THE BLOG

Rifts in Africa's 'Rising' Narrative

We are constantly reminded these days that Africa is rising, harboring six of the world's ten fastest growing economies. In March, the Economist declared that "Africa is the world's fastest growing continent just now," and the "hottest frontier" for investments. Time magazine's cover of Africa Rising said "it is the world's next economic powerhouse," and added that challenges lie ahead. The Wall Street Journal calls it "a new gold rush." The Financial Times names it "Africa calling." A McKinsey Global report dubbed growing African countries "lions on the move." Others, such as Forbes magazine, aren't just satisfied with rising: Africa Is Rising Fast, they say. There is even a new book: The Fastest Billion.

No question that some good stuff is happening in Africa, but the story does not end there. There is the other side. Africa is growing but its growth seems to be leaving people behind. The celebration, therefore, seems premature; it is like we are patching the roof of the house before laying the foundation down. That is very risky because even a weak wind might just crumble our house and lead the new narrative to vanish like similar narratives before it. Be cautious, people, it takes time to build a standing house!

A new study by the African Development Bank (AFDB) and the Global Financial Integrity reveals that from 1980-2009 Africa has lost $1.2 to 1.4 trillion in illicit financial outflows, or dirty money, such as corruption, tax evasion, bribes and other criminal channels. That is an unbelievable amount of money, more than three times the total amount of foreign aid received in the same period. This challenges the current assumption that Africa receives money in the form of foreign aid and foreign investment from its donors and partners. Indeed, Africa gives more to the rest of the world than it receives. It is a net creditor through illicit means, the report shows.

"The resource drain from Africa over the last 30 years -- almost equivalent to Africa's current GDP -- is holding back Africa's lift-off," said Prof. Mthuli Ncube, Chief Economist and Vice-President of the African Development Bank, adding that "The African continent is resource-rich. With good resource husbandry, Africa could be in a position to finance much of its own development."

Africa's economic powerhouses tend to do worse than the rest. The report says that South Africa, Africa's largest economy, has lost $170 billion in net resources over a period of 30 years in illicit outflows. For Nigeria, Africa's second largest economy, things are even more dire; over $250 billion left the country. Another report in 2012 showed that Nigeria has lost over $400 billion to oil corruption alone since independence in 1960, which is way more than its current 268 billion in nominal GDP.

Just before the latest report, Africa was in the headlines for all the wrong reasons again. A new report by The Africa Progress Panel headed by the former secretary general of the United Nations, Mr. Kofi Annan, reveals that Africa is plagued by secret mining deals and financial transfers, and that companies are exploiting Africa's vast natural resources as a result of mismanagement, corruption and weak leadership in many resource-rich countries.

Take the Democratic Republic of Congo for example. The poster child for mineral wealth, estimated to be harboring in excess of $24 trillion under its soil, also holds the ugly position of being the poorest country on earth according the UN Human Development Index. The report details the depth of secret deals in Congo from the highest office of the land, with five underpriced deals costing the country $1.4 billion. The report noted that "the figure was equivalent to double DR Congo's health and education budgets combined." In one single deal with the Eurasian Natural Resources Corp, the country lost $725 million. And yet, Congo's economic growth in 2012 was a whopping 7.2% and is expected to be even higher in 2013.

No wonder economic growth is impressive in much of Africa, but its benefits aren't trickling down yet. Africa has its own 1 percent issue. With over 5% of annual GDP growth, and continuing upward projections, the growth is accompanied with little in employment growth and poverty is not falling as fast as it should. In some countries, such as South Africa, the wealth is concentrated in the hands of the elite that looking at the GDP per capita becomes meaningless. Overall you get a good impression, but upon inspection, things aren't that great. At least, not yet. No Afro-pessimism here, just looking at the facts.

This creates a sort of economic paradox. What uses are impressive GDP growth numbers without jobs and real impact to people's lives? The UN Human Development Index, a measure of the overall well-being of people, gives a better illustration. Its latest report shows that much of Africa is still at the lowest ranks compared to other regions, with all ten least developed countries belonging to Africa.
It seems like growing an economy is much easier than bringing real development out of it. And the starting point ought to be waging a war on corruption and curbing illicit transfers of such huge sums of money out of Africa. With good management of what we have, we need no outside help.

The change in the media narrative about Africa, previously deemed too negative, is most welcome. But that should not mean blindly being positive, for it would lead us to become complacent and lose track of how to tackle our biggest challenges. Challenges ahead of us, such as curbing corruption and governance deficits in some countries, are enormous. Optimists and pessimists about Africa's rise are equally right, with data and facts to back up both arguments.

Yes, Africa is rising in the new century from the preceding stagnant decades. But it is still the poorest continent by far and its growth tends to be more commodity-driven than by value-addition to resources -- a much weaker position in international economic competition. Africa of tomorrow will go the way its current leaders decide today. Leaders have to ensure better management and investment of proceeds from natural resources; a more integrated Africa to achieve some sort of bargaining power in international arenas and a better governed Africa, to keep moving forward. Otherwise the new media narrative won't hold and the house might well fall down before it is built. That would be a far worse tragedy.

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