Business Strategies In Africa
Essay by 24 • March 3, 2011 • 12,610 Words (51 Pages) • 1,719 Views
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Towards a Growth Strategy for Africa
Marcel Fafchamps, Francis Teal, and John Toye
REP/2001-06
Centre for the Study of African Economies
Department of Economics, University of Oxford
Manor Road Building, Oxford OX1 3UQ, United Kingdom
csae.enquiries@Economics.ox.ac.uk
November 2001
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Executive Summary
Now that China and India have found ways of growing out of poverty, attention has again
turned to Africa. The purpose of this report is to ask which engines of growth can be
activated in sub-Saharan Africa today.
After two decades of stagnation in the continent, discouragement is taking hold. The
focus of policy has shifted further and further away from growth-oriented interventions
towards welfare assistance. Yet, in the long-run, a growth strategy is the most cost-
effective way of dealing with poverty. This is true for two fundamental reasons: first,
growth lifts many of the poor out of poverty; second, it generates the government
revenues necessary for anti-poverty measures. A donor strategy that focuses exclusively
on short-term poverty alleviation is a dead end, condemned to last indefinitely.
Rapid growth, when it happens, is disruptive. Measures are needed to protect vulnerable
groups against disruption. In a growing economy, educating the poor is a good way of
helping them partake to increased aggregate prosperity. In a stagnating economy, the net
effect on poverty reduction is less clear. The rapid increase in education which occurred
in sub-Saharan Africa from 1960 to 1990 was not sufficient to generate growth.
Exporting out of Africa is currently the only promising avenue for growth. It is not
entirely understood why exporting countries grow faster, why technical progress is more
rapid in export oriented countries, and why exporting firms are more efficient. It may be
due to knowledge transfers, to the competitive pressures induced by exporting, or to gains
from using surplus resources not captured by standard trade models. Whatever the
explanation, the link between exports and growth seems indisputable. The further fact
that Africa represents a tiny fraction of world trade and that its exports are in many cases
below their level of three decades ago means that the potential for expansion is
enormous. Experience from various African countries such as Ghana and Uganda
suggests that export recovery can generate substantial gains quickly. In this report, we
focus on four sectors with significant export potential in sub-Saharan Africa:
manufacturing, agriculture, tourism, and mining.
A dramatic rise of exports out of Africa is essential for sustained growth in the continent
as a whole. This may come from manufacturing where long-term rates of growth can be
much higher than in agriculture. Successful industrialization would draw labour to
rapidly expanding cities and relieve the countryside from having to sustain the mass of
the poor.
Not all African countries will become manufacturing export platforms in the foreseeable
future. For many of them, agriculture, tourism, and mining offer the best prospects for
exports and growth. A long-term vision is essential. Africa will not revive its primary
exports without identifying new markets and raising productivity so that growth is
profitable. This can only be achieved via institutions and adequate technology combined
with the incentives to adopt innovations, many of which have long been available.
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For growth to take place, technology transfers and investment in physical and human
capital are necessary. While the engine of growth may be in the private sector, policy
intervention is required to create an environment in which firms can operate. The first
component of any such environment is a sound macroeconomic policy based on fiscal
balance and low inflation. Albeit there remain important areas of dispute regarding what
constitutes an appropriate macro economic policy, these disagreements are primarily
about means rather than ends. They are ignored here since we focus on ends.
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