continent wishes to join the globalisation process, it must accelerate its role through a bold reforms package in three main areas of human capital, structural transformation of the economy, and governance and institution building.

African countries must scale-up investment in Human Capital.

If China was able to grow from having a per capita GDP of $190 in 1978 to $5,432 in 2011 and is today the second largest economy in the world, it is largely due to its investment in the education system, which created conditions of competitiveness and skilled labour in a globalised economy.

The average duration of schooling has increased from 3.8 to 7.5 years in two decades, and while the literacy rate in Africa remains below 65 per cent, this stands at more than 90 per cent in countries such as Brazil.

Africa accounts for 16 per cent of the world’s population and is exposed to 23 per cent of diseases, yet it received only one per cent of global health expenditure in 2015. Without a healthier and better educated population, Africa, will not take off.

Some countries can be cited for increasing investment in education, for example Ethiopia and Kenya, but quality and transition rates deserve strategic priority.

Mauritius and Cape Verde have expanded investment in health sector while others have developed social protection systems such as Cabo Verde’s expansion of pension system, Tanzania’s Social Action Fund, Ethiopia’s Productive Safety Net Programme, Uganda’s Social Assistance Grant for empowerment.

Second, Africa needs a structural transformation of the economy.

Currently, more than 80 million young Africans are unemployed, about 700 million are working in the agricultural sector, and despite this, more than 80 per cent of exports still consist of primary products and only a very small part of the production is transformed cotton 3 per cent, cocoa 4 per cent and coffee 3 per cent.

African countries must allocate resources to transform primary sectors into high productivity units to stimulate growth and improve people’s livelihoods.

Some countries such as South Africa, Rwanda, Morocco, Kenya and Cote d’Ivoire are making efforts to improve global competitiveness but the cost of production on average remains high.

Finally, there must be a focus on good governance and institution building.

Corruption alone causes Africa to lose 25 per cent of its GDP per year, and besides the economic losses, such practices only fuel inequalities and present obstacles to fostering an inclusive society.

African countries must fight corruption, consolidate institutions, and strengthen the rule of law if they want to truly be a part of the globalised world.

Evidence-based studies have shown a strong correlation between good governance, quality of growth and human development.

Most countries with strong control on corruption have high Human Development Index. In addition, sub-Saharan countries must double their tax revenues, which are low at only 15 per cent of GDP, in order to create adequate fiscal space to boost investments in infrastructure and human capital.

Some countries such as South Africa, Namibia, Algeria, Tunisia and Senegal have expanded their fiscal space to more than 20 per cent, but this is still low compared with OECD average of 34.4 per cent.

By 2050, Africa will have more than two billion people, representing a considerable asset for the continent’s internal market as well as labour force. But this also poses considerable challenges that require strong political will and visionary leadership.

Jean-Luc Stalon is UNDP resident representative in Senegal and PhD candidate on political economy of growth and inequalities; @JLStalon

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