Six of the 10 fastest-growing economies of the last decade were in sub-Saharan Africa.
By: DANIEL W. YOHANNES AND MO IBRAHIM
Long a symbol of stagnation, the African continent is experiencing a reawakening. Poverty and hunger are still widespread problems, but Africa’s growing middle class is creating business and investment opportunities that are among the best in the world. With the right trade policy and development assistance, we can unlock the potential of a thriving private sector and lift millions from poverty.
Six of the 10 fastest-growing economies of the last decade were in sub-Saharan Africa, the Economist recently found. And over the next five years, the average African economy will outpace its Asian counterpart. From telecom to financial services, extractive industries and consumer goods, Africa is open for business.
Yet challenges remain steep, from export tariffs that stunt development to the dismal shape of roads, electricity grids and other infrastructure that prevent businesses from getting their goods to market. Transport costs in Africa can be as high as 77% of the value of the exports. This is where smart development assistance must play a role. Two excellent examples that work hand-in-glove can be found in the United States, with the African Growth and Opportunity Act (AGOA) and the Millennium Challenge Corporation.
Enacted in 2000, AGOA reduces the tariffs that African exporters face in U.S. markets while providing technical assistance to help them take advantage of the legislation. In 2010, the initiative brought in $44 billion in African export earnings, a more than 438% increase since its inception in 2001, according to the U.S. International Trade Commission. Overall, calculates former Assistant U.S. Trade Representative for Africa Rosa Whitaker, the effort has created more than 300,000 African jobs.
While that law opens the U.S. market, the Millennium Challenge Corporation helps African exporters take advantage of it. In partnership with African governments, the corporation funds projects that build trade capacity, from irrigation systems that boost productivity to airports and seaports for shipping cargo.
To qualify for financing, partner countries must meet international standards for good governance, invest in their citizens, and ensure economic freedom. This means making business-friendly policy reforms, such as fighting corruption and eliminating the red tape that suffocates entrepreneurship. These are many of the same standards that businesses look for when deciding where to invest capital.
Trade and development policies often conflict with each other, but in this case the U.S. government and the Millennium Challenge Corporation have devised a coherent approach to foster the domestic and international conditions that will enable Africa’s private sector to thrive.
Now we should be working to expand opportunities for AGOA-approved goods in sectors where Africa has significant potential for growth, like agriculture. Africa accounts for 60% of the world’s arable but uncultivated land, and although 70% of Africans are involved in agriculture, the continent still faces considerable hunger and malnutrition.
The United States is doing its part by investing in agriculture projects through the Millennium Challenge Corporation. But, together with African governments and businesses, more needs to be done to build the production capacity of African farmers and improve their links with U.S. markets.
America has always given generously to the cause of poverty reduction in Africa, but moral leadership is not the only interest at stake. Other nations seeking to gain a foothold in emerging African markets are investing heavily in their development. Now is not the time to back away. The economic future and national security of the U.S. are equally compelling reasons to invest in Africa’s growth.
Mr. Yohannes is CEO of the Millennium Challenge Corporation. Mr. Ibrahim is chairman of the Mo Ibrahim Foundation and a board member of the global antipoverty advocacy group, ONE.
Article originally printed by the Wall Street Journal, June 27, 2011
