Balancing the See-Saw of African Economy

Hon’ble Audu Innocent Ogbeh, Former Minister of Agriculture of the Federal Republic of Nigeria

In Africa, economic growth in 2019 stabilized at 3.4% and is projected to increase to 3.9% by 2020 and 4.1% by 2021, but will remain below historic rates. The basic concepts of growth are also changing as private consumption increasingly moves from production and exports. The investment represented over half of the continent’s growth for the first time in a decade, with private consumption contributing less than one per cent.

The Economic Tragedy of the XXth Century: Growth in Africa (NBER Working Paper No. 9865) explores the deteriorating economic status of the African continent in terms of how rich and African nations themselves may support the world’s poor nations. The authors describe the most significant reasons behind the disaster using the strong structural determinants of economic development in a cross-section of countries.

The first to blame was the investment shortage. The investment rate in Africa has declined over the past 40 years. Investment has declined since 1975 to 8.5% for the entire continent, compared with investment levels between 20 and 25% of the average OECD economy and 30% of East Asian economies. In addition, most investments have been biased towards the public sector, which is inefficient. The investment rates have risen, but only marginally, recent reforms in Africa.

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However, the 2020 Outlook reveals that development is smaller than inclusive. Inclusive growth was achieved in just about one-third of African countries, reducing both poverty and inequality. This year the main theme is to provide Africa’s future staff with education and skills. Africa has remained behind other developing regions in education and training, following improvement over recent decades. Policy initiatives will include both quantity and quality management steps and match education policies with labour market requirements.

This calls for greater access to schools in remote areas, increased opportunities for investment in education, a demand-based education system that will meet the needs of employers, investment in nutrition to support disadvantaged children and the development of STEM and ICT capabilities. The economy calls for radical universalism in education budgets to tackle inequalities in education — setting high expectations for the poor and vulnerable and for basic education, where social benefits are greatest.

Video Source: EYEGAMBIA (Youtube Channel Post: Audu Ogbeh | Former Minister of Agriculture & Rural Development, Nigeria ) 

The economy indicates that public spending on education and infrastructure is complementary because investment in both is far higher than investing in one. The productivity of spending on education in Africa is much less than in Asia. The good news, however, is that African nations could almost achieve universal primary enrolment without increasing expenditure by increasing the efficiency of education spending – at 58 per cent for primary education.

Key policies to improve spending efficiency and education quality include conducting education expenditure audits and reviews, improving teacher quality, and using performance-based financing. In its last part, the report provides short-to-medium term forecasts on the evolution of key macroeconomic indicators for all 54 regional increasing investment and quality of education involves carrying out auditing and evaluation of education expenses, increasing the training of teachers and using performance financing. Increasing investment and quality of education involves carrying out auditing and evaluation of education expenses, increasing the training of teachers and using performance financing.

The report provides, in its final section, short- to medium-term forecasting for all 54 regional Member States of key macroeconomic indicators as well as an overview of socio-economic challenges and development in each area. The more quantitative research carried out in the first part of the study is granular.

Read the Full Report here

Data Source: African Development Bank Group and NBER Working Paper