African growth threatened by world economy

Agriculture is an engine for growth in Africa, and can contribute considerably to economic development. Rising prices is an opportunity for African farmers, yet a challenge for poor consumers. (Photo: Miles Harriman)

Africa has made considerable progress in a number of fields over the past years, with consistent economic growth as a major source of encouragement. Mounting global food prices may reverse this trend for countries dependent on imports of food as well as energy. As yet, Africa is hardly in a position to profit from rising food prices.

The main priority is to offset hunger and to safeguard progress on the Millennium Development Goals. Climate change adds to the burden.

Africahas made progress on several of the MDGs, but in general the continent stands to fail in achieving the ambitious goals set by world leaders at the Millennium Summit in 2000. The Secretary-General of the United Nations, Ban Ki-Moon, has recently voiced serious concern about the potential detrimental effects of international economic developments on poor countries, particularly those in Africa. After the second meeting of the MDG Africa Steering Group, established last September, Ban struck a note of urgency, and appealed for “concrete action” to help the continent achieve the MDGs.

Calling for an African Green Revolution

Ban Ki-Moon has joined his predecessor Kofi Annan in calling for an African Green Revolution, as one way of facing the challenge of achieving the MDGs and facing the rise in food bills. In a message to the governing council of the UN International Fund for Agricultural Development (IFAD) in February, the SG warned that the world faces a “development emergency”, describing climate change as a “daunting obstacle” to progress in fighting poverty, and urging greater focus on agriculture. Commenting on climate change, the IFAD president, Lennart Båge, commented: “Put simply, the price of development just went up”.

In March, the Secretary-General published a sobering article in the Washington Post, on “The New Face of Hunger”, pointing to the already visible effects of soaring food prices and noting that food riots have erupted from West Africa to South Asia. “Fragile democracies are feeling the pressure of food insecurity,” Ban noted; adding: “This is the new face of hunger, increasingly affecting communities that had previously been protected.” The SG underlined the point that the tools and the technology designed to beat hunger and meet the MDGs are there, but that political will and resources, “directed effectively and efficiently”, are needed. In the short term, the urgent humanitarian needs must be met, noted Ban; in the longer term he stressed the need to boost agricultural production, citing the president of the World Bank, Robert Zoellick, who had said that there is no reason why Africa cannot experience its own green revolution.

Increased support for African agriculture

The World Bank has sharpened its focus on agriculture over the last few years, and is stepping up its support for agricultural development in Africa. In March, the Bank said it would nearly double the amount of loans made available to help boost agricultural production in Africa, to USD 700 million, up from a previous level of about USD 420 million. The 700 million will be spent in fiscal 2009, starting June 2008. Bank officials have indicated plans to push the amount to 850 million in coming years. In announcing the drive, the Bank president, Robert Zoellick pointed out that the focus on agriculture production should address the whole value chain, including everything from property rights, seeds, fertilizers, irrigation and more. In 2007, when reviewing its three-year Africa Action Plan, the World Bank announced plans to accelerate progress in Africa, emphasizing a strengthening of the African private sector and raising agricultural productivity.

In a much heralded speech on 2 April, “A Challenge of Economic Statecraft”, prior to the spring meetings of the World Bank group, 12-13 April, Robert Zoellick called for a plan to fight hunger. This “New Deal for a Global Food Policy” should combat hunger and malnutrition through a combination of emergency aid and long-term efforts designed to boost agricultural productivity in developing countries, also requiring a shift from traditional food aid to a broader concept of food and nutrition assistance, and a green revolution in Africa. Zoellick said: “We can help create a ‘Green Revolution’ for sub-Saharan Africa by assisting countries to boost productivity throughout the agricultural value chain and help small-holder farmers to break the cycle of poverty.” With the increased support for agricultural development, he continued, “We […] can help countries and farmers manage systemic risks, including through financial innovations to counter weather variability, such as drought.  We can offer access to technology and science to boost yields.” The Bank’s “New Deal” has been met with mixed responses, several NGOs noting that it is coming rather too late. Tom Arnold, chief executive of Concern Worldwide, made a point that “Any short-term measures to alleviate the problem have to go hand in hand with a serious and strategic commitment to promoting agricultural productivity in Sub-Saharan Africa”.

The “New Deal”, the president pointed out, should focus not only on food, but also on the interconnections with energy, yields, climate change, investment, the marginalization of women and others, and economic resilience and growth. Zoellick also called for a fairer and more open trading system, where the solution he advised is to break the Doha Development Agenda impasse in 2008. In order to raise funding for development in Africa, Robert Zoellick outlined a plan for sovereign wealth funds to invest one percent of their holdings in equity in Sub-Saharan Africa to boost investment opportunities and development – equaling up to USD 30 billion, enabling African economies to become a complementary pole of world economic growth in the next 10 to 15 years.

Record high food prices increase the need for international food aid. The World Bank has called for å new global food policy with a shift away from traditional food aid. (Photo: Dag Leraand)

Continued optimism on African growth

Economic growth in Africa has been considerable, and rather stable, over the last few years, averaging above five percent. The United Nations Economic Commission for Africa (UNECA), reports that the continent has continued to sustain its growth momentum of previous years, recording an overall real GDP growth rate of 5.8 per cent in 2007. The forecast for 2008 is 6.2 per cent, according to the organization’s Economic Report on Africa 2008.This growth performance was driven mainly by robust global demand and high commodity prices. Other growth factors in Africa include continued consolidation of macroeconomic stability and improving macroeconomic management, greater commitment to economic reforms, increased private capital flows, debt relief and increasing non-fuel exports. Africa has also witnessed a decline in political conflicts and wars.

Key challenges to Africa's growth in 2008, according to UNECA, include the risk of a sharper slowdown in the US economy and a fall in global commodity demand and prices. Also high oil prices will hit oil importers through the current account and inflationary pressures. In addition to political instability in some countries, inefficient public infrastructures and unreliable energy supplies at national level, as well as poor integration of transportation and energy networks at regional level, continue to impose important constraints on Africa's growth.

The first joint meeting of African ministers of economy and finance held by the African Union (AU) and the UNECA, in Addis Ababa, Ethiopia on 31 March to 2 April, addressed the emerging challenges facing Africa, and the new international economic environment within which they must be tackled. The concluding document notes that while economic growth has been considerable, this has not yet translated into job creation and poverty reduction on a wide scale. The ministers also noted with concern the rising prices of oil and food, whilst the UNECA Executive Abdoulie Janneh noted that: “The main issue is about increasing Africa’s ability to feed itself […] by improving yields and turning research and development results into production”.

“Rapid escalation in food and energy prices, if not managed properly, could pose significant threats to growth and employment, good governance, peace and security," UNECA stated in a paper, “Meeting Africa's New Development challenges in the 21st Century”, prepared for the finance ministers’ conference. It attributed recent social disturbances in several African countries to rising staple food prices. These price rises “pose a significant threat to Africa’s growth, peace and stability,” the ministers warned, fearing that the social unrest seen in some countries might spread across the continent – also as a result of rising fuel prices, and hence increasing transport costs. The Bank for International Settlements (BIS) has warned that raising food prices are driving up inflation in Africa and posing fresh challenges for central banks in the region, whereas the World Bank has warned that rising food prices have come to stay.

The poor are hardest hit by food price hikes – i.e. those spending the largest share of their budget, between 60 and 80 percent, on food. Less money means less food, and less nutrition, impairing the health of people and the development of nations.

At the Addis conference, the UN Secretary-General, Ban Ki-moon, urged Africa and the world to step up efforts to reach the MDGs in Africa, saying that: “We can and must make the 21^st century the African century”.