African Economic Conference 2017 – Governance for Structural Transformation

Photo: Boakai Fofana/allAfrica

The 12th edition of African Economic Conference is being jointly hosted by the UN Economic Commission for Africa, the African Development Bank and the UN Development Programme.

press release

Information Note: African countries entered the millennium with an impressive record of economic growth. Prior to the global financial and economic crisis, gross domestic product (GDP) grew on average at 5.7 per cent per annum during 2001-2008. In 2009, growth decelerated to 2.5 per cent as African economies were impacted by reduced demand for their exports, and lower investment and aid flows to the continent.

However, effective macroeconomic management, increased diversified trade and investment with emerging countries, a growing middle class, increased domestic consumption, and intensified regional integration enabled African countries to weather the impacts of the global crisis and recover with an average GDP growth rate of 3.3 per cent per annum between 2010 and 2015. Africa’s average growth remained moderate throughout 2016 (3.7 per cent) and is expected to reach 4.5 per cent in 2017. According to the African Economic Outlook, this sustained growth is due to improved macroeconomic governance, stronger domestic demand and a friendlier business environment. In fact, 37 African countries have shown improvement in the Overall Governance score (a one score point increase from 49.0 to 50.0 between 2006 and 2015), and about 70 per cent of the African population have benefited from improved governance. However, the majority of African countries have performed poorly in the category of Safety and Rule of Law (e.g. personal safety, national security, accountability, corruption and bureaucracy, etc.).

Notwithstanding the sustained level of economic growth, about half of Africa’s population still lives below poverty line. In other words, the strong growth rates have not translated into decreased poverty and inequality, or more job opportunities, especially for young people. Also, African countries’ efforts at reforming their economies have not always resulted in the desired transition into more diversified high-productive industrial sectors. Many African economies remain narrowly based on the production and export of unprocessed agricultural commodities and natural resources (minerals and crude oil). Only a few African countries have succeeded in structurally transforming their economies – Egypt, Mauritius, South Africa and Tunisia. These countries achieved sustained growth of more than 2 per cent during the period 1960–2007 and were able to meet all or some of the requirements for a classical structural transformation (e.g. GDP shares of the three sectors – agriculture, industry and services, and manufacturing – increase as real per capita GDP increases). For instance, Tunisia recorded an average annual real per capita GDP of 3.4 per cent during the period 1970–2007, whilst the GDP share of the three sectors of its economy increased over the same period. A diversified economy, highly productive industrial and services sectors, robust institutions, an enabling environment for investment and competitiveness, and stability are all characteristics of the structural transformation of Mauritius, which is often cited as a success story. The success of South Africa in their structural transformation is most attributable to its robust mixed economy (including mining, manufacturing, food processing, clothing and telecommunications), increased public investment in agro-processing, automobile, steel and engineering, and promotion of its own local technological expertise).

Governance is a complex concept that goes beyond the traditional conception of exercise of authority or power in order to manage an entity’s economic, political and administrative affairs. It refers to the dynamic framework of rules (formal and informal), norms, values, structures, relationships, systems and processes by which an entity (public and private/corporate or state and non-state) is directed, controlled and held to account and whereby power/authority within the entity is exercised and maintained for the attainment of specific outcomes. It encompasses broad-based participation, rule of law, accountability, transparency, responsiveness, effectiveness and efficiency, stability and safety, equity and inclusiveness, empowerment, and control of corruption.

On the other hand, structural transformation, which refers to “the reallocation of economic activity across the broad sectors of agriculture, manufacturing and services”, is indispensable for African countries to significantly reduce poverty and achieve the Sustainable Development Goals by ensuring that the sources of growth are diversified through industrialization, value-addition and structural transformation. It turns out that one of the preconditions for the successful transformation of African economies is good political, economic and environmental governance. In other words, structural transformation requires good governance underpinned by: democratic, responsive, transparent and accountable systems of governance; sound macroeconomic policies; adequate institutional and human capacities to design and implement development programmes; ‘social contract’ between Governments and citizens on mutual roles and responsibilities; sufficient investment in social and economic infrastructure; and an enabling environment for competitive manufacturing, agribusiness and services sectors.

In general, many African countries have made progress in improving political and economic governance over the past decade. The gains in good governance, however, are more attributable to achievements in human development, political participation, and human rights, whilst performance in safety and rule of law, and sustainable economic opportunities have deteriorated. It is worthy to note that in their attempts to achieve structural transformation, many African countries have failed to prioritize the application and practice of the principles of good governance, which calls for political representativeness, institutional effectiveness and robust economic management. These principles of good governance enable a country to formulate and implement sound structural transformation agendas. In Africa, evidence shows that countries with limited transparent, accountable and responsible Governments and institutions, or weak socioeconomic systems, have experienced slow progress in diversifying the economy, increasing high intensive labour productivity, improving the environment for business and investments, creating sustainable job opportunities, and upscaling human well-being.

The goal of the 2017 African Economic Conference will be to identify more specific governance policies and strategies for successful structural transformation, building on existing best practices and alternative African perspectives leading to structural transformation. The Conference will bring together policymakers, researchers and development practitioners from Africa and from around the world to make strategic contributions to the achievement of structural transformation in Africa with an emphasis on developmental governance. The Conference will also provide an opportunity for participants to assess the impact of current economic and political governance strategies on economic transformation, poverty, inequality and human development in Africa. In addition, participants will be able to discuss successes and lessons learned, and identify remaining gaps, challenges and emerging issues on the topic. The Conference will encompass in-depth presentations of policy-oriented research by both established academics and emerging researchers from the continent, who will debate and recommend policy options on how to upscale governance for the structural transformation of African economies and societies.

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