Crossing Africa’s t’s and dotting Africa’s i’s

I'm writing this on my ipad so please excuse crazy spelling…

I observed President Obama's visit to Africa from my working vacation vantage points on the southeastern coast of this vast continent. And I was chuckling to hear so many common themes in the speeches... Talking about Africa as if it is one place, emphasizing trade vs aid, the 'us versus them' approach to China... It was almost like the continent's story was coming into full view as a bestseller of development (albeit told in soundbites).

It got me thinking of how I would reflect on Africa's recent development story and coming challenges using standardized buzzwords and catchy slogans; and I came up with the idea of crossing t's and dotting i's... "what are the finishing touches needed to finish this development story?"

Forgive me for the apparent glibness of it, the motivation came partly from observing Maputo's morning vista as below. As you can see, it's tough to be in Africa!

When I look at African countries I am working in right now, it appears to me that various things are going very well, and make for a beautiful picture of economic development. I particularly observe three t's, trade, tourism, and tall buildings, that dominate discussion and the growing skyline.

In the trade category, one finds countries ramping up imports and export volumes with old and new partners. A 2011 OECD report indicates that trade volumes grew from about $200 billion in the mid 1990s to around $1,000 billion in 2008, and the countries Africa engages with are more diverse than ever (see the chart below).

Source: http://www.oecd-ilibrary.org/sites/factbook-2011-en/04/01/05/04-01-05-g1.html?itemId=/content/chapter/factbook-2011-37-en

Africa's tourism potential has also been emphasized in recent speeches and indeed has been an area of growth for some countries. A 2007 paper on the topic (by Bichaka Fayissa and colleagues, at http://www.mtsu.edu/economics/FacPapers/TourismAfricawp.pdf) noted that the 1990s saw a "rise in tourist arrivals from 8.4 million to 10.6 million and receipts growth from $2.3 billion to $3.7 billion" and argue that tourism helped a range of countries grow their economies into the 2000s as well. It helps to have beautiful sunrises and palm trees, a la Maputo.

Beyond trade and tourism, there is the 'tall building' phenomenon that one sees across the continent. Cranes, cranes, and more cranes; building hotels, houses, shopping malls, and a range of other new structures. Sherelle Jacobs wrote about it in 2012 recent article in African Business, focusing on 3 countries in different geographic locations on the continent (see http://www.questia.com/library/1G1-286828246/construction-in-africa-is-the-boom-here-to-stay)

Nigeria's construction industry is expanding at a solid rate: according to Business Monitor International, year-on-year growth climbed to 12.3% in 2011 and should be around 9.7% in 2012. It is predicted that the sector will achieve an overall value of $3.3bn this year and $10.1bn by 2021. In Angola, the construction sector value is projected to increase by no less than 14% in 2012. Even in Zambia, the industry is also predicted to undergo an average growth rate of 9.3% from 2011 to 2015 and from 18 to 19% of GDP.

So far a beautiful picture...ships coming and going, tourists visiting with their dollars, construction booming. But is Africa crossing its t's? I worry that the answer is no, partly because of some i's that need dotting: innovation, inclusion, institutions, and (broader) infrastructure.

My first concern is with the lack of what I might call 'innovation value' in African trade. A 2010 McKinsey report shows that a third of Africa's growth story in recent years is all about natural resources (http://www.mckinsey.com/insights/economic_studies/whats_driving_africas_growth). The authors made it a positive story, saying that other factors were driving two thirds of the growth. But many of the other factors involved little more than the production and sale of non tradable goods and services (reflected in growing domestic consumption, construction, etc.). My worry is that Africa's trade story has more old parts to it than the new parts it needs. Indeed, those trying to fill the ships with Africa's natural wealth are now more diverse than ever, and the natural wealth they are seeking to take away is not just gold and diamonds, but outgoing trade is still mostly about commodities with little value add or innovation...or what my colleagues Ricardo Hausmann and Cesar Hidalgo call 'complexity' (see Ricardo Hausmann, Cesar Hidalgo, et al. "The Atlas of Economic Complexity". The Observatory of Economic Complexity (Harvard HKS/CDI - MIT Media Lab).

The work on economic complexity shows that African countries trade in low complexity products and are far far away from getting the kind if value from trade that they need to truly develop. South Africa's trade is the most complex (here you should read things like 'innovative', 'high value', 'capable of producing jobs and growth') in Africa, but it is 55th in the world (and the complexity is declining). Other African countries tend to have extremely low levels of economic complexity and although they have been becoming more complex in recent years it is simply not enough to make trade the promising avenue for success that some suggest it could be. The very reliable Wikipedia has a reference page that shows economic complexity data that seems quite accurate, http://en.wikipedia.org/wiki/List_of_countries_by_economic_complexity, where the following graph shows African countries with lower complexity than other continents (the lighter the color of a country, the lower the economic complexity). Certainly one can see that poorer countries have lower levels of complexity, and this is a major reason African countries are stragglers, but one does need to ask what African governments are doing to promote innovation and so enhance complexity. My biggest concern is that the recent findings of oil, coal and other minerals will actually lead to greater dependence on such products and a satisfaction with staying non complex instead of a drive to innovate.

I know the graph below is old (2005) but it further illustrates the point, I think. It shows that African trade--to China, the USA and beyond--has involved fuel and other natural resources leaving the shores, and higher complexity goods arriving. Not, in my opinion, a sign of innovation...and not a trade relationship that will lead to sustained growth and the kind of development story we all want for the continent.

https://www.google.com/search?q=aftocan+trade+natural+resources+%25&ie=UTF-8&oe=UTF-8&hl=en&client=safari#client=safari&hl=en&q=african+trade+natural+resources+%25&spell=1&sa=X&ei=i73TUcD_MMrJhAeG8oDQAw&ved=0CCgQvwUoAA&bav=on.2,or.&bvm=bv.48705608,d.ZG4&fp=8636a2d9edc76375&biw=1024&bih=672&biv=i%7C2%3Bd%7C3ou0WTltd1sl5M%3A

Crossing the t's and dotting the i's means promoting innovation and increasing complexity in African economies, and promoting outward trade based on much more than natural resources. I would love to see us measure this for different countries, examining the way economic complexity indexes change over time, and how export baskets become diversified.

Beyond innovation, I am concerned about inclusion in Africa. When I look at the trade, tourism and tall buildings phenomenon, I am generally seeing activity by the higher income for the higher income. The trade dollars go to those who control the resources, and the cranes are building hotels and shopping malls in the big cities, while the need for hospitals and schools and roads and power facilities goes largely unmet. I don't want to sound overly revolutionary here, because there are good things going on in these areas... But is the growth inclusive enough? In most of Africa I have to say no.

One of the simplest indicators I have for inclusion is the degree to which a country registers its people...making them part of the formal political and economic landscape. The record of such registration is really weak for most of Africa, as in other poor countries. I have blogged about this before and think we should be paying more attention to the issue. Here are some of my past thoughts (partly updated) on looking at the poor performance of many African countries on this indicator (see the table below and full blog entry at http://matthewandrews.typepad.com/mattandrews/2012/10/b.html):

The first thing this kind of data shows is that many many people are not registered in their countries. When I examined 100 countries I found that as many as 50% of the children under 14 were probably not registered. Wow. This is so disempowering. And it is such a basic and unfortunate constraint on their participation in the educational, economic, social and political life of their country. If most people are not registered in places like Liberia, don't we think that governance [and economic vibrancy and development] is limited as well: we might promote democracy but many are not registered to vote; we might provide schooling, but many are not in the system to attend; we might think that good governance involves having a formal rule of law, but if people are not registered how do they access and engage with the formal legal system [; we might see trade, tourism and tall buildings but these are not produced inclusively and the gains are not shared much either, leading to narrow economic development rather than broad development]?

I would love to see this kind of measure used as an indicator of both governance and progress in African countries (and in other poor countries). The table shows what progress we would see if this kind of indicator were used as a post 2015 goal....focusing on less than a15% increase in registration would see 14 million additional under 14 Nigerians with a chance of 'inclusion' in their formal systems, and between 3 and 5 million more in Uganda, Sudan and Ethiopia. Other key indicators of inclutsion and the inclusiveness of growth could include (sorry for using the word again and again) new and old measures of inequality and measures of participation in the formal economy. The latter is such an important indicator for African countries because so many people are not engaged in the formal economy. Increasing this engagement will be a sign of progress and inclusion.

Crossing the t's and dotting the i's means promoting inclusion in African economies. I would love to see us measure this for different countries, examining the growth in birth registration and formal sector economic participation over time, and paying more attention to issues of inequality.

The trade, tourism and tall building gains in Africa are further limited by what is generally agreed to be a weak institutional and infrastructural foundation in most of the continent's countries. The rules of the game simply don't do what is required to facilitate the kind of shared, innovative growth needed. Ditto with the infrastructure-and here I refer to hard infrastructure like roads, power, and water facilities and soft infrastructure where the continent builds its human resources (especially educational, training, scientific and agricultural knowledge generation, etc. entities).

The growth I see in countries has stretched the many countries' extant rules of the game and infrastructure to the limits, and we are seeing all sorts of cracks across the continent. I don't like many measures of corruption for a variety of reasons but one needs to pay attention when ALL the indicators show that African countries perform worse than other countries. And it seems obvious from most measures that governments have very little control over their budgets, and their civil service systems, and police forces are feared, and more. Not all countries are in this boat, but it is not too inaccurate to generalize Africa now as the new Wild West, with general lawlessness growing at the same time as the continent emerges economically. How do you game the Wild West to allow more stable and mature growth profiles to emerge?

Amazingly, this story of weak institutions plays out against a backdrop of probably the greatest effort to build new rules of the game in the history of the world. Working with donors, African countries have spent billions of dollars and pursued thousands of reforms designed to introduce new, good, better and best institutions into their countries. I have blogged a lot about this and it is the focus of my new book. The book is titled The Limits of Institutional Reform in Development because the results of much of this institutional reform drive have indeed been limited. Governments have better looking laws and systems that are commonly not used or implemented or enforced. So Uganda has the best anti corruption laws in the world and one of the biggest (and growing) corruption problems. Even a country like South Africa looks better on paper than it does in practice, outperforming many rich countries on metrics like the Doing Business indicators but managing to do business relatively poorly (sporting a GDP growth rate that is perpetually lower than comparators, and an unemployment rate that speaks to a stagnating economy...not one where business is being done).

Africa's institutions are pretty much like those some colleagues found when looking at drivers testing regimes in India. They found that cities were developing state of the art, best practice, testing regimes that made their governments look modern and efficient. But very few people actually took the test. I call it the What you see is not what you get syndrome and think it is endemic in Africa...and undermines the trade, tourism and tall building gains everyone alludes to when speaking of Africa's new economic boom.

Interestingly, one can see the institutions problem in Africa when looking at road safety. The continent has fewer vehicles per head than other regions of the world but many of the countries have the world's highest death rates on their roads. A 2013 World Health Organization report found that "The regions that displayed the highest rate of road traffic deaths per 100,000 people were Africa (24.3), the Eastern Mediterranean (21.3) and the Western Pacific region (18.5). The lowest rates were found in Europe (10.3) and the Americas (16.1)." (http://journalistsresource.org/studies/environment/transportation/road-safety-motor-vehicle-accidents-surveying-global-us-data#)

The table here shows that 42 of the worst 56 countries on traffic mortality are in Africa!

Traffic mortality per 100,000, age adjusted	2007	Traffic mortality per 100,000, age adjusted	2007	Traffic mortality per 100,000, age adjusted	2007	Traffic mortality per 100,000, age adjusted	2007
Eritrea	62.9	Iran	42.6	Morocco	33.4	Namibia	38.3
Libya	50.4	Liberia	42.5	Zimbabwe	33.2	Tunisia	38
Egypt	47.5	Syria	42.5	Malawi	33	Senegal	37.9
Cook Is	47.4	Botswana	41.7	Cameroon	32.8	Benin	37.5
Niger	46	Guinea-Bissau	41.4	Sierra Leone	32.8	Sudan	37.4
United Arab Emirates	45.5	Mauritania	41.1	Swaziland	32.5	Sao Tome and Principe	37
Angola	45.4	Afghanistan	40.7	Zambia	31.8	South Africa	37
Iraq	44.6	Chad	40.6	Saudi Arabia	31.2	Ghana	36.9
Ethiopia	44.5	Madagascar	40.4	Kazakhstan	31.10798	Burkina Faso	36.6
Kenya	43.9	Rwanda	40.1	Cape Verde	30.9	Congo, Rep.	36
Jordan	43.5	Nigeria	39	Lebanon	30.8	Yemen, Rep.	35.8
Tanzania	43.2	Comoros	38.6	Burundi	30.1	Lesotho	34.6
Mozambique	43	Mali	38.6	Uganda	29	Pakistan	34.1
Gambia	42.7	Central African Rep.	38.4	Congo, Dem. Rep.	38.4	Togo	33.5

 

The same report shows that many African countries have made great steps introducing new road safety laws, sipped limits, seatbelt requirements and the like...but the death rates remain high and growing. The laws that exist are not enforced, and in many of the countries there is very little money and attention focused on fostering better implementation of these new institutions. The rules of the game now exist on paper but getting more from them is proving difficult. The result is growing road deaths, and we should expect more as Africa gets more cars on the roads.

Crossing the t's and dotting the i's in Africa requires closing the gaps between the institutional forms that exist on paper and the institutional functionality we see in practice. I would love to see us measuring this progress by looking at the results of institutional change in African countries...not just the forms. We could start by looking at progress in combating road deaths as this would require a variety of REAL institutional reforms in the continent. Other measures like maternal and under five mortality rates reflect on broad sets of REAL rules of the game in African countries (influencing resource allocations, access, power structures in countries, and more) and could give a really good measure for us to use in seeing if governments are being serious about improving their institutions.

Beyond these service delivery metrics, I think we should pay more attention to some key indicators showing whether governments have any control over their resources...and if governments are being more open about what they do with these resources. I like the Open Budget Index for this but would want a focus on the degree to which countries are open about budget execution (not just formulation). As readers of my blog know I also like the Global Integrity measures because they allow us to see the quality of laws, implementation of such, and gaps between laws and implementation. Looking at data in this way helps us see the fakers from the others. And we should all be serious about saying that faking is not OK...if a country can implement laws that are not quite world class it is much better than not implementing laws that are world class.

I'm running out of steam and have not even started talking about infrastructure yet. But my concern here is that we are not building enough of the things we need...infrastructure to help us expand our productivity and avenues to build our scientific, managerial and creative know-how. The cranes on the Maputo horizon, and marring my view of the Indian Ocean, would be better deployed in so many places other than the luxury residence going up (probably for some new coal billionaire or for a foreign head of some development organization). More complex, demanding and public-oriented infrastructure is needed...in roads, universities, power stations, and the like. It seems that infrastructure for public good is less valuable in Africa than infrastructure for private benefit, however.

This post is much longer and more rambling than I thought I would produce at the start. I thought then that I would be writing about the finishing touches needed in Africa's development story. I guess that, in my opinion, we need more than an exercise of crossing Africa's t's and dotting its i's. There is a lot to build on on this continent. But the storyline still needs much more substance before I see it as a best seller.