Daily Maverick
Dailymaverick logo

Opinionistas

This is an opinion piece. The views expressed are not that of Daily Maverick.....

These are not the best of times for Africa - World Bank economist

Xolisa Phillip
By Xolisa Phillip
12 Oct 2022
Facebook
0
The seed that nourished Africa’s two-decade economic miracle – human capital development – has diminished and its erosion is responsible for the region’s downward growth spiral. The pandemic has unleashed an onslaught on the continent’s human capital development that is undermining Africa’s post-coronavirus economic recovery efforts. In its latest edition of Africa’s Pulse, the World Bank reveals the structural factors driving the backward slide.

In the post-pandemic context, Africans are poorer, hungrier and highly unlikely to escape the poverty trap, according to the World Bank’s latest assessment of the region’s economic recovery efforts. 

World Bank Africa chief economist Andrew Dabalen concedes: “These are not the best of times for Africa.” 

In its three-year cycle of devastation, the coronavirus outbreak has led to deep erosion in the human capital development Africa made in the past two decades. 

The region’s breakthroughs in human capital development drove, and sustained, the continent’s uninterrupted economic miracle – also known as the Africa growth story. 

However, it is now clear that the pandemic is not a one-off supply and demand side shock on African economies. Rather, its socioeconomic and fiscal after effects will linger much longer in the near, medium and long term.  

Published on 4 October, the recent edition of the World Bank’s Africa’s Pulse paints a post-pandemic scenario that poses all manner of dilemmas for the continent’s policymakers and decision-makers. 

The World Bank predicts that Africa will grow 3.3% in 2022 compared with 4.1% the previous year, marking a 0.3 percentage point difference. 

“That may not seem that bad,” says Dabalen,“but if you factor in population growth in Africa, it basically means less than 1% growth per person.”  

“That [low level of growth] is not good enough for poverty reduction,” Dabalen explains. 

Per capita income has also been on a downward trajectory. That further entrenches pre-existing inequities and widens the gap between the region’s rich and poor. 

For 2022, Africa’s per capita income will lift 0.7%, which the World Bank says “is insufficient to meet the challenging goals of poverty reduction and boosting shared prosperity in the medium to long term”. 

At its onset, the pandemic not only wiped out the continent’s employment gains, but also ravaged incomes while choking off prospects for alternative sources of prosperity. 

Between 2023 and 2024, per capita income is projected to climb 0.9% and 1.3%, respectively. 



Visit Daily Maverick's home page for more news, analysis and investigations



According to the World Bank, that pace of per capita income recovery is still too slow and “falls short of putting the continent back on the pre-pandemic path of poverty reduction”. 

Africa’s relatively weak relationship between economic growth and poverty reduction compounds the problem. 

Faced with feeble per capita income, Africa’s poor also do not have adequate social protection to fall back on. 

The pandemic-induced shocks undermining Africa’s economic recovery include limited fiscal space for sovereigns as a result of higher debt repayments.  

Furthermore, the deteriorating global growth outlook poses a threat to Africa’s export-dependent economies because that will mean lower foreign currency receipts. 

African economies have higher trading volumes with external partners than among the region’s countries, which is a structural hangover from the continent’s past.

That reliance on external trade remains a major vulnerability for Africa. The World Bank proposes, as a solution, strengthening regional integration to overcome this structural defect.   

Most of the observations in Africa’s Pulse apply to South Africa.

The World Bank forecasts a -1.9% reduction in the South African government’s spending in 2023, “with a negligible recovery in 2024”. 

Investment in the domestic economy has rebounded to 4.2% so far in 2022 and is expected to reach 4.9% in 2023. However, that is from a low base. 

Moreover, the improvement is largely attributable to private investment while “public investment continues to disappoint”. 

A particular bright spark in Africa’s Pulse is South Africa’s energy sector, whose infrastructure plans are expected to further boost investment.  

In 2023, the World Bank expects South African agriculture to support growth, industry to recover and the service sector to moderate.

Overall, however, the World Bank predicts further weakening of the domestic economy, citing structural constraints and persistent headwinds. 

In 2023, the World Bank expects the South African economy to slow down to 1.4% and rebound to 1.8% in 2024. 

The World Bank notes: “This weak performance is insufficient for the country to address the socioeconomic problems of high unemployment and rising inequality.”  

Indeed, these might not be the best of times for Africa in general and South Africa in particular. That means the region’s policymakers and decision-makers shoulder an even greater responsibility in ensuring they prevent the continent from plunging into the worst of times. BM/DM 

Categories:

Tags: