CURRENT ECONOMIC AND SOCIAL DEVELOPMENT

By Alan S. Gutterman1

1 The material in this report is derived from a discussion that will appear in Organizational Management and Administration: A Guide for Managers and Professionals by Dr. Alan S. Gutterman and is presented with permission of Thomson Reuters/West. Copyright 2011 Thomson Reuters/West. For more information or to order call 1-800-762-5272. Dr. Gutterman is the Director of the Center for Management in Developing Countries [www.managingfordevelopment.org]. The information in this report is based upon, and adapted from, United Nations Economic Commission for Africa, Overview of Economic and Social Conditions in Africa in 2010 (Addis Ababa, Ethiopia: United Nations Economic Commission for Africa and African Union Commission, 2011) ("UNECA 2010 Report"). 2 Id. at 2.
3 Id. The United Nations Economic Commission for Africa ("UNECA"), in a paper published with the African Union Commission, has reported that Africa appears to have weathered the recent global economic crisis and sustained and strengthened its economic recovery in 2010 by achieving an average GDP growth rate of 4.7%, which compared to a 2.3% increase in 2009. For the continent as a whole, real GDP per capita increased by 2.4% in 2010. While UNECA noted the general uptick in economic activity in 2010, notice should be taken of variations in the rate of recovery across countries and sub-regions, a subject covered in more detail below. For example, as has been the case for the last decade, oil-exporting countries experienced stronger growth than oil-importing countries (5.4% to 3.9%); however, UNECA pointed out that one significant development was the apparent growth of the non-oil sector in the oil-exporting countries, presumably an attempt by those countries to diversify their economies. UNECA suggested that if this trend were to continue and those countries were indeed able to achieve success in their non-oil and non-mineral sectors then Africa might be able to realize its potential for becoming the fastest-growing continent in the world from 2050 to the end of the current century. For the near-term, expectations were that African growth would continue in 2011 at an average rate of around 5%.2 UNECA highlighted several positive factors as provided the foundation for the economic recovery in Africa, including "the rebound of export demand and commodity prices; increased inflows of foreign direct investment especially in extractive industries and aid; return of tourism; investment in infrastructure associated with countercyclical policies adopted by many African countries; increased activities in the service sector, particularly in telecommunications, higher consumer demand; and good harvests in some countries."3 As noted above, progress varied across sub-regions and countries throughout Africa, confirming that it is impossible and unwise to generalize when discussing economic conditions and performance in Africa given that different factors are in play based on local conditions. UNECA reported that the best performing regions in 2010 were East Africa (6.8%) and West Africa (6%), followed by the main oil-producer North Africa (4.7%), Central Africa (4.3%) and Southern Africa (3.3%).
4 Specific comments on each of the regions are useful5: 4 Id. at 4.
5 Id. at 5-6. West African countries benefitted from high oil prices in 2010; however, revenues from non-oil activities also grew in several countries including Nigeria, Ghana (increased activity in the construction and services sector), Sierra Leone (strong performance in agricultural and mining sectors) and Liberia (increased earnings from rubber exports). However, other countries, such as Côte d’Ivoire, Guinea and Niger, experienced weak growth due to political disturbances, security issues and power shortages.
A number of countries in East Africa, notably Ethiopia, Rwanda, Tanzania and Uganda, posted impressive growth figures for 2010 and UNECA took specific note of expansion of industrial services sectors, especially telecommunications and construction; increased agricultural output (Ethiopia); increased mining output (Tanzania) and continued robust investment in donor-funded infrastructure development (Ethiopia and Tanzania).
Growth in the oil-producing region of North Africa was also supported by a variety of other factors, including increased government spending (Libya and Mauritania) and expansionary fiscal policies (Egypt), robust activity in non-oil sectors such as agriculture, construction, mining and services (Mauritania and Sudan) and rising industrial output and investment (Tunisia). Minor impediments to growth included economic problems being experienced by key trading partners in the European Union (Tunisia) and downturns in agricultural production (Morocco).
Southern Africa experienced relatively strong growth for much of 2010; however, progress slowed substantially during the last quarter due to weakening of private consumption. While the region trailed the rest of the continent with respect to growth, countries such as Malawi, Mozambique and Zambia grew more than 6% and Botswana and Namibia recovered to pre-crisis levels. Factors contributing to growth included the investment and revenues associated with the FIFA World Cup in South Africa, increased export activities, expansion in the mining sector (Botswana, Malawi, Mozambique, Namibia and Zambia) and bumper harvests (Mozambique and Zambia). Zimbabwe benefitted from an improved macroeconomic environment, increased industrial capacity and manufacturing output and an upturn in tourism.
Central African countries enjoyed only modest growth in 2010, continuing the trend established in 2009, and UNECA noted that all of the Central African countries, except Republic of the Congo, expanded by less than 5% due to lack of export diversification, political and security uncertainties (Central African Republic) and declining oil production (Equatorial Guinea, Gabon and Cameroon). UNECA did point out that there was evidence of strong expansion in the non-oil sector and increased mining activity in oil-producing countries such as Equatorial Guinea,
　
Gabon and Cameroon; however, these developments were not sufficient to generate the extraordinary levels of growth seen in other parts of Africa.
Inflation rates generally declined in Africa during 2010, dropping from 8.3% in 2009 to 7.2% in 2010.6 UNECA noted that this trend, which was expected to continue in 2011, could be attributed to increased supply of agricultural products in some countries, aided by good climatic conditions that contributed to large harvests, increased food supply and a corresponding decline in consumer prices in many countries; the strength and stability of some currencies; excess capacities and competitive pressures across the continent. The drop in inflation allowed most African countries to adopt monetary policies that were accommodative or neutral. Increases in budget deficits were observed due to implementation of expansionary fiscal policies to support recovery efforts and this eventually led some countries to tighten their fiscal policies and consolidate their budgets. There was a moderate widening of current account deficits across Africa in 2010 due to a variety of factors including robust import growth fuelled by large amounts of public investment, rising private demand and increasing food and energy prices.7 6 Id. at 8.
7 Id. at 2.
8 Id. at 6.
9 Id. at 2.
10 Id. at 10-11. UNECA reported that the economic recovery had not, however, cured many of the economic and social problems that have haunted Africa for decades. For example, economic growth had not been accompanied by any meaningful reduction in unemployment, which remains high in general and is particularly acute among the youth and vulnerable groups. UNECA observed that the high level of unemployment in many parts of Africa is attributable to various factors, including education quality, the narrow-based economic structure of the African countries that depend on capital-intensive extractive sectors with few forward and backward linkages with the rest of the economy, rapid population growth and imperfections in the labor market.8 UNECA noted that high unemployment and food prices, which remain high even though inflation has subsided a bit over the last few years, have fanned frustration among large segments of African society and contributed to the political and social unrest that has been erupting in many countries, particularly in North Africa. UNECA blames the lack of jobs and the resulting poor social outcomes on the failure of African economies to achieve meaningful economic diversification and reduce their heavy dependence of production of commodities and exports.9 One of the most important findings reported by UNECA was unsatisfactory progress toward the achievement of social development goals in Africa. UNECA provide a status report on the situation in a number of different areas, including the following10:
Progress toward reduction of absolute poverty was slow during 2010 and UNECA reported that "[p]overty rates remained chronically high and the positive economic
　
growth did not result in meaningful job creation and higher income for the poorest segments of the population". UNECA cautioned that unless strong economic growth can be translated into employment creation and benefit for the poorest sectors of African society, a substantial percentage of the working population in sub-Saharan Africa is in danger of falling below the extreme poverty line.
Progress was reported with respect to eradication of extreme hunger and a number of African countries were able to reduce their levels of malnutrition during 2010; however, UNECA remained concerned about whether this trend could continue if international food prices continued to rise.
Primary school enrollment, an important educational indicator, increased by 18% between 1999 and 2009; however, the quality of the education remains suspect and UNECA noted problematic completion rates of primary school and high pupil-to-teacher ratios. A related concern was that primary education was disproportionately emphasized at the expense of creating opportunities for development of the higher educational skills that are required in the job market, a situation that UNECA cites as one of the "major drivers of unemployment".
UNECA did report improvements in women empowerment and gender equality in 2010, particularly with respect to access to primary school education. Some countries showed significant progress with respect to increasing the participation of women in decision-making (e.g., women in Parliament) and providing better access for women to higher education opportunities; however, UNECA noted that gender equality remained a concern in other areas such as employment and income.
UNECA reported modest progress with respect to a range of health-related measures of development, including reduction in the under-five mortality rate, albeit not as fast as authorities had hoped; an overall decline in maternal mortality; significant improvements in coping with the HIV/AIDS pandemic; and progress with respect to access to safe drinking water and improved sanitation. However, progress was not uniform throughout Africa and, for example, several countries experienced increases in maternal mortality rates and there is evidence of inequities in access to safe drinking water based on income and geographic location (i.e., residents of urban areas are much more likely to have clean water than those living in rural areas).
UNECA concluded that although Africa has made important progress toward some key social development goals and has experience strong economic growth over the last few years, significant challenges remain and steps must be taken to address several key factors and issues. First of all, while economic growth has been achieved, it has yet to reach the level necessary for reaching various social development goals and the growth that has been achieved is too dependent on the primary commodity sector that has low employment elasticity. Second, UNECA urges African governments to place social development high on their agendas and to commit to investing in the resources necessary for the requisite level of economic growth, such as allocating sufficient resources to primary education. Third, initiatives for promotion of broad-based and shared growth must be launched to reduce poverty through creation of more employment opportunities. Finally, African governments and business organizations must cope with "inequality" on a number of levels. UNECA reported that "Africa is a highly unequal continent on many indicators, second only to Latin America. In addition to historically high inequality
between rural and urban areas, the continent is characterized by high horizontal inequalities, reflected in the exclusion of many social groups from actively participating in the social, economic and political processes in many countries."11 11 Id. at 12-13.