OECD Forum on Africa focuses on turning uneven economic growth into shared and sustainable economic transformation

08/10/2013
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The task is to unleash the full potential of the continent’s natural capital – to which its growth is so closely tied – and in so doing to empower its human capital, which is what will ultimately sustain it, far beyond the time when the continent’s natural resources and their high prices run out. We need to turn finite wealth into infinite wealth, natural wealth into created wealth, and resource-based economies into diverse knowledge- and industry-based economies which create jobs. Donald Kaberuka for This is Africa / Financial Times

“We can pat ourselves on the back for two minutes today”, said OECD Secretary-General Angel Gurria at the 13th OECD International Economic Forum on Africa, “but that is all. The great things that Africa has done in the last decade have not yet gone far or deep enough.”

It was a day of many harsh truths: “Africa’s 5, 6, 7% growth is all very well, but China has managed an annual 10% for 30 years”, said Mallam Sanusi Lamido Sanusi, Governor of the Central Bank of Nigeria. “We have much further to go. And where does our money go? It goes on things like salaries, overheads, production subsidies – and not where it ought to go. In Nigeria, we are sitting on $25 billion of pension money, which we could be investing in meeting our own infrastructure needs, or in building our manufacturing and processing capacity. We grow tomatoes, and yet we import tomato paste.”

The conference, held in Paris on October 7, looked at the continuing challenges of turning uneven economic growth into shared and sustainable economic transformation in Africa. Its special focus was the potential for the continent’s natural resources, as vehicles to bring about the ‘structural transformation’ whereby countries relocate economic resources from low-productivity activities, like family farming or petty informal trading, to more productive ones like manufacturing.

The secret of transformation: women and men

What will be the secret of this transformation? “Les hommes”, answered Daniel Kablan Duncan, Prime Minister of Côte d’Ivoire, quickly adding that the term was generic and included “Les femmes”. The Asian example was constantly invoked, with Deng Xiao Ping mentioned at least five times in the morning session. But African Development Bank President Donald Kaberuka added a cautionary note. “Each country has to find its own path to development, and we cannot transpose models. We at the African Development Bank say that there is no escalator or lift towards economic transformation – you have to take the stairs. There are many models of capitalism, and some countries just muddle through. What we do see everywhere, though, is the role of institutions – many, but not all, which are institutions of state – in anchoring and driving development.”

In a wide-ranging opening session on Africa and the global economy, Carlos Lopes, Executive Secretary of the UN’s Economic Commission for Africa, bemoaned Africa’s poor marketing in advertising its successes (15 of the world’s 20 best-performing countries) in meeting the Millennium Development Goals. He also challenged perceived truths: Natural resource revenues can only account for about a third of Africa’s growth in the last decade, he said, while we are inflating the significance of China on the continent of Africa, since the continent only receives 4% of its foreign direct investment.

120 billion barrels of oil reserves

Asked for his blueprint and vision for economic transformation in Africa, President Kaberuka cited two huge challenges – the energy crises faced by almost every African country through a lack of basic infrastructure, and the inherent challenge in coordinating 54 fragmented and individual countries. He also stressed his and the Bank’s two priorities: “Inclusion”, and “jobs”. He illustrated the former by warning of its absence – in the form of the devastating consequences of exclusion, whether in lives blighted or potential unfulfilled, and increasingly of international terrorism – and the latter by the example of Ethiopia, now a global manufacturing hub for the international shoe market. Africa needs to create 50 million jobs a year, said Carlos Lopes, and even with the smartest approaches to agribusiness it cannot do this from the land alone.

The potential of Africa’s resources is not in question. The Bank estimates that Africa has 120 billion barrels of oil reserves, no less than half of Saudi Arabia, and 600 million hectares of uncultivated arable land, half of the world total.

Africa is losing over $60 billion a year

All agreed that the first challenge of natural resource management is to secure its full revenues and to use them wisely and fairly. Government tax revenues from natural resources for 2011 may have been up by 40%, but profits for international companies went up by 110%. This is a huge mismatch. Africa is said to be losing over $60 billion a year in illegal outflows and price manipulation in the extraction of minerals, with most of the proceeds going offshore. The easiest and the worst option for governments is merely to take the short-term rent paid by international companies for the right to discover and develop the continent’s natural resources, rather than do the hard work of creating jobs and ploughing back the proceeds into where they are needed most, in areas like health and education.

So the conference moved beyond the tax and transparency agenda – and with it the wider primacy of strong institutions, laws and procedures, and accompanying good governance – to ask how natural resources could contribute to structural transformation. The OECD highlighted three channels: “diversification”, “capabilities” and “revenues”.

“Diversification” means investing natural resource revenues in other productive activity, with examples cited in Chile (investing copper proceeds in an enhanced fishing industry), Malaysia and Indonesia. “Capabilities” means developing and selling the know-how that maximizes natural resources, as South Africans have done in the global mining market, for instance. “Revenues” is the key: it means investing resource revenues in education and health, infrastructure and strong services.


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