Priorities for the African economy of tomorrow

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The African economy has been facing strong instability since the coronavirus pandemic spread across the continent. It is hitting public finances, of course, but it is also and above all hitting businesses and in particular the most fragile among them. If the IMF forecasts a 1.6% contraction in GDP in 2020, it is above all in millions of jobs lost, millions of bankruptcies, and millions of deaths that the health and economic consequences of this unprecedented crisis will be assessed.

See also: Kenya PEO

In practice, structural adjustment plans, negotiated within the framework of the IMF, will be implemented to finance the national rounds and attempt to raise the economies. These plans will, as always, have their conditions. The international community has learned a lot from the plans of the 1980s and 1990s and from the management of conditionality. At the same time, Africa and the world have changed since then. The hope is that this learning as well as this change will be integrated into the public policies that will be followed by the recipient countries, and suggested by the international institutions that prescribe them.

To ensure this, we must begin by discussing the strategic situation of the planet and its repercussions on Africa in terms of economic policies, the question of the African private sector, the specificity of oil-producing countries, and the environmental issue. It will also be necessary to address the essential issue of membership.

The world of yesterday is not the world of tomorrow.

The world of 2021 will not be quite the same as the previous one, even if it is impossible to predict its contours. But we can imagine that Western countries will want to shorten value chains. They will want to create or maintain strategic production capacities on their territory, whether national or extended, such as Europe. This movement will reinforce the major trends that began to emerge in the early years of the twenty-first century: robotization on the one hand, and the American and European balance of payments deficits on the other, combined with higher production costs in China and emerging Asia, will make “Asian-style” development strategies, based on manufacturing exports (China) and even services (India), problematic. We are likely to see an acceleration in the repatriation of industrial production capacity to OECD countries and strengthening of “local consumption”, which will affect food in particular.

In this context, Africa, especially sub-Saharan Africa, must rely more on its domestic continental, regional or national market. This is its best asset in this uncertain world. It is also a logical macroeconomic place. This market is indeed growing massively and surely. It is propelled by the acceleration of the demographic transition, which is leading to a demographic dividend from which the continent must capture the benefits.

Sub-Saharan Africa must bet more on its domestic continental, regional or national market. This is its best asset in this uncertain world.

Of course, some export niches will remain interesting. This is the case, for example, in the agricultural sector, where “consuming locally” will not exhaust all distant commercial movements, particularly in the field of plants. This will be all the more productive if the continent manages to climb the value scale and incorporate more value-added into its exports. Other agricultural sub-segments and certain industrial products (textiles, etc.) will provide opportunities: Africa can occasionally take the place of China and certain Asian countries in these value chains destined for these latter countries or the OECD countries, as Ethiopia is showing, despite all the limits that must be placed on this dynamic.

Finally, the field of services remains largely open: the evolution of European demography will make it structurally demanding for low-skilled labor, via immigration, but also, increasingly, for remote services, including skilled ones. The repatriation of migrant capital and the export of services also have an important role to play in an African economy that would gradually increase its skills through investment in education.

Future structural adjustment programs must build on these observations. They must not remain prisoners of the 19th-century policy designs that too often remain the mantras of prescribers.

 

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