St Paul's Institute

Africa Rising: The Ethics of Economic Transformation

by Ivor Agyeman-Duah

Posted: 26 Mar 2015

Some African economic analysts believe the continent has come of age. Economic growth is faster than in 40 years, with many countries in sub-Saharan Africa even exceeding the 7% annual growth which will help their economies double in a decade.  Africa Rising shows in a growing middle class enjoying status infrastructure symbols such as soaring shopping malls and residential mansions, fueled in part by Asian investments, particularly from China.  The global confidence in Africa is also enhanced by greater political stability and better governance architecture, resulting in increasingly democratic electoral outcomes.

However, exports of agricultural products and raw materials still dominate.  Local manufacturing remains at low or negative growth rates, even in economies generally considered to be doing well a few years back such as Ghana's.

So, how can economic growth be used to transform economies?  The leading think tank, the African Center for Economic Transformation (ACET) calls this "Growth with Depth," by which they mean:

· Diversified production

· Export competitiveness

· Productivity increases in firms, on farms, and in government offices

· Technology upgrading, from low to medium and high technologies, and

· Human well-being, led by higher incomes and better jobs in the formal sectors.

Africa's current outlook may be good for business and especially multinational investors in the oil and gas sectors, in telecommunications, public infrastructure and real estate development. This is reflected very much in the optimism of leading business and economic companies in Europe and the United States to whom this is a new phenomenon. However, real benefit from economic globalization, would be in structural transformation that could lift millions of Africans out of poverty, an outcome which should be of interest to the growing middle class itself. 

The founder of ACET, the distinguished African economist and former executive secretary of the UN Economic Commission for Africa, Dr. K.Y. Amoako has argued that: 

"If Africa's recent gains are to be economically, socially and environmentally sustainable for the next 20 years, much less the next 50, then we face a fundamental challenge to the continent's prevailing economic structures a challenge to modernize and diversify that is too often overlooked in today's dialogue."

Governments everywhere provide the public infrastructure needed to help creative individuals in the private sector drive economic growth, development and hence talk of transformation.  Think tanks, multilateral development banks and foundations work on macro-economic issues of transformation aimed at changing the narrative.  In large and small works, ordinary Africans and intellectuals alike are engaged in economic transformation.

The biblical injunction "Ethiopia shall stretch forth her hands unto God" has taken on new meaning in modern African economic life.  The country abounds in transformation stories.  One example is the Ethiopia Commodity Exchange established by Eleni Gabre-Madhin, the Ethiopian economist, in 2006.  Within a decade Ethiopia's commodity exchange has come to serve smallholder farmers and traders.  Rather than excluding those with less education or less capital, it has balanced the interests of all actors.  The founder has built up informal markets by adding technology and systems to develop more transparent, efficient, and reliable trading.

In its first year, the Exchange traded 222,000 tons (from its 138,000) of coffee and by the second to third year to 508,000 tons.  The value of the Exchange has risen from 2010-2011 by 368 percent to reach $1.1billion.  Storage operations grew from 1 warehouse in Addis Ababa to 55 warehouses in 17 locations and from a 5,000 ton capacity to 250,000 tons.  In 10 years over 10,000 rural farmers who lacked capital, market access, storage facilities and other production constraints, benefit from the Exchange's products and services.  Over 256,000 mobile subscribers are connected to the Exchange for knowledge and 107 countries visit the website of the Exchange daily.

A second Ethiopian example is the establishment of the Huajiah Shoe Factory, founded by the Chinese UNIDO Ambassador and CEO of Made in Africa - Helena Hai.  The company started its US exports within the first three months of establishment and employed 3,000 people by the second year.  Hai's explanation of success is rooted in the dual responsibility of public-private partnership and how perseverance from both makes this work.

In many parts of Africa there are stories of individuals engaged in transformation; in Kenya, a biometric system has been devised to track state treasury funds to make savings; in Mauritius new foreign direct investment builds its financial and tourism sectors, and in Rwanda agro-processing, the manufacturing base of rural communities, is re-directing capital and thus increasing growth in education and investment in youth.  Recently in Rwanda, I witnessed transformation stories in information technology which now contributes 3% to GDP, and the manufacturing of a bio-gas from organic waste in a collaborative project with the United Nations and Kenya.

The Africa Rising narrative needs to mean more than middle class consumption at the shopping malls full of imported goods.  Grassroots transformation strategies, deepening the durable benefits of economic growth to the whole of Africa's population, are needed.  Many examples already exist.  From a bottom-up transformation strategy in a cocoa farm, to working at a maize farm toward the higher hybridity of seeds, or in creative ways of reducing marketing constraints through accessible roads to urban centres - all of these help to reduce poverty levels where as much as half of the population still live in poverty.

Economic transformation means new policy thinking, structures of the economy and best practice models.  For the Africa Rising story to become permanent, it needs to be based around these transformative principles and perspectives.

About this author

Ivor Agyeman-Duah is a Ghanaian associate economist and author of several books on Africa.

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The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.