African economies' prospects for long-term, sustainable growth are under threat from weakness in the core conditions necessary for competitive and productive economies, despite outwardly healthy-looking growth rates in many parts of the region, according to the African Competitiveness Report, released on Thursday, June 4 in Cape Town.
The biennial report, themed "Transforming Africa's Economies", is jointly produced by the African Development Bank, the Organisation for Economic Cooperation and Development, the World Bank and the World Economic Forum, and contains the detailed competitiveness profiles of 40 African economies, and comprehensive summaries of the drivers of competitiveness in each. These profiles are used by policy-makers, business strategists and other key stakeholders with an interest in the region.
This year's report combines detailed data from the Forum's Global Competitiveness Index (GCI) with studies on three key areas of economic activity; agricultural productivity, services sector growth and global and regional value chains. The data points to low and stagnating productivity across all sectors: agriculture, manufacturing and services, partly as a result of ongoing weakness in the basic drivers of competitiveness, such as institutions, infrastructure, health and education. This shortfall masks a better performance in other areas of the economy; specifically, better functioning of labour and goods markets.
In view of Africa's young and growing population, labour-intensive sectors must play a larger role in the continent's transformation: the growth in services - both in terms of GDP and employment - cannot propel Africa's growth alone, and even here development remains uneven, with too many people employed in low productivity services.
"In recent years we have seen some of Africa's leading economies make very promising progress in terms of driving growth through the enabling of markets. However, sustainable growth must be built on a solid foundation, and this means strong institutions, good infrastructure and targeted investments in health, education and skills," said Caroline Galvan, Economist, World Economic Forum, and co-author of the report.
Key findings from the report's analysis include:
Improving agricultural productivity: Agriculture provides an important source of income for the majority of African citizens, but productivity remains too low and based on small-scale subsistence production. Improvements such as better leveraging of technology (both information and communications technologies, as well as development of high-yield crops and better irrigation), more clearly defined land property rights and promotion of rights and opportunities for women, who represent a significant share of the agricultural workforce on the continent, are all needed to address this. Moreover, enabling greater market access for small-scale farmers would help ensure inclusiveness, while the development of regional value chains would serve as a useful stepping stone, enabling them to improve production and marketing processes, and ultimately to meet the quality standards of world markets.
Leveraging services: Services exports are typically viewed as an area of comparative advantage for more advanced economies, but a deeper examination of trade statistics suggests that they are much more significant for Africa than previously thought, especially as inputs into exports from other sectors. Further development of low-cost, high-quality services will help countries participate in local, regional and global value chains. It will also encourage policy-makers to promote services development as part of a wider growth agenda.
Tapping global value chains (GVCs): Greater participation in global and regional value chains can accelerate African economic transformation through the gains associated with enhanced productivity and the development of new activities. However, gains from GVC participation are not automatic and require a broad set of policies, with a particular focus on trade facilitation, investment, transport infrastructure and access to finance. Many of these policy areas have economy-wide benefits beyond GVC integration.
"Business cannot continue as usual in Africa's agriculture sector. It is imperative that productivity be significantly boosted through tailored agriculture research, harnessing ICT and strengthening linkages between small-scale farmers and commercial producers while better integrating them into regional and global value chains" said Steve Kayizzi-Mugerwa, Ag. Chief Economist and Vice-President, African Development Bank.
"The service sector is rapidly becoming much more prominent on the development agenda across Africa and for the World Bank. In many countries across the region, services are the most rapidly growing sector, creating new jobs and economic activities, and providing critical inputs to boost production in other sectors. Yet productivity of the service sector remains low. To be more competitive, governments must lower trade barriers as well as enact complementary regulatory reforms. These reforms are also necessary for Africa to deepen its integration into global value chains," said Anabel González, Senior Trade and Competitiveness Director, World Bank, Washington, DC.
"To consolidate the progress achieved and make new gains that will allow Sub-Saharan Africa to fulfil its full potential, we need to promote further investment in infrastructure, adopt swifter trade procedures, increase regional integration and build more effective institutions. Faster structural transformation is also needed to boost productivity, enhance job creation and improve social cohesion," said Angel Gurría, Secretary-General, Organisation for Economic Co-operation and Development (OECD), Paris.
More than 1,000 participants are expected to attend the 25th World Economic Forum on Africa in Cape Town, from June 3-5, 2015. The theme of the meeting is "Then and Now: Reimagining Africa's Future".
The World Economic Forum is an international institution committed to improving the state of the world through public-private cooperation in the spirit of global citizenship. It engages with business, political, academic and other leaders of society to shape global, regional and industry agendas.
Incorporated as a not-for-profit foundation in 1971 and headquartered in Geneva, Switzerland, the Forum is independent, impartial and not tied to any interests. It cooperates closely with all leading international organizations (www.weforum.org).
