Africa in the aftermath of the recession

Many African scholars and politicians have repeatedly made the point that Africa remains behind other regions or continents as a result of the historical injustices it endured for centuries. Disturbingly, though, the injustices have taken a different form over the years, particularly by the so-called developed world. This is not to say that part of the problem is African leadership and or historical conditions that constrain the speed of advancement. Note that I talk of Africa in general terms but the focus is almost always on Africa south of the Sahara — there are even more reasons lately to distinguish economies of North Africa from those of sub-Saharan Africa. This piece is largely on the economic issues in the context of the recent global economic recession.

To start with, the late Moses Abramovitz — one of the founding faculty of the department of economics at Stanford University — in his 1959 essay in honour of Bernard Francis Haley, his former university colleague, sounded a warning that “we must be highly sceptical of the view that long-term changes in the rate of growth of welfare can be gauged even roughly from the changes in the rate of growth of output” and called for “further thought about the meaning of secular changes in the rate of growth of national income and empirical studies that can fortify and lend substance to the analysis”. In short, Abramovitz appealed for better scientific endeavour in establishing whether economic growth leads to improved welfare.

Economists have since been hard at work with empirical studies heeding Abramovitz’s call. It is safe to conclude that many, relevant empirical studies suggest some link between the growth of the economy and social progress, notwithstanding the view that economic growth is a poor measure of general welfare. Joseph Stiglitz and Amartya Sen, among others, are doing work in this area and indications are that a new measure of welfare is in the making. Acknowledging the scepticism that Abramovitz highlighted, this piece departs from the point that economic growth is important, not for its own sake but in order to absorb more people into the labour market and so on and so forth.

This piece looks at Africa in the aftermath of the global economic recession. In essence, I examine some aspect of the state of Africa since 2007 because the 2007-2008 food crisis foreshadowed the most recent increase in food prices in 2010-2011. Also, according to recent historical records, the global financial crisis gained momentum in 2008 while the full-blown global economic recession occurred in 2009. The chronology of these major global economic events is critical as it points to one fundamental story: Africa has had to deal with successive economic crises in a short period of about four years. This indicates the severity of the economic setbacks only beginning to surmount now. The weakening in economic performance as a result of the recent global economic crisis has reversed significant hard-earned gains precipitating increases in levels and rates of unemployment and poverty.

So how has the state of Africa, with regards to the economy, evolved during the past couple of years, especially two or so years after the global economic recession? To start with some good news. Data — and I draw from a range of sources — suggest that economic growth in sub-Saharan Africa rebounded in 2010 with an increase in gross domestic product of 4.7%. A trend that is expected to continue (projections for 2011 and 2012 are of growth rates of 5.3% and 5.7%, respectively). This should be read in the context of economic growth that slowed sharply from a 6% average yearly growth in 2006-2008 to only 2.1% in 2009 in sub-Saharan Africa. The dire consequences of this for Africa have been that:

(1) Though youth unemployment has been steadily declining from about 14% in 2000 to about 12% 2009, it appears to be picking up again.
(2) Africa’s share of global trade has fallen from about 8% in 1980 to about 3% today.
(3) About 7 million people were prevented from rising above the poverty line and so on and so forth.

Many other consequences of the recent global economic crisis are yet to be felt. Take for instance, the fall in global demand for raw materials and increased oil prices. Sub-Saharan African export revenues declined sharply in 2008 and into 2009, resulting in a deterioration of the current account, eroding foreign exchange reserves and generating major losses in trade tax revenues.

Another case relates more specifically to the negative impact of reduced economic growth in relation to poverty: the World Bank estimated that an additional 46 million people in developing countries were expected to fall into poverty in 2009 as a result of the financial and economic crisis. This on top of the estimated 100 million additional people remaining in extreme poverty due to the food and energy crises of 2007-2008. The other concerning estimate from the UN was that the number of people living on less than $2 a day was expected to increase to more than 1.5 billion globally and the percentage of workers earning less than $2 a day was estimated to increase from 82.2% in 2007 to 86.6% in 2009 in Africa. The latest data from the Food and Agriculture Organisation indicates that 925 million people are presently hungry or malnourished globally.

Indeed, the practical implications of the recent mistakes of the developed world are awful for many ordinary Africans. Take for instance, the decline in remittances! The estimate, regarding Kenya for instance, is that remittances to Kenya reduced the number of people living in absolute poverty by 8.5% in 2006, yet in 2008-2009, Kenya experienced a fall in the international remittances of more than 10%. Another example, in Ghana remittances were reported to have fallen by about 10%-13% in the same period. Arguably, the decline in remittances induce most families to remove children from school because many parents use remittances to pay for schooling and the sick do not attend healthcare centres.

What is to be done? Perhaps not more than what many have recommended. After all, African economies are on a relatively strong rebound. The trouble, however, is that economic growth rates — in the midst of severe hardship — in Africa are too low and applying the various recommendations that many economists have made will only get Africa to where it was before the first economic crisis hit Africa in 2007. In addition, there are grounds to believe that a global economic crisis will happen again — nothing major has been done to avert the recession in future.

The fundamental question that Africa and Africans, as well as those who care about the human condition broadly, should be addressing is: whether the socio-economic system adapted from others is the ideal one for the challenges confronting Africa presently or in the recent past. I have argued for the reconfiguration of socio-economic processes and interactions away from the mainstream capitalist mode. But it remains unclear as to how would the reconfigured socio-economic processes and interactions practically occur. One thing for sure though is that the current dominant paradigm is no longer advancing the human condition.

In conclusion, if the idea of an alternative socio-economic model for Africa is to be crafted, then perhaps the advice given by former president Thabo Mbeki in his inaugural 2010 Africa Day Lecture should be the starting point. That for Africa to claim the 21st century there is “the need to recapture the intellectual space to define [Africa’s] future, and therefore the imperative to develop its intellectual capital”. He goes on to argue that “one of the urgent contemporary tasks that confront African producers of knowledge is to understand the meaning of the global economic crisis to the African continent”. I have mainly presented the data and provided some interpretation of the state of Africa post the recent global economic crisis. As to what the global economic crisis means for the African continent, let’s continue engaging.