Africa's Missing Ingredients

• Author: Abdoulaye Bio-Tchané/Etienne B. Yehoue
• Position: Director of the IMF's African Department and a former Minister of Finance and Economy in Benin/Economist in the IMF's Monetary and Capital Markets Department
• Pages: 44-48

Page 44

How aid can be better directed to entrench development in sub-Saharan Africa

By some accounts, Africa is finally on a growth path. sub-saharan Africa is experiencing its fourth year of strong growth and is forecast to do well next year too. Higher oil revenues, strong commodity prices, and increased debt relief are being used to make inroads into poverty. While parts of Africa are still plagued by wars and tarnished by corruption, elsewhere improved macroeconomic performance and better policies are helping countries put their economies on a firmer footing. But is the good news temporary?

A look at the numbers gives pause for thought. After all, despite some recent progress, income per capita in Africa (measured in year 2000 dollars) is lower today than it was 25 years ago (see Chart 1). And, at least until recently, Africa was mired in a debilitating cycle of "stop-go" economic policies and bouts of civil strife that led to macroeconomic instability and high inflation.

However, Africa's lower per capita income cannot be explained by falling levels of formal education or of capital. social and economic indicators reveal that Africa is more educated today than it was 25 years ago. Indeed, primary school enrollment now exceeds 90 percent and secondary school enrollment has also risen, although only to about 30 percent (see Chart 2). similarly, literacy rates have reached 59 percent for adults and almost 70 percent for youth. Though these may not be perfect measures of human capital, they do indicate that human resources on the subcontinent have not been deteriorating. similarly, gross capital inflows to subsaharan Africa have increased over the past three decades, and the region has benefited from massive aid flows and recent debt relief. Aid flows into Africa are not enough to meet the millennium Development Goals, but their recent surge has been noticeable and even poses challenges for the conduct of monetary policy in a few countries. However, rising aid flows have not enabled the subcontinent to deliver on the promise of economic development (see Chart 3). In other words, important though they are, education and capital are not enough to sustain high growth in Africa.

So what are the missing ingredients needed for sustained growth in Africa? Certainly, tropical diseases such as malaria and worm diseases create severe health conditions that reduce labor productivity. Also, the extractive institutions inherited from former colonizers have influenced the current weak institutions in Africa and have thus contributed to the unfavorable conditions for growth. But this article focuses on an often-overlooked key factor in Africa's long-term development: the need to foster the creation of an independent and fair government apparatus, supported by a strong civil society, an effective private sector, and institutions that provide oversight of government actions. Targeted external aid can assist the creation of this type of governance structure.

Page 45

Democracy is not enough

Despite the subcontinent's newfound growth, African states have been slow to adopt aggressive policy reforms that can deliver rapid and sustainable development similar to that experienced by southeast Asia. What is the reason for this? Africa has tried both democracy and dictatorship. In general, both have failed to provide the conditions for sustained economic growth. since independence, Africa has been dominated by authoritarian governments. In fact, between 1946 and 2000, there were only 189 country-years of democracy in Africa, compared with 1,823 country-years of dictatorship (Golder and Wantchekon, 2004). In early elections immediately after independence, numerous parties competed and voters had a range of choices. However, perhaps because of the lack of a democratic culture or tradition, competitive multiparty elections were soon replaced by single-party rule.

Under dictatorship, governments enjoyed complete autonomy and were not beholden to particular interest groups. But these regimes did not deliver sustained growth (or in some cases any growth). Instead, they undermined state-society relations, which are so important for binding the government to society and providing institutionalized channels for continual negotiation and renegotiation of goals and policies (evans, 1995).

[ GRAPHICS ARE NOT INCLUDED ]

Governments under these regimes lacked both sources of intellectual power and the advantage of decentralized private implementation. In some cases, these governments became predatory, promoting corruption by extracting rents or kick-backs at the expense of society. Clearly, African dictatorships did not demonstrate the type of autonomy that would create...