10.09.2012

Earlier this month, the World Bank released its biannual
publication, Africa’s Pulse, which examines Africa’s economic situation. The basic conclusions of
this article were highly optimistic, arguing that despite the global economic
downturn, African economies have been consistent in raising GDP rates over the
past decade with little impact from the 2008 financial meltdown. The authors of
Africa’s Pulse claim that these growth rates seem to be sustainable for the
future, especially with recent discoveries of more natural resources.

The publication states that sub-Saharan Africa
is one of the world’s fastest developing regions, with annual growth rates around 5-6%. Why such growth?
The authors claim that it is because of discoveries in new natural resource
reserves, expansionary government spending, and increased urbanization.

Great – the overall economies in sub-Saharan
Africa are growing, but that does not necessarily mean the people are profiting
from this growth. GDP growth rates are known to be poor indicators in increased
standard of living for the obvious reason that if GDP rates rise, that does not
mean the revenue is being reinvested in the general population. But this seems
to be a point that this publication seems to forget in all of its praising
of African economic growth.

The problem I have with this report is its claim that urbanization is one of the leading factors of economic growth. The report
claims:

Together with rapid
population growth and urbanization, the demands for better social and economic
policies have been growing. With rapid population growth Africa is also
urbanizing rapidly, with deep implications for social and economic opportunities.
No country has ever reached high income with low urbanization. Today, 41
percent of Africans live in cities, with an additional one percent every two years.
By 2033, Africa – like the rest of the world – will be a majority urban
continent. Urbanization and development
go together. With a large urban consumer base, firms and customers benefit from
scale economies.

Problem #1: Demands
≠ Action

The report claims
that with urbanization there have been increased demands for social and
economic policies. Sure, this may be true that the demands from those
moving to urban areas are increasing, but what the report fails to acknowledge
is whether these demands are being met by the government. It means
nothing for those living in urban slums if they demand for better economic and
social policies all day and night unless their demands are heard and acted
upon.

The Economist recently released a chart comparing
urbanization and GDP per capita in Asia and Africa. The results show that perhaps those
calling for increased urbanization because it leads to more wealth may be
wrong. While urbanization has been relatively synonymous with GDP per capita
growth in Asia that has not been the case for Africa (especially in nations
like Liberia – although there are clearly other factors at play here as well).

As Tom Murphy points on in his post about this chart, these graphs lack
significant data – for example, these are only a handful of samples from each
continent, which might perhaps skew the data. However, the basic trend these
graphs illustrate is interesting.

Although urbanization is relatively good in
areas such as decreasing ethnic animosity, it must be remembered that urbanization will not solve all of Africa’s problems.

Sure, perhaps it might be in the West’s best
interest for Africa to urbanize, but it might not be Africa’s best option. This
may just be completely off-based thoughts of mine, but increased urbanization
in Africa would benefit the industrialized countries of the West because it
means more consumers for the world’s goods – what capitalist economy wouldn't want that?

Furthermore, urbanization also means more
participants in non-agrarian sectors of the economy, also a bonus for the West.
But what all the praise for urbanization forgets is about making use of Africa’s
agriculture. If more people are moving from rural areas to cities, then the agricultural
sector will start to dwindle – not something that would be good in the long run
in my opinion.

For all those who claim that urbanization is the
panacea for Africa’s problems, then tell that to those living in Kibera or
those living in Freetown’s slums. Urbanization does not look so shiny from these
perspectives.

Before we celebrate the end of African poverty
as we know it, we need to look past what misleading information the facts and
figures might tell us and look closely at where the money is going. If it’s
going into the pockets of government officials, then it obviously is not doing
much good.

One such misleading figure is this map that
shows the middle income countries in Africa and those projected to be middle
income in the near future. Perhaps it’s just me, but this is highly misleading.
According to the graph, South Sudan is middle income. My question is: Middle
income for whom?! Some of the countries labeled as middle income in the
graph are laughable, such as Equatorial Guinea (I’m so glad the government is
living at high income standards while the rest of the population suffers as a
result of government despotism).

All in all, the growth rates coming from Africa
look promising for a more prosperous future for the continent. And yes, there
has been undeniable growth. But we need to remember to ask ourselves: who is
benefiting from the national economic growth and is the growth sustainable
(i.e. not reliant on cyclical commodities like natural resources)? There are
many things standing in the way of the future of economic growth across Africa,
and one of those is politics. But I’ve already rambled enough for one day.

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