How can African countries capitalise on the current geopolitical changes?

This year Africa celebrates 50 years since the founding of the Organisation of African Unity (OAU); never before has the continent been so poised to reap the benefit of its enormous resources. Sweeping political and economic changes over half a century have reformed global power structures, reconfigured international relations and led to serious rethinking of development paradigms.

It is only befitting to recognise the significance of the African Union’s (AU’s) role in this transition. The OAU, established in 1963, laid the foundation for the unity of the African continent. It aimed to rid the continent of the remnants of colonialism and restore Africa’s dignity and pride after centuries under domination; promote the integration of the continent; and defend its interest in a Cold War arena. As the continent evolved, the OAU, heralded as the most notable result of pan-Africanism, was replaced by the AU in 2002. The AU symbolised a new era for the continent, aiming at accelerating the process of economic integration, resolving socio-political problems and intensifying continental unity, to enable Africa to play a more meaningful role in the global economy.

In just over a decade, Africa has experienced growth from only 2.1% in the 1990’s to 5% in the past decade. The future outlook remains promising as Africa’s economy is projected to continue growing, despite global financial market turmoil. Investor confidence has also been revived, brought about by drivers such as an increased prevalence of peace, democratic elections and improved governance. As a result, Africa has attracted more foreign direct investment (FDI). Africa has been experiencing an upward FDI trend, with US$47bn mark in 2011. In 2012, this upward trend has continued, with FDI registered at $50bn. Outward FDI flows from Africa nearly tripled in 2012, from $5bn in the previous year to an estimated $14bn.

How can Africa capitalise on the current trends?

Africans can take control of their natural resources

Africa’s industrial potential had been stifled by the legacies of colonialism which left behind weak institutions and an infrastructure designed to enhance extraction of the continent’s resources. Structural adjustment programmes had particularly negative effects on technological accumulation, human capital development and export performance. However, Africa’s resources wealth accounts for approximately three-quarters of the world’s platinum supply, half of its diamonds and chromium, one fifth of gold and uranium supplies, just over half of the world’s uncultivated arable land, with the potential to become the breadbasket for the world, and has gas and oil production in over 30 countries. With the abundance of resources and the rising global demand for them, Africa must manage its resources carefully.

Currently, there are far too many economies in Africa that are dependent on the production and export of primary commodities. These are generating prosperity and development in other regions instead of in Africa, exporting jobs and opportunities. The continent runs the risk of marginalising its own role in international trade if it does not add value to its commodities. Commodity-based industrialisation therefore offers the scope for value addition as well as forward and backward linkages. Ethiopia’s leather industry and Nigeria’s oil supply industry provide good yet random examples of linkages that are not only developing, but also deepening into high value-added activities. Such initiatives must become the norm.

Africa’s economic future will be determined by how it designs and implements effective policies to promote industrialisation. There is an urgent need to address infrastructure constraints and bottlenecks, facilitate the development of the commodity sector and linkages, boost availability of unskilled and semi-skilled jobs, provide job training in higher artisanal skills and deploy data driven evidence to inform planning. These all present opportunities for Africa and its partners to better collaborate without depriving Africa of the benefits of its resource boom.

Africa’s demographic dividend

Africa’s population is projected to double attaining close to 2.3bn people over the next 40 years. This will represent about half of the globe’s total population growth. Africa is also the only continent with a significantly growing youth population. Projections suggest that in less than three generations, 41% of the world’s youth will be African. By 2050, Africa’s youth will constitute over a quarter of the world’s labour force. By the end of the century, the continent will have the lowest dependency ratio in the world.

In addition, Africa is experiencing an unprecedented rate of urban growth. Projections indicate that between 2010 and 2025, some African cities will account for up to 85% of the population. This will mean a transition from a rural to a predominantly urban society, with the largest cities on the continent, Lagos and Kinshasa, growing to 15m people by 2025, and others such as Dar es Salaam reaching 7m. Cities in Africa generate approximately 55% of the continent’s total GDP relative to cities in developed countries that generate approximately 90% of their GDP. Being cognisant of the related challenges, such as the need to ensure essential services to cater for this phenomenon, the opportunities for economic growth, poverty reduction and human development are profound.

Approximately 54% of Africa’s youth is currently unemployed and more than three-quarters live on less than $2 a day. A correlation and lessons to be learnt can be drawn from Asian emerging markets, where 40% of its rapid economic growth between 1965 and 1990 was attributed to an increase in the working age population.

However, a youth population of such magnitude also indicates that the real challenge of the 21st century is the ability to address this demographic imbalance in a manner that will preserve the interests of future generations. A demographic dividend is needed. Inspired by Jean-Jacques Rousseau’s seminal work The Social Contract, there is need for a new intergenerational social contract that is driven by the necessity to balance the needs of the current and future generations; between a young Africa and an aging population elsewhere in the world.