East Africa has made significant economic progress in recent years. Over the last decade new resources have been discovered, economies have been growing and the middle class has expanded, beckoning foreign investors. But what does the future hold for the region?
According to Gabriel Negatu, East Africa Regional Resource Centre director at the African Development Bank, “the next 20 years look very attractive” for East Africa.
“[In] the last few years the economic performance of this region has been extremely impressive. The decline of the 1980s has been [over]turned and Ethiopia, Rwanda, Tanzania and Uganda have been some of the fastest growing economies in the world,” Negatu said at the recent East Africa Property Investment Summit.
Integration holds most promising prospects
“This region is already fairly integrated but is set to grow more and faster by integrating better. A borderless East Africa will also potentially create economies of scale. For instance, infrastructure will allow people and services to move freely, reducing the cost of transactions.”
The region’s integration will rely heavily on physical infrastructure including roads, railway lines and information technology, Negatu noted.
However, the infrastructure projects needed to connect the region require billions of dollars, money that is increasingly becoming “hard to come by”, hence the need for governments to make projects attractive to the private sector.
Jobs for the youth or else…
Young people are also a key ingredient in East Africa’s future success. Negatu described the booming youth population as a “double-edged sword”. If effectively harnessed, he said, the demographic dividend could be a major contribution to the economy, but if not, it could pose other dangers.
He warned that unless there are deliberate efforts to ensure growth is inclusive and sustainable over the next two decades, then “the slightest event could trigger a very strong reaction” from citizens as has happened in some Arab nations.
“It’s very easy to look at growth figures and to be positive, but… if we continue in the current trend of growth… that is not inclusive, then we stand the risk of having the ‘East African Spring’ in a very short period.
“I lived in Tunisia a couple of years ago when the Arab Spring broke out. If you looked at Tunisia before that incident it was a well performing society, the infrastructure was first world, the economy was robust, [the country was] peaceful and so on. [But] it took one sole individual to set himself on fire to unleash the Arab Spring. And this was done by the young generation.”
According to Negatu, youth employment and inclusion could “be a game changer” in the next 15-20 years, adding that expanding the private sector will be central to creating jobs.
Skills also need to match demand. While there is an influx of graduates in certain professions, emerging industries such as mining face skilled labour shortages.
“I am willing to bet that all the petroleum engineers in East Africa do not add up to 100. I am told most of the Kenyan mining engineers are in Australia because mining was not a priority [here] a few years ago. As the economy begins to transform and shift then we need to make sure the labour supply meets the demand, and not only in terms of numbers but in the quality of labour that is demanded.”
Negatu expressed optimism that East Africa’s private sector “will undoubtedly drive growth” in the region but urged governments to improve the business environment. He noted that while smaller economies such as Rwanda and Burundi have reformed in recent years, bigger countries like Kenya, Uganda and Tanzania remain sluggish.
Instability a concern
Instability, and its spillover effect on the economy, is also a key concern. In recent years there has been conflict in South Sudan, the Democratic Republic of the Congo (DRC) and Somalia, as well as repeated terrorist attacks in Kenya which has hampered sectors such as tourism.
“It is a very unstable region. This country [and] that country may be stable but conflict is not contained in one single country. Conflict has a very high spillover effect. What happens in Somalia spills into Kenya and into Ethiopia, what happens in South Sudan spills in all directions [and] what happens in DRC spills [into other countries].”