On May 22-26, 2017, the African Development Bank Group will hold its 17 Annual Meetings in Ahmedebad, India, with the central theme, ‘’Transforming Agriculture for Wealth Creation in Africa.’’ Earlier, in April, AfDB President, Dr Akinwunmi Adesina and his team went on a four-day official visit to India, ‘’to set the stage for improved cooperation between the development bank and India, as well as India’s relation with Africa in general’’. During the visit, the Dean of African Diplomatic Corps in India, Ambassador, Alen Tsesaye Woldemariam of the State of Eritrea, commended AfDB’s ‘’steadfast commitment for a better Africa’’, even as Adesina noted that ‘’India’s experiences are relevant to Africa’s development’’.
Between 2000-2010, noted as the ‘’Indian Decade’’, Africa’s economic relations with India recorded remarkable growth, with India as the dominant partner. By 2013, Africa accounted for 16 per cent of India’s Foreign Direct Investment (FDI), worth US$13.6billion, while Africa’s FDI to India was five times higher at US$65.4billion, representing 26 per cent of the country’s total inward FDI of which a large proportion, reportedly, came through Mauritius because of the double taxation avoidance agreement (DTA) signed between India and Mauritius.
AfDB, under Adesina, is focused on a five-point agenda christened ‘’5-Highs’’, namely, ‘’Light up and Power Africa’’, ‘’Feed Africa’’, ‘’Industrialise Africa’’, ‘’Integrate Africa’’ and ‘’Improve the Quality of life for the People’’. The ‘’5-Highs’’ are a build up on the existing AfDB’s ten years strategy (TYS)- (2013-2022), entitled, ‘’At the Centre of Africa’s Transformation’’, which focuses on achieving inclusive growth, transiting to green growth through five operational priorities- infrastructure development, regional economic integration, private sector development, governance and accountability and skills and technology, and with special emphasis on gender, fragile states and agriculture and food security.
Over five years to 2015, AfDB has deployed US$5.5billion in investments in the agriculture sector, with a portfolio of 6000 agriculture projects, to develop value chain infrastructure, and boost agriculture yield and productivity, introduced fertilizers technologies, new seeds varieties, built irrigation systems and roads, and invested in transportation corridors to link producers to urban markets, and reportedly, recorded 97 per cent rating on its agriculture projects, above average.
However, it has been observed by experts that the ‘’agriculture miracle’’ that has transformed other developing countries has not been experienced by Africa. Also, the continent has failed to industrialize in the twenty five years since the first African Industrialization Day. Reports show that, in 2010, sub-Sahara Africa’s average share of manufacturing value added in GDP was 10 per cent, unchanged from the 1970’s, and manufacturing output per person was about one third of the average for all developing countries while manufactured export per person is about 10 per cent, all of which contributed to over 42 per cent of the population living below the US1.25 poverty line and around one in four people in sub-Sahara Africa being unnourished.
The developments had prompted AfDB, the Brookings Institution and the United Nations University-World Institute for Development (UNN-WIDER) to come together to answer the question why there is so little industry in Africa.
The take off point to evolving solutions to the challenges of African economies is the realization that African economies remain largely factor-driven. The World Economic Forum’s Global Competitiveness Report divided countries into three stages, namely, 1, Factor-driven economies, ‘’where countries compete on the basis of price as they buy and sell basic products, 2, Efficiency-driven economies, ‘’where growth is based on the development of more efficient production processes and increased product quality’’, 3, Innovation-driven economies, ‘’where companies compete by producing and developing new and different products and services by using the most sophisticated process.’’
Most developed economies are innovation-driven, while BRIC nations (Brazil, Russia, India and China) are efficiency-driven, though China competitiveness is noted to be ahead of others and fast-driving to the innovation stage. Also, South Africa is fast driving towards maturity stage with world class infrastructure, a prerequisite for poverty reduction.
Factor-driven economies do not rule the world, thus African economies need to evolve essential and adaptive policy options and strategies to transit from being factor-driven to efficiency-driven. They need to embrace innovations across various facets, including their financing systems, entrepreneurial strategies, education, leadership, existing inimical cultures, and also embrace technology through strategic partnerships with developed economies.
As noted by Peter Howitt, “economies that cease to transform themselves are destined to fall off the path of growth’’, and growth need to be inclusive and matched with development which entail increase in citizens quality of life, measured by literacy rates, poverty rates, environmental quality, life expectancy and freedom of expression.
The importance of the financial system cannot be overemphasized. It is the axle on which the wheel of economy revolves. A robust financial system correlates macro-economic stability needed to effectively power economic growth. African economies need an effective combination of development banking, vibrant capital markets and a network of commodity exchanges to redefine their financing structures and catalyze faster and greater industrial growth and achieve sustainable development. African economies need to re-invent their economies and evolve dominant market-based financing structures to catalyze industrial growth faster. The capital market is one of the most important factors of funding infrastructure with strong socio-economic impact.
As noted by the International Finance Corporation (IFC), the private arm of the World Bank, had noted that “Africa cannot adequately address its enormous development financing needs with existing funding sources. The private sector through local capital markets can help bridge the financing gap.’’ At an International conference on the capital market, in Kigali, in 2015, Jingdong Hua, IFC Vice President and Treasurer, also noted that, ‘’vibrant capital markets are the foundations for accelerating and sustaining economic development of any economy’’.
•Arize Nwobu Acs, is, Assistant Director/ Head, Research and Technical, Chartered Institute of Stockbrokers, Lagos. He wrote via [email protected]