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Business News of Sunday, 26 June 2011

Source: Jude Kyoore

World Economic Power: Where is Africa?

A review of the historical antecedents of world economic power indicates the specific times that
a number of nations (usually Western) had influenced the world through economic means, dating
back to the 13
century. In most cases in the past, economic power was preceded by military
sovereignty which brought in its wave marked economic prosperity in countries such as The
Netherlands, Germany, Britain, France, and Russia. The primary compositions in all economic
power status were the country’s industrial base, natural resources, technology, geographic
position, health, and education systems. Since the end of World War II, the US has dominated
the world, both economically and militarily. Today, the reins of world economic power are
however shifting hands as a consequence of globalization with Brazil, Russia, India and China
(usually called by the acronym BRICs), seen as the largest emerging economies. Experts say
speed of change and technological innovation taking place particularly in China is breathtaking
and is creating a new reality; reality that is unprecedented and which economists say will
leapfrog China as the biggest economy in the world in as little as 20 years time. The term shift
inherently implies variation in space and over time. The puzzle therefore is, why has the wind of
change eluded sub-Saharan Africa and is there any shred of evidence to suggest that it is coming
soon? Obviously, there are a thousand and one reasons why a greater number of people will see
this as wishful thinking. But perhaps, this solid stance might be softened if one considers the
facts of history particularly the case of the much touted China.
In 1949, China was one of the poorest and most underdeveloped countries in the world with
about 90% of the population living in the countryside and most of them living in poverty as it
was in sub-Saharan Africa. Up to the 1960s, the economy of China was dominated by
agricultural activities and the only difference from that of sub-Saharan Africa was the color of the skin of the respective populations. The turning point in China’s history towards
industrialization started in 1978 with reforms which created high incentives for farmers, and
greater effort to open up the economy to foreign direct investment. Subsequently, there was a
change to allow freer price movement which consequently led to China becoming the ‘world
factory’ with a growth rate of 10% per annum for the past 25 years. In contrast, within the same
spate of time, the economic performance of sub-Saharan African countries worsened as indicated
by lower economic growth rates, greater instability of exchange rate, lower exports and increased
reliance on foreign aid. Indeed, it has been estimated that for the past 50 years, more than $1
trillion in development-related aid has been transferred from rich countries to Africa and yet no
significant development has been realized. Whether it is economic, human development,
corruption perception, or doing business around the world index, sub-Saharan Africa countries
consistently fall short of preferred limits. The attempt of the World Bank and IMF to promote
policies by means of structural adjustment designed to restructure African economies in order to
improve their performance in the increasingly competitive world economy, did little to reverse
the situation in the 1980s. Meanwhile, China had continued its vigorous development policies,
and from 2007 till date, it accounts for as much of global economic growth as the G7 leading
industrial countries combined. Sub Saharan Africa cannot even boast of 5% of global trade and
most population growth rates exceed the growth in economy. The main driving factors for
China’s economy are the astronomical rates of saving (approximately 37.5% of annual income),
investment, and exports. Even though, there are serious issues such as inflation and concerns of
overheating of the economy, there is no doubt that standard of living generally has improved for
the Chinese citizenry.At the continental level, the picture doesn’t seem to be positive on Africa ever becoming a world
stage of economic activity. In fact, the 7 % growth rate which is necessary to move countries out
of poverty looks more of a mirage than a reality in many instances. With the current average
growth rate of 3% in many sub-Saharan African countries, it is unlikely that extreme poverty will
be eliminated soon and much less likely that the continent will become a world economic super
power. That notwithstanding, all hopes cannot be lost of ever realizing the goal of controlling the
economic welfare of the world. As a matter of fact, in some academic studies, South Africa has
been labeled as one of the emerging economies of the world. Other candidates of high
performance are Botswana, Rwanda, and Ghana. In 2009, the World Bank survey ranked
Rwanda as the number one favorable destination of doing business in Africa. The case of
Rwanda is phenomenal given that it had to start at scratch after the Genocide to rebuild a whole
nation without reliance on aid. On the other hand, in spite of the fact that Nigeria and Egypt have
relatively large economies, living standards in those countries do not reflect their sizes.
The economy of Ghana is making great strides in attaining the millennium development goals
and stabilizing the economy, consequence of past and present policies that various governments
have adopted since 1992 that sought to increase food production through the modernization of
agriculture. Surely, the snail-paced growth of agriculture over years is not in any way
comparable to the huge success in China’s situation. Nevertheless, having the right footing as the
Chinese did is by any means relevant to charting a prosperous future, at least on theoretical basis.
Even at this stage, there is some level of worldwide recognition of the significant strides Ghana
has chalked. No wonder the former president, John Kufour, was recently awarded a prize for his
role in cutting in half the proportion of Ghanaians living in hunger and under one dollar a day, making Ghana the first sub-Saharan African country to have reached that point. Also, Ghana is
the first sub-Saharan African country to be declared a middle income country in the latest survey.
The problems confronting sub-Saharan African countries cut across broad perspectives and in
every facet of life: social, political, environmental, economic, and geographic. No single solution
can ever be the blueprint to help the continent take its turn as a world vanguard. The list of
solutions is limitless and sometimes conflicting. One thing however is clear; Africa will have to
first be self sustaining in food production and possibly export in huge volumes finished products
to command the necessary foreign exchange. A modernization of agriculture to avoid
dependence on the benevolence of nature will be a big leap to achieving this. This simple
principle has worked in all cases of development. Fortunately, African countries are blessed with
large arable land and do not have to face the types of difficulties that Japan and South Korea
have to deal with. Let Sub-Saharan Africa feed its population and all others will be added onto

Jude Kyoore
Minnesota, USA