In the1980s, Africa implemented structural reforms to curb a protracted decline in economic growth and development experienced soon after independence. State-led development institutions were dismantled in favor of private institutions. Parastatals were not innovative and, counter-intuitively, relied on inappropriate capital-intensive technologies. What followed after the structural reforms was a period of sustained economic growth.
Africa’s economic growth is faced with unnerving challenges which have made the continent susceptible to both external and internal shocks. A decline in global commodity prices affects the majority of African countries including major economies such as Nigeria and South Africa. In the wake of 2016 decline in crude oil prices as a result of oversupply, dipping demand and a strong dollar, Nigeria’s economy fell into a recession for five consecutive quarters. During the same period, South Africa’s economy; faced with months of political turmoil, effects of prior year’s drought and low commodity prices, fell into a recession as well. Trade and manufacturing were struggling and demand for locally made goods was weak.
A skill mismatch in the labor market and lack of responsiveness and adaptability has seen the continent suffer from unprecedented levels of unemployment, compounded by a rapidly growing population. Africa’s population is forecasted to increase 2.5 fold by 2050. Entrepreneurship will play a critical role in creating jobs for the unemployed youth and boosting incomes. Agriculture is a critical sector employing over 60 percent of Africa’s labor force and contributing over 30 percent of Africa’s GDP. However, adverse effects of climate change and erratic weather patterns are a threat to the continent’s food security. To avoid mass hunger, Africa’s food production needs to increase faster than the global average. Investing in yield-enhancing technologies, encouraging youth participation and value addition will go a long way in boosting agricultural productivity.
Education is the key to unlocking quality human capital development. Foreign direct investments are a function of a country’s labor productivity. Foreign direct investments are critical to recipient economies. With the right education system, a productive labor force is guaranteed thus improving capital inflows from abroad.
Insufficient infrastructure is a major drawback to Africa’s economic growth and development. Insufficient infrastructure increases cost of production. According to Africa Development Bank, Africa needs to invest between US $130 – $170billion a year over the next seven years on productive infrastructure in order to bridge the infrastructure gap. This amount is more than the US $93billion proposed by the Africa Infrastructure Country Diagnostics report.
Structural reforms are needed to include policies that will bolster technological development, quality of public taxation, entrepreneurship, agricultural productivity, education, labor market adaptability and infrastructure development. Africa also needs policies that will increase private sector participation in development matters and unlock the capital that the continent desperately needs to address some of the most pressing challenges. Government revenues are insufficient to meet the continent’s competing development needs thus tapping into the private sector is paramount. Removing restrictions against private sector participation will accelerate economic growth and development.