According to the Africa Progress Report - 2013, produced by a committee headed by Kofi Annan, economic growth in sub-Saharan Africa is far outpacing progress in Human Development.
To quote from the summary:
"The past decade has been a period of sustained growth in Africa. Despite a weaker global economy, regional growth has averaged over 5 per cent a year. Twenty resource-rich countries have been at the forefront of the economic recovery. These countries, accounting for 56 per cent of Africa’s population, have grown on average more rapidly than other countries – and they include some of the world’s fastest-growing economies. Half of the resource-rich group has seen average income rise by one-third or more. In 2012, Angola and Sierra Leone outperformed China; Ghana and Mozambique grew more rapidly than India.
Many resource-rich countries are moving up the international wealth rankings. Over the past decade, Cameroon, Ghana, Nigeria and Zambia have crossed the threshold from low-income to lower middle-income status. Another five countries – Angola, Botswana, Gabon, Namibia and South Africa – are in the upper middle-income group. Equatorial Guinea, with an average income of US$27,478 in 2011, is classed as a high-income country.
Progress on reducing poverty and improving human development has been less impressive. Resource-rich countries have some of the world’s largest gaps between their global ranking on wealth, as measured by average income, and their performance on wider indicators for wellbeing, as captured by the Human Development Index (HDI). Equatorial Guinea’s HDI ranking is 91 places below its average income rank, and Angola’s is 38 places below. Moreover, resource-rich countries are heavily concentrated in the lower reaches of the HDI ranking. They account for 9 of the 12 last places, with the Democratic Republic of the Congo, bottom. "
Based on World Bank research, Equatorial Guinea has a per capita GNI that is almost 25% higher than that of Poland, yet life expectancy is 25 years less, under 5 mortality rate is 20 times higher and maternal mortality per 100,000 live births is almost 50 times higher.
The reasons for the disparity, which is similar in most of the high growth African countries, are complex. They range from corruption at the highest government levels, through inefficient tax systems that make it easy for multinationals to evade taxes, the fact that a large amount of GNI is down to gross export revenue, and on to the nature of African trade.
The latter has changed little in the past several centuries; raw materials are grown, mined, drilled for and exported. There is little or no local processing, which would add significantly to local economies in the form of employment rather than revenue from sale of material sale.
Tax on raw materials is almost non-existant in some countries. For example, Zambia's tax revenue on mining activities is less that one quarter of one percent!
The map below shows how natural resources are found throughout sub-Saharan Africa. It does not account for yet unconfirmed but realistic expectations of enormous oil and gas fields in East Africa, but it clearly shows the potential for many countries in the region.
The answers are not simple or easy to implement. However better management of resources will be a start. Quoting again from the report:
"Concession trading arrangements are often associated with undervaluation of assets. No country has lost more from this practice than the Democratic Republic of the Congo. This report includes a detailed analysis of five privatization deals conducted through the sale of state-owned assets to foreign investors operating through offshore companies registered in the British Virgin Islands and other jurisdictions. We estimate the total losses sustained in these deals as a result of undervaluation of the assets at US$1.3 billion - –more than double total budget spending on health and education. In a country with 7 million children out of school, the sixth highest child mortality rate in the world, and endemic malnutrition, losses of this order carry high human costs.
The underpricing of concessions generates large returns for offshore companies. In the case of the Democratic Republic of the Congo, we estimate that underpricing generated returns of around 500 per cent for the offshore companies involved. "
Additionally, the Organization for Economic Co-operation and Development (OECD) says that losses from trade mispricing are greater than total Foreign Direct Investment.
The second major step is to add value to raw materials before they are exported by, for example, refining oil or processing ore. The Africa Mining Vision, prepared jointly by the African Union and The Economic Commission for Africa, sets out, according to the report:
"a compelling agenda for using resource wealth to boost inclusive growth, expand opportunities and reduce poverty faster."
However, the report also concludes that, without direct efforts by the G8 and G20 countries, progress will be slow and efforts to raise revenue through taxes will be particularly difficult because of the use offshore accounts, shell companies and the weak disclosure standards applied in many 'developed' countries. This may be the biggest hurdle of all given that, again quoting the report:
"The Canadian government has opposed the introduction of mandatory disclosure standards. This matters because companies listed on the Toronto stock exchanges control global mining assets in excess of US$109 billion and in 2011 were involved in over 330 projects in Africa."
Canada? Who would have guessed?
The full report, or a summary, can be found at: http://africaprogresspanel.org/en/publications/africa-progress-report-2013/apr-documents/ .
It is compelling reading.
TW
