UNCTAD's Economic Development in Africa Report 2014, launched on 3 July, shows that there are structural problems in the pattern of growth in Africa and that these require a move away from consumption to coherent investment policies.
Africa cannot achieve sustained economic growth and transformation without diversifying the sources of its economic growth both on the demand and supply sides of its economies, UNCTAD's Economic Development in Africa Report 2014 argues.
"This year's report shows that investment will be critical to the future development of the continent," UNCTAD Secretary-General Mukhisa Kituyi said. "The report says that investment is a major driver of structural transformation, and will be critical for sustaining growth for employment and poverty reduction in Africa over the medium-to long-term. Of course, governance, policies and institutions that generate, utilize and catalyze investment matter enormously. These are key because investment rates in Africa are currently low relative to what will be required to achieve national development goals."
Subtitled Catalyzing Investment for Transformative Growth in Africa, the report says that Africa has experienced relatively high growth during the past decade but the nature and pattern of this growth has not resulted in more jobs and poverty reduction because consumption has been the dominant driver. Instead, the report says, a consumption-based growth strategy must go hand-in-hand with an increase in investment, particularly investment that which increases the capacity to produce tradable goods, to reduce the likelihood of current account imbalances in the future and to diversify sources of growth on both the demand and supply sides.
On the demand side, the report recommends balancing the relative contributions of consumption and investment to the growth process since it is evident that a consumption-based growth strategy cannot be sustained in the medium to long term. This is because it often results in such economic challenges as over-dependence on imports that in turn affects the development and survival of local industries, and job creation.
On the supply side, the report recommends that sources of growth on the supply side also need to be diversified, requiring a shift from low- to high-productivity activities, both across and within sectors.
The report shows that structural problems exist within Africa's recent growth from a supply or sectoral perspective, with many countries yet to go through the normal process of structural transformation characterized by a shift from low- to high-productivity activities, and a declining share of agriculture in output and employment, as well as an increasing share of manufacturing and modern services in output.