The African Growth Story: Mechanics and Politics

Another version of this article was published in the Tribune.

After two decades of stagnation, Africa is widely believed to have turned the corner in the new millennium.  Countries across the continent are witnessing significantly increased foreign investment, trade, and feverish economic activity. More than half the countries in Africa recorded GDP growth of over five per cent during the second half of the previous decade, while per capita incomes have increased alongside the proliferation of various consumables. Flights to Africa have risen by 85% between 2005-2011 and more mobile subscribers are in Africa today than in Europe[i]. As five-star hotels and plush malls spring up across African cities, a vibrant debate on the long-term developmental impact of this economic boom has emerged. However, while there is much talk of the ingredients (manufacturing, services etc) absent from the African growth, less attention has been paid to the presences (mechanics and politics) of the expansion.

Pronouncement from The Economist

Resource-Driven Growth

In large part, the African turnaround is linked to the stupendous rise of the so-called ‘emerging’ Asian economies, and the demand for various raw materials that fuel their growth. Indeed, according to a McKinsey report, about a third of the continent’s growth is specifically on account of extractive industries. Price of commodities like gold, copper and iron ore spiked to record levels during the 2000s, a trend that was only temporarily disrupted by the global economic crisis of 2008. Copper price, for instance, which in the 1990s hovered between $1 and 1.5/lb has consistently stayed over $3.5/lb since 2006[ii]. The beginning of this rise coincided with the climax of a decade of political economic restructuring across the Global South that created the conditions for the ‘globalization of capital’[iii].

Home to hitherto untapped or underexploited reserves of these and other resources, Africa has become the venue for an unprecedented scramble between transnational corporations on the one hand, and governments keen to project their energy and food security objectives towards Africa, on the other. In fact, in today’s global scenario with geoeconomics having supplanted geopolitics as the overarching state agenda, it is common to find parastatals engaged in competition or collaboration with private corporations over access to resources. Existing diplomatic channels of India, China, Russia and elsewhere are being reoriented to this end as we speak, and new ones are being created where they did not exist. Even post-Apartheid South Africa has emerged as an important player in regional affairs, which among other things shows the tensions within BRICS, at least as far as country-specific geoeconomic objectives are concerned. The China-Africa and later, the India-Africa Summit are now venues at which these Asian countries seek to create and guarantee conditions favouring trade with Africa, which has grown exponentially to over $160 bn and $70 bn a year respectively[iv]. Accordingly, views on India’s strategic maneuvers vis a vis other states get adequate traction in foreign policy and academic circles these days, but this is ultimately an altogether narrow lens through which to view Africa.

Formal and informal economic activities are on the rise

Formal and informal economic activities are on the rise

The strong economic performance of late has led to renewed expectations of an African ‘renaissance’ amongst several observers. To critics though, it is merely a repetition of the cycle of booms and busts previously associated with Africa that leaves few positive legacies in the long run[v]. This particular argument draws on the notion of the ‘resource curse’, that is, the idea that extractive industries create conditions for underdevelopment and/or state failure in the territories that house them. There are several facets to this notion, ranging from the environmentally deleterious effects of extraction, its relatively modest infrastructural requirements and therefore scarce long-term benefits, to the suppression of other domestic industries on account of the export-driven strength of the national currency (the so-called ‘Dutch Disease’).

These are undoubtedly valid concerns but the resource curse is ultimately a limiting frame of interpretation with little space for differences and particularities, or for national and local capacities to influence outcomes—it is as if the story of inevitable doom is already written. The situation is more complicated, given, for instance, that a few miles either side of the Zambia-Congo DR border on the Central African Copperbelt, the regimes of extraction and their long-term effects—developmental and political—are radically divergent. In Zambia, union workers, with relatively decent salaries and benefits, participate in mining that is practiced within acceptable social and environmental variables and contributes tremendously to the national exchequer through (though relatively low) taxes. Contrastingly, in Katanga (Congo DR) a single individual—the Provincial Governor—owns stake in all mining activities, and conditions are considerably worse for almost all others Congolese concerned. It is therefore more productive to conceptualize the complex of forces underlying these issues as the canvas upon which actual transformations, debates and politics occur. To this end, a more nuanced and contextual approach is needed.

Political Reconfigurations

It is clear that the resource sector remains the pivot of most, though not all, African economies. This is most certainly a continuation of and not a break from forms of incorporation of the continent into the global economy that were the hallmark of colonialism. Yet, much has changed in Africa since then. The immediate postcolonial period (1960s to 80s) was marked by attempts to forge a different route to development, and took shape as policies favouring import substitution, strategies for diversification, and agricultural intensification. Though success was patchy at best, a measure of political stability had been achieved in several countries, largely through the proliferation of single party states either aligned to one of the Cold War blocs or constantly seeking to leverage both under the guise of non-alignment. Favourable commodity prices then had made it seem like Africa was about to zoom onto the developmental orbit[vi].

This postcolonial compact and optimism soon collapsed under the strain of the global economic slump following the Oil Shock in the 1970s. Surpluses from extractive industries and export-oriented agriculture shrank dramatically, plunging economies into a downward spiral and contributing to the implosion of the state. What emerged were two drastically reshaped state-forms: countries like Cote d’Ivoire, Congo DR, and Somalia entered a phase of civil war and fractious struggles over resources, which continue unabated. Other states like Zambia, Ghana and Cameroon were subjected to wide-ranging structural adjustment programmes by international financial institutions. Here, multiparty electoral democracy was also initiated just as industries and resources were privatized during the 1990s.

The immediate results were mostly disastrous, causing widespread unemployment, contraction of agriculture, and inflation. Interestingly, early millennial trends showed that countries in the midst of civil wars were growing more rapidly than the latter grouping. The picture has changed radically since then. The upshot of privatization was that national assets had entered the market for throwaway prices, bringing back transnational capital. In Zambia, for instance, Vedanta bought the largest copper mine—Konkola—and Tata took over the erstwhile state-operated Pamodzi Hotel in capital Lusaka; both for a relative pittance. Mines and processing plants have since then passed through several hands to be concentrated in the hands of mining giants, subsequent to a recent phase of industry-wide acquisitions and mergers[vii].

It is in this precise context that African growth story is situated. The crucial difference from the post-Independence expansion is that assets are no longer in public hands, which means there is less revenue for social expenditure. Also, as critics have argued, the lack of manufacturing base across Africa may prematurely cut short the economic expansion. Not that African policymakers and thinkers are unaware of the debate on economic diversification and the need for the development of manufacturing. At issue is the fact that given the global free-trade regime and the low-cost production model already in place elsewhere (particularly China), it is extremely difficult, if not outright impossible, for African countries to implement industrial strategies with any real prospect of success. Regional blocs like the Common Market for Eastern and Southern Africa (COMESA) are only one part of the picture, and in any event, have contributed little of note.

It should also be noted that about sixty per cent of Africans still live in rural areas, many of them tied to subsistence agriculture, often on communal lands. They have thus far benefitted only peripherally from the growth, mostly through the renewed emphasis on primary education and basic healthcare. In many places—Madagascar and Ethiopia are prime illustrations—rural citizens have in fact been dispossessed on account of large-scale enclosure by agriculture or plantation concessions; a process commonly termed land grabs. And yet, African states and communities are no longer the passive victims they are usually portrayed as. Where political will exists, states have the capacity to weigh trade and investment options with national interests in mind. In this process, local and vocal opposition to such public-private dispossession is today legion, even though it hardly finds mention in international media and popular writing.

It is therefore is crucial to reorient the discussion towards the manner in which Africans grasp, organize and seek change. Already, the relative political stability of the last ten years, increased capital flow due to the boom, debt-relief subsequent to the Highly Indebted Poor Countries initiative, and the enhanced vibrancy of civil society following democratization have together created new political spaces. African governments are faced with increasingly forceful demands from diverse internal constituencies that are dissatisfied with the largely meager developmental and poverty reduction effects of the economic growth thus far. Having privatized resources from a position of weakness in the 1990s and implemented exceptionally low rates of royalties and taxes, states are today under pressure to revise these frameworks to plan out and embark on a refigured development agenda. In the last instance, these are the debates and politics—and less so, the supposed benevolence of China or India—that will shape the contours of African futures, and to which we must attend.

**


[ii] Commodity prices can be tracked on Kitco Metals webpage, http://www.kitcometals.com/charts/

[iii] (Negi and Auerbach, 2009: 101)

[v] See the recent debate in The Economist, ‘Africa’s Rise: How real is the rise of Africa?’, http://www.economist.com/debate/overview/249

[vi] For an ethnographic account of the era of boom gone bust in the mid-1980s, see Ferguson (1999)

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