Category: Future

While most African countries have not made a lot of economic progress in the past 50 years, the future could well be quite different. A new publication by emerging markets investment firm The Renaissance Group, entitled The Fastest Billion, argues that Africa’s economy could grow to “first world status” if the continent manages to achieve sustained annual two percent growth for each of the next thirty years.

Africa has leap-frogged the slow development process of other countries in the area of mobile telephony, and we can expect to see it leapfrog in many other industries, including the automobile and aviation industries, according to the author, who predicts that Africa can become an economic competitor to leading countries such as Germany and the United States by the middle of the current century.

The economy of Kenya is predicted to grow by mid-century to be larger than the current economies of Mexico, Switzerland, Indonesia, Turkey and Korea. Thus by mid-century, Kenya’s economy is expected to be as large as the current tenth-largest economy in the world. To get things started, sub-Saharan economies are expected to grow by 4.8 percent overall in 2012.

The East African region currently has a number of opportunities to improve its position in international trade. In the past few weeks, the US has announced that it will provide $10 million to assist in the economic integration of the East African Community, a substantial Chinese trade mission has visited the East African Community headquarters, and the European Union has been negotiating towards an Economic Partnership Agreement.

Notwithstanding the progress that has been made to date in negotiations, there are numerous obstacles on the path to future prosperity. Closer integration of the East African Community is hampered by distrust and rivalry between member countries, as well as by practical matters such as the need to secure sufficient revenue. Because income taxes supply very little revenue, many African countries are reliant on revenue from import duties – revenues that they would be losing through closer economic integration or through free trade agreements with Europe or other countries or regions.

While in the past Europe has accepted duty-free imports from Africa without requiring African countries to reciprocate by accepting duty-free imports from Europe, the new Economic Partnership Agreements are unlikely to be so lenient. China is particularly interested in accessing natural resources from Africa, but also sees Africa is a large potential market for manufactured goods and services.

The sixth annual Ibrahim Index of African Governance was released recently, and it indicates that on average governance has been improving in Africa. Unfortunately the improvements have in most cases been very slow, and some countries have been going backwards rather than forwards. The top five ranked countries are Mauritius, Cape Verde, Botswana, Seychelles and South Africa. The bottom five are Somalia, Democratic Republic of Congo, Chad, Eritrea and Central African Republic.

Somalia’s overall score for 2011 of 7.2 out of 100 (a decline from 8.8 in 2006) reflects a score of less than 10/100 for rule of law, accountability, personal safety, participation, human rights, public management, business environment, infrastructure, welfare and education, but it does not reflect the hope associated with the country’s advances this year in the war against al Shabaab, and the newly appointed government.

Higher up in the rankings, Kenya came in at 25th with a score of 52.7 out of 100, with significant gains over the past 5 years in health and welfare but significant losses in participation and national security. Uganda was ranked 19th with a score of 55.1, showing gains in national security and health but losses in rule of law and business environment. Tanzania came 10th with 58.8, showing gains in infrastructure and rights, but losses in public management and national security.

The transitions of many African countries to black majority rule have often not been happy ones. Zimbabwe is an obvious example, with the country experiencing gradual economic decline after Robert Mugabe gained control, accelerating to rapid economic decline as Mugabe gave up all pretence of governing the country for any purpose other than for the benefit of himself.

At the time of South Africa’s transition to black majority rule, it was widely feared that South Africa might head in the same direction. Nelson Mandela turned out to be an outstanding president, but it is widely perceived that his successor Thabo Mbeki did not measure up to Mandela, and Mbeki’s successor Jacob Zuma (after the caretaker presidency of Kgalema Motlanthe), a proud polygamist and subject of persistent corruption allegations, does not measure up to Mbeki.

So, how are things going in South Africa, and what does the economic future look like? According to the Census 2011 figures, average household incomes doubled in the preceding decade to almost $12,000, largely due to a growing black middle class. The average household income of black people who make up 80% of the country’s population was now $7,000, while the average white household income was $42,000. Thus, in spite of the country’s political struggles, its economic growth seems to be continuing.

Last time general parliamentary elections were held in Kenya in December 2007, things did not go well. Campaigning was divisive and tribalistic, and the election itself was marred by abuses and fraud, and followed by weeks of violence in which more than 1,000 people were killed and hundreds of thousands rendered homeless. The next elections are scheduled for March next year, so the question is whether things will be better next time.

Some significant changes have occurred in the past five years, but other things have not changed. One significant problem is that the perpetrators of the post-election violence from the last elections have not been brought to account. Four prominent Kenyans have been charged by the International Criminal Court over their roles in the violence, but their cases will not be heard until after the elections are over.

On the other hand, the country has a new Constitution which should limit the power and impunity of the country’s political leaders, and there is a new judiciary which seems to be more willing to act independently than did the old. In the past five years, the country’s development has continued and oil has been discovered, leading to hopes that a more business-like approach to politics will emerge.

Over the past 20 years, significant advances have been made in reducing the number of deaths of children aged under five, largely as a result of more widespread and better vaccinations, better health care, improved education, and greater efforts by governments. The global infant mortality rate has dropped from 12 million in 1990 to 6.9 million in 2011, notwithstanding the fact that the world’s population has increased almost 40% over that time.

The infant mortality rate has decreased by more than 50% over the past two decades in some African countries including Rwanda, Malawi, Ethiopia and Tanzania, but infant mortality remains high in sub-Saharan Africa, with 19 of the 20 countries with highest infant mortality rates being in the region (the other country being Afghanistan). The East African countries with the highest rates are Somalia, Burundi and South Sudan.

Successes over the past 20 years point to greater successes in the future. The biggest killers of children in East Africa are pneumonia, diarrhoea and malaria, and these can be prevented or treated inexpensively. Increased availability of vaccinations, oral-rehydration salts and antibiotics, along with better nutrition and education and support for mothers, can prevent the vast majority of child deaths.

Kenya is planning at some time in the future to export oil via Lamu, with the oil coming via yet-to-be-built pipelines from South Sudan, Uganda, Ethiopia and the Turkana region of Kenya. In the meantime, East Africa imports oil for its needs via the port of Mombasa, and the current jetties in the Mombasa area are inadequate to fulfil the growing oil import needs of Kenya, Uganda, Rwanda and Burundi.

Thus Kenya is seeking a commercial partner to pay for a large new oil jetty, which has an estimated cost of up to $100 million. The country’s main oil jetty at Kipevu has a maximum ship capacity of 85,000 tonnes, and the smaller jetty at Shimanzi has a limit of 30,000 tonnes. As a result of limited jetty capacity and also limited storage in the country, oil ships often have to queue up waiting for a berth, and the cost of oil is higher because of the congestion and associated delays.

An upgrade is also planned for the Changamwe Oil Refinery at Mombasa, adjacent the Kipevu oil jetty, and Kenya Petroleum Refineries Ltd is seeking to raise $1.2 billion to cover the cost of that upgrade. The Kenya Pipeline Company is also planning to build a bigger and better oil pipeline for transporting oil to Nairobi and elsewhere in the country.

Now that the Amisom troops have “won” the war in Somalia against the al Shabaab insurgents, a suitable exit strategy has to be devised. Unfortunately it is far easier to win a war to oust tyrants than it is to establish a benevolent government in the wake of the ousting. One need only look at Iraq and Afghanistan for precedents of wars where it has proved immensely difficult for the conquerors to exit with grace.

When external military force is used to evict a regime from a country, the result usually seems to be a power vacuum which is attractive to all sorts of people with improper motives. Important policing and civil society institutions are often very weak or non-existent, leaving the people to struggle along with high levels of insecurity and corruption, and with dysfunctional marketplaces and social arrangements.

Somalia has recently appointed a new government and a new president, and hopes for the future are high. The country has a range of natural resources, and the Somali people have a reputation for resourcefulness, so there is every chance of significant economic growth, but there are also enormous challenges, particularly with regard to the power ambitions of the many well-armed warlords still operating in the country.

China’s infrastructure investments in Africa continue, with the latest reported to be a new standard gauge railway line between Mombasa and Nairobi. Apparently the new line is intended to be the first phase of a new network through Kenya serving Uganda, Rwanda and Burundi. The latter three countries will be particularly interested, because at present their imports come largely by road through Kenya.

Uganda’s imports were largely stopped during the post-election violence in Kenya in 2008, and since then Uganda has been actively seeking alternative supply arrangements. There are advanced plans for building a railway line between Tanga on Tanzania’s coast just south of the Kenyan border to Musoma in Tanzania, which is on Lake Victoria. This would enable imports for Uganda to be routed via rail from the Tanzanian coast to Musoma, and thence by ferry to Uganda.

Kenya’s new railway line between Mombasa and Nairobi will be constructed by China Roads and Bridges Company, and will be financed under a Chinese contractor-negotiated loan. The deal, which reportedly already has been signed by the Kenya Railways Corporation, specifies that the KRC will deal only with the Chinese company. The construction costs might ultimately be financed in part by a levy on petroleum.

The Ugandan National Planning Authority has been making plans for the country’s economic transformation over the next 30 years. Life expectancy is projected to increase from the current level of 51.5 years to 85 years. Average income per person per year is projected to have risen from the current level of $506 to $9,500. The infant mortality rate is projected to drop from 63 per 100,000 live births to 4 per 100,000.

These are fine targets to aim for, but how can they be achieved? The projections require an annual GDP growth rate of 8.2%, with growth coming mainly from oil and gas resources, agricultural reforms, tourism and increased employment. Countries such as South Korea and Malaysia have demonstrated that sustained economic growth from a low base is achievable given appropriate policies and conditions.

However, Uganda went through a national planning process in 1999 to create a vision for prosperity in the year 2025, but that project seems to have fallen by the wayside. In order to achieve sustained economic development, significant cultural changes and commitment are required. It is yet to be seen whether the country’s leadership will be willing to take the necessary steps.