AFRICANGLOBE – It is true that several countries still rely on natural resources and commodities, but recent statistics show that the Africa Rising narrative is not dependent on oil nor does it depend on mining. In a recent article titled The Twilight of the Resource Curse, a British newspaper, ‘The Economist,’ argued that the effects of the resource curse is waning. Here is how Africa is ending the curse:
Better Leadership – Several African countries have been blessed with good leaders in recent times. These leaders have turned around the fortunes of their states by engaging in policies that encourage the growth of other sectors of the economy. Small companies are thriving and entrepreneurship is growing rapidly across the continent, as governments continue to encourage their growth by implementing favourable policies. They have also encouraged investments by making their environments business-friendly. The World Bank’s Ease of Doing Business list lays credence to the better business environment several African nations now have, with countries from the continent ranking well.
“The World Bank’s annual “Doing Business” report revealed that in 2013/14 sub-Saharan Africa did more to improve regulation than any other region. Mauritius is 28th on the bank’s list of the easiest places to do business. Rwanda, which 20 years ago suffered a terrible genocide, is now deemed friendlier to investors than Italy,” the Economist notes.
Commitment to diversification – African countries have shown unprecedented commitment to diversifying their resource-based economies. Therefore, after making the business environments attractive to investments, they ensured that these investments are focused at other under-developed sectors of the economy. Nigeria, Africa’s biggest economy, has recorded growth exceeding 5 percent in the last three years. The Economist rightly claimed that the growth is not powered by oil exports, despite the country being the continent’s largest oil producer. This is because, in recent years, the country’s oil industry has been dormant. Growth has, however, arisen from the services sector, with things like mobile phones, banks and construction driving the sector, which now represents 60 percent of GDP.
Angola, another oil-based economy is looking elsewhere. Its 5.1 percent expansion in 2013 came mainly from sectors like manufacturing and construction. Fishing and agriculture also expanded by 10 percent and 9 percent, respectively that year. The government now gets about a third of its revenue from non-oil sources, compared with almost nothing a decade ago, according to economists at Standard Bank. Rwanda and Zambia were also among countries mentioned by The Economist to be diversifying their economies.
Better Fiscal Policy – Although countries in Africa are moving away from resource-dependency, commodities have always being the mainstay of major economies on the continent. The volatility of commodity means government spending smooths out the booms and busts, according to the Economist. Majority of resources-rich economies had often spent without recourse to the future, when commodity prices go up, until recently, when they started recognizing the need to save for the raining days. According to a recent “report from the World Bank,” the Economist wrote, “fiscal policies in many African countries have become more sensible. These days a fair number of African economies save money during the good times, in order to spend it in the bad ones.”
The British newspaper however admitted that Africa still has a very long way to go, as it remained the most dependent on commodity exports. But despite turmoil in commodity markets, Africa remains one of the world’s fastest-growing regions. What is needed by the continent to end the curse, according to the Economist, are right regulatory reforms, improved education system and investment in infrastructure. I couldn’t agree more.
By: Niyi Aderibigbe