Africa's reforms should balance growth, equity, and sustainability concerns, including protecting society’s most vulnerable, particularly youth and women, who tend to be left behind during economic transformations.
For decades, economic diversification has been a policy priority for low- and middle-income economies. Unfortunately, this goal continues to elude Africa.
Africa is home to eight of the world’s fifteen least economically diversified countries. It is this reality that weakens the foundation of our economic transformation and slows growth progress.
It also makes these countries particularly vulnerable to sudden external shocks, as the pandemic-induced disruption of tourism and oil-dependent economies has illustrated.
It is for most of these reasons that the 2021 African Economic Conference (AEC) urged African countries to implement crucial governance and economic reforms if they are to see the continent through a historic crisis brought on by the Covid-19 pandemic.
This couldn’t be further from the truth. The richness and the capacity that the continent has doesn’t deserve to have people living in such poverty.
The next few years are critical for Africa. It needs to make the right decisions to fight extreme poverty.
The three critical areas that need urgent attention include human capital, institutions, and infrastructure.
With the theme of this year’s African Economic Conference being “Financing Africa’s post-Covid-19 development,” it is clear that the continent is not out of the woods yet, which is why there was a call for universal vaccine access to curb the spread of the coronavirus.
There is an even stronger need to close the huge financing gap for the continent to build back bolder, bigger, better, and sustainably.
Going by the current trends and economic outlooks, many African countries face the risk of defaulting if the G20’s Debt Service Suspension Initiative is not extended beyond this year.
The bigger risk is that countries will fail to borrow and service their debts as they reach the 70-75 percent debt ratio.
Thus, new strategies for financing Africa’s Covid-19 pandemic recovery, including domestic resources, and a rethink of the global financing architecture are needed, especially given the International Monetary Fund’s Special Drawing Rights.
Another solution lies in one of the continent’s most valuable resources: young people. Africa must invest in the emerging generation, for growth since it is the fastest-growing demographic group in the region.
We have to ride on the confidence of the young people. Africa’s ability to make it out of poverty and inequality depends on this spirit of the youth.
Done correctly, Africa could evolve into a continent where domestic resources account for the majority of development investment. But this would require “urgent and coordinated action to stop the leakage of $90 billion of illicit finance flow that leaves Africa every year.”
Given Africa’s weak global growth prospects and substantial downside risk, Africa’s economic policies must strike a balance between supporting growth and creating the fiscal space to respond to emergent economic challenges.
What this means is that countries need to execute on fiscal consolidation now, particularly in highly indebted countries.
The reforms should balance growth, equity, and sustainability concerns, including protecting society’s most vulnerable, particularly youth and women, who tend to be left behind during economic transformations.
Tackling corruption decisively would also help raise additional resources and redirect them to growth-friendly areas while restoring the integrity of institutions. This would in turn spread economic benefits more widely within and across countries.
This is a time to act boldly and swiftly to ensure we don’t confine Africa’s youth to the margins of global economic activity.