Economic growth for Africa: the sustainable way

20 September 2012

Experts at the UNCTAD Trade and Development Board session today said African countries will have to make major structural changes to their economies -- and should look at it as an opportunity to get in on the ground floor of green economic growth.

Today’s session of the Trade and Development Board focused on the topic “Towards sustainable structural transformation in Africa: challenges and opportunities.” 

UNCTAD’s Economic Development in Africa Report 2012, which addresses the subject in detail, served as background for the discussion.

UNCTAD Deputy Secretary-General Petko Draganov, opening the debate, said that on one hand, African countries are faced with the urgent need to transform their economies – especially through industrialization – to achieve the growth needed to lift millions out of poverty.  On the other hand, it is necessary to ensure that this growth, and the resulting use of natural resources, does not endanger the environment.  Currently, he noted, Africa faces extensive threats from climate change, and although the continent has done little to cause climate change to date, its own prosperity depends on effectives response to these environmental challenges.

Mr. Taffere Tesfachew, Director of UNCTAD’s Division for Africa, Least Developed Countries, and Special Programmes (ALDC), said African countries have shown a good record for economic growth recently, but the concern is that this growth hasn’t resulted in sufficient job creation.  It is clear that structural transformation is needed – industrial development must be accelerated, and economies on the continent must be more diversified.  Dependence on commodity exports currently is leading to de-industrialization and to a narrowing in the variety of what is produced, the opposite of what is needed, he said. 

Mr. Xavier Carim, Deputy Director General of the Department of Trade and Industry of South Africa, said the concept of “sustainable economic transformation” is a useful advance in thinking on African development.  He said South Africa has developed a strategy called the New Growth Path that aims to accelerate economic progress along an inclusive path that generates sustainable, decent jobs to reduce the poverty and the extreme inequalities that characterize South African society and the country’s economy.  The plan focuses on long-term industrialization and aims to create 5 million jobs and to reduce unemployment from 25 % to 15% over 10 years.  Specific efforts are focusing on agro-processing, forestry, aquaculture, and other sectors that will add value to the nation’s mineral production and promote green economic growth, he said.

Mr. Vinaye Ancharaz, Senior Development Economist for the International Centre for Trade and Sustainable Development, said energy is by far Africa’s greatest infrastructure challenge, and shortages of electricity have posed the most daunting obstacle to industrialization and to the economic growth that can come from it.  The good news, he said, is that the continent has vast potential for green energy generation – 325 days of strong sunlight per year, 15% of world hydropower potential (less than 10% of which is currently tapped), and significant opportunities for wind and geothermal energy.  Developing these resources, especially using current and upcoming technology, should enable the continent to unlock new opportunities for green and sustainable economic growth and to “leapfrog” its industrial development.

Mr. Moustapha Kamal Gueye, Head of Green Economy Advisory Services of the United Nations Environment Programme (UNEP), told the meeting that even in times of high economic growth, Africa has had difficulties with job creation.  There is growing evidence, however, that investments that promote sustainable development can enhance job creation in ways that “fit” the continent.  Fruitful opportunities exist, for example, in the fields of sustainable agriculture, clean energy generation, energy efficiency, forest management, and sustainable transport.  Taking advance of the fact that the continent is a late industrializer should help African countries to use advanced technology that enables them to “leapfrog” their industrial development, using energy and natural resources efficiently and thus becoming globally competitive, he said.

Mr. Charles Gore, former Head of the Research and Policy Analysis Branch of UNCTAD’s ALDC Division and an Honorary Professor of Economics at the University of Glasgow (United Kingdom), served as discussant for the afternoon panel debate.  He said the basic message of UNCTAD’s Economic Development in Africa Report 2012 is that African countries should and must promote structural transformation of their economies, and that the energy and agriculture sectors are two critical areas for this transformation.  Also vital is astute improvement of infrastructure.  Transformation is necessary for economic “catch-up,” job creation, and poverty reduction.  At the same time, however, African countries must focus – as the rest of the world soon will have to do – on obtaining more economic growth per unit of resources used, and for mitigating the environmental impacts of resource use.  Environmental issues should be regarded not only as a development problem but as an opportunity and a way forward, he said.

In the discussion that ensued, several delegates raised the issue of cost. Africa's sustainable structural transformation will require important financial resources that Africa does not have. The continent will succeed if the international community scales up its official development assistance and foreign direct investment towards the key sectors of energy, agriculture and industry in Africa. In addition, African countries will have to increase their domestic financial resource mobilization in order to complement insufficient external resources. African countries will also have to upgrade their technical skills through appropriate education policies and infrastructure in order to meet the requirements of their sustainable structural transformation.