Lee-Roy Chetty
Lee-Roy Chetty

Keeping Africa’s growth up, poverty down

These are uncertain times for the global economy. The recovery in the US remains sluggish, the debt crisis in Europe is unresolved and more alarmingly, there are signs of a slower growth in China.

The global economic crisis, which started in 2007, has not spared the African continent. According to the 2012 African Economic Outlook produced jointly by the African Development Bank, the Organisation for Economic Cooperation and Development, the United Nations Economic Commission for Africa and the United Nations Development Programme, economic growth in Africa slowed from an average of 6% in the years prior to the onset of the crisis to 3.1% in 2009. In addition to this slow-down in economic growth, in 2011 variables such as high food and fuel prices as well as political unrest in several North African countries also exacerbated an increase in slowed growth on the continent. However, in 2012, the recovery has picked up and is forecast to grow at 5.8%, the highest level of growth pre-economic crisis.

Forecasted growth prospects are underpinned by an expected continuation of good economic policies, strong demand from emerging markets and from within the African region, as well as rising commodity prices. However, several risks remain for the growth prospects for Africa.

These risks are linked to the uncertainty in the global economy, lingering political challenges within several countries and the narrower space that exists in many countries for further counter-cyclical policies. Countries that face structural constraints related to un-diversified economies, poorly developed infrastructure, shrinking export revenues, and a lack of long-term financing remain particularly vulnerable.

With the uncertain outlook for economic growth in the rest of the world come deep concerns about the prospects for continued reduction in poverty and improvements in other measures of development in Africa. Even before the crisis, accelerating progress towards meeting the United Nation’s Millennium Development Goal of cutting poverty in half by 2015 seemed incredibly ambitious. There has also been insufficient progress in critical areas such as food security, employment creation, and child and maternal health on our continent.

These challenges are being amplified by persistent inequalities in development outcomes. Moreover, issues of sustainability of the development process itself are intensifying given pressures from rapidly growing populations and the increasingly negative effects from environmental degradation and climate change. These pressing issues will need to be effectively addressed in a post-2015 agenda that must be shaped by the people of Africa.

Bolstering economic growth in Africa is critical but it is clearly not enough. Recent events in North Africa and elsewhere have once again shown that aggregate advances in economic and social indicators, impressive as they may be, must be accompanied by empowered citizens and equal opportunities. Policy-makers need to be particularly concerned that growth translates into broader gains in human welfare that the benefits of development accrue more evenly and that issues related to sustainability of development are effectively addressed. A central question facing Africa today is therefore how to foster inclusive and sustainable development in the current age of global economic uncertainty.

* This work is part of a series of articles based on my current research and work at a think-tank at the United Nations in Geneva.

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    • http://none Lyndall Beddy

      Some figures you might want to keep in mind:

      Despite all the fuss and the “global recession” USA unemployment is only at 8.2 percent. In the 1980s it was actually at 10.1 percent at one time.

      And in the “Great Depression” of the 1930s USA unemployment was only 25 percent (i.e. 1 in 4 people)

      And no country gets below 5 percent unemployment, because that is actually equivalent to zero – since there are always people who can’t, or don’t want to, work.

      I was absolutely furious when Trevor Manual, some years ago, loftily disclaimed that the real unemployment figures were much higher than his official stats, saying “If unemployment was above 25 percent people would be dying in the street”.

      The reason people were not “dying in the streets” was Civil Society, NGOs and Religious Organisations feeding them!

    • Norman Petersen

      @ Lyndall Beddy its true when you say” the reason people were not dying in the streets was Civil Society, NGOs and Religious organisation. From my side….I am really really up to my neck with this recession that is forcing our people even myself to pay for the mistakes that the banks made and continue to make, but at the same time making profit year after year….

      Our current system which we using, refering to the monetary system is really failing us and this system which is is higly supported by the banks is really not contributing anything to society and the banks are also not donating any part of their profits to fill the hole in the credit deficit in the country.

      How can countries win recession, when its main focus (that is to look after the needs of its poeple) is highligted with a black higligther and countries are forced into paying off their debts to the IMF and world bank.

    • Liqourice All Sorts

      Economic growth of national GDPs has in recent years been synonymous with increased numbers of poor and starving people globally. Trickle down does not work. And you cannot rely on G8’s or Brics, or G20’s. They are made up of politicians representing vested interests trying to scoop as much as they can like vultures or the Mafia, while their front-men in government (politicians) mouth platitudes to the multitudes merely to garner votes and stay in power to scoop as much as they can for themselves. The world needs a radical new direction, i.e, direct democracy of civil society without political middlemen.

    • http://www.sane.org.za Yaj

      @ Lyndall The real unemployment levels in the US are closer to 16% when discouraged job-seekers are included in the stats.

      @ Leeroy , given the unfolding global slowdown and the investment strike by private capital locally ( sitting on a cashpile of R520billion) we should and can only rely on establishing our own public/ state-owned banks (of the deposit-taking kind) at local , regional and national levels to generate the capital and invest in productive sustainable developmental enterprises or we risk massive economic dislocations and social unrest.

      Without banking and monetary reform which includes seigniorage reform, full reserve banking and social credit in the long-term , we will have no sustainable economic future or any social cohesion that has been recently been so topical.

    • http://none Lyndall Beddy

      Yaj

      You have never answered my previous queries:

      1, Why should anyone deposit in a bank which does not pay interest – why then save at all?

      2. What makes you think the governemnt can run a bank – are not the examples of the Land bank (bankrupted twice), the Road Accident Fund (bankrupted 3 times), the Post Office (also bankrupt), the Setas (who invested, and lost,taxpayers money in Fedentia) good enough for you?

      The real problem is allowing banks to lend money that does not exist and has NOT been deposited by anyone – and that is a result of the world going off the gold standard onto the dollar, when the dollar was still backed by the gold in Fort Knox, and the Americans then cheating by de-linking the dollar from gold. AND the result of lack of bank regulations by governemnts and politicians – even more proof they could never run a bank.

      For thousands of years money was gold and silver or backed by either, and borrowers could only borrow (and pay interest) what depositors had deposited (to earn interest) and the bankers took a percentage of the interest as fees.

    • Jack Sparrow

      @Liqourice; I’m with you. Growth, GDP etc etc do not necessarily measure any improvement in the lives of the common man. Sure it’s a start but in many parts of Africa, it just means that the rich got more rich than the poor got poorer. Dickering about unemployment in the US has got very little to do with us.

      In short, the SA government should concentrate on creating an environment where all business, and particularly small business and business into Africa, can flourish. Sadly they are doing the opposite at present and that is why investors are sitting on their money. How can you invest when there is no reliable electricity (and the price is going up like a rocket), harsh labour laws, miles of red tape, stupid internet speeds and prices, rampant corruption (particularly in company registration), poorly educated labour, convoluted BEE/AA policies and of course, a threat of nationalisation? Not for me unless the returns are very, very good. That is a trap of its own.

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    • http://www.sane.org.za Yaj

      @ Lyndall, who says that a state bank doesn’t pay back interest, indeed ti could pay back more interest to savers than the private banks currently do.

      Public state banks are working perfectly well doing straight-forward retail banking in Brazil, China, India and Germany and North Dakota in the USA.

      The Bank of North Dakota has been in existence since 1919 and functions perfectly well up to this day. North Dakota is one of the top economic performers in the USA today-boasts a budget surplus(only one of 2 states that does) , has the lowest unemployment levels and thriving small businesses anf farmers to whom the BND is able to provide affordable working capital.

      In Germany many local businesses and firms bank with state-banks like KfW bank hence the secret to Germany’s success as manufacturing and exporting economy.

      These banks on the whole do not engage in speculation and dabbling in derivatives etc.

      do some research on this for yourself and get a bit more informed before you criticise.

    • http://none Lyndall Beddy

      Yai

      Who said “interest free banks” – YOU did!

      And maybe the governments of Brazil, North Dakota and China are not “entitlement kleptocracies”?

    • http://none Lyndall Beddy

      Yaj

      There is no point to a few banks, whether state banks or not, taking deposits of REAL money (i.e. deposited savings), if all the rest of the banks of the world can lend FAKE money (i.e. money that does not exist and no-one has deposited or saved).

      The WORLD standard has to change – from the unlinked to gold dollar!

    • http://www.sane.org.za Yaj

      @ Lyndall Beddy

      this “fake money” that the private banks lend out at massive profit to themselves happens to provide 97% of our money supply(debt).

      Therefore , why let private banks alone have this privilege ? Why can’t the state issue its own money supply using the fractional reserve mechanism ?

    • http://none Lyndall Beddy

      Yaj

      The state has mismanaged everything including the state banks it did inherit from the Afrikaner. None of our “leaders” were even trained to run a spaza shop!

      And ONCE AGAIN you were on the air about “a financial transactions tax” replacing income tax and VAT,

      VAT is a transactions tax, and the easiest collectable one in the world, and was suposed to replace income tax according to the politicians when first introduced, which I am old enough to remember.

      Like Capital Gains Tax was dropped everywhere else because it brings in nothing and costs a fortune to administer. If you tax Capital Gains you have to allow Capital Losses – which just leads to reverse takeovers, which liquidators know all,about!

      ANY new tax just gets added to the others, and continually increased, by our greedy politicians.

    • http://none Lyndall Beddy

      Yaj

      Listening to you again on the radio, I understand that you have confused two problems – Peak Oil, and unemployment and lack of Development.

      The problem of Peak Oil is solved by replacing oil with coal (which includes Sasol) and nuclear power.

      The problem of unemployment and no jobs on a planet with finite resources is not going to be solved by a state bank giving loans to small businesses (as you suggested) which use just as much energy. Especially since 80 percent of new businesses fail – and would therefore not be able to pay back the State Bank, which would not therefore be able to repay its depositors/savers, and they would all go bankrupt.

    • http://none Lyndall Beddy

      I am no great fan of “green energy” with the exception of biofuels (which SA used to have anyhow as Union Spirits which was a by product of the sugar industry, before being suppressed by the oil companies, Opec and their cartels); and hydro-electric power (if you have a Niagra or Victoria Falls in your country!)