I’m afraid I still find the case for a deep cynicism on African development convincing.
If the crises of the 80s came at a particularly vulnerable time for most of the continent, the ongoing wave of mercantilism and deglobalization may prove no less inopportune. Virtually no African states put the era of cheap credit and global markets that’s now ending to any use except to get foreign companies to export their raw commodities. I’m not at all convinced we’ll navigate the much rougher seas ahead with any more skill: many countries likely already have their best years of growth behind them. Much of the continent will be locked out of future regional manufacturing supply chains, and with the advances in automation taking place there couldn’t be a time when a massive labor surplus would be less of an asset. We’re simultaneously being cut out of the renewable energy revolution and losing access to financing for fossil fuel projects except for export.
Even assuming these states had workable development plans, there’s been a eye-watering interest rate hike that may not come down for a long while. Governments are accessing credit on usurious terms. That means very little investment, foreign or domestic, will be possible on any of our most pressing needs. We’re already seeing signs of another 80s style spate of sovereign defaults, except in a more ambiguous, more hostile international environment. The limited gains made in food security, education and healthcare are stalling and all now risk being unraveled.
As for African states being more coherent or resilient, I’d argue some have learned to maintain appearances better but are still hollow. Looking around, Ghana and Zambia are in default. Kenya is stagnating, and will likely soon follow them into bankruptcy. Egypt is in an IMF straitjacket, and won’t get out without reining in its military, which seems unlikely. Nigeria’s economy is in bad shape and it still hasn’t got a grip on its security situation. South Africa can’t even keep the lights on. Whatever momentum Ethiopia gained in the last two decades was lost in Tigray. Sudan will probably be a war zone for another fifteen years. The DRC is too lucrative to too many parties to ever be stable. Rwanda is growing, but too small and starting from too low a base to make a difference to the overall picture.
Zooming out, the entire Sahel region is imploding, and the free flow of weapons and fighters means this probably cannot be arrested even in the medium term. The AU is moribund and too easily bounced by external actors to be a meaningful force. Regional integration isn’t happening with any of the urgency required. The AfCFTA is making very little progress. Our geopolitical prospects may be improving, but that just increases incentives for elite subversion. Imperial powers old and new are tightening their hold on their interests. The current crop of leaders is as spineless and short-sighted as any before it, and it doesn’t look like the next is up to the job.
An instructive reference point for me has been India: its fundamentals are incomparably ahead of most of Africa yet I still would predict a long and uncertain path to relative prosperity for it. Even China arguably hasn’t completed its development, miraculous as its rise has been. I find it very unlikely a substantial proportion of the continent will experience strong enough growth to achieve reasonable average living standards before running into demographic headwinds. Birth rates aren’t plummeting as sharply as Asia but they’re still dropping fast, and Africa may hit its peak population in as little as 20 years. The time to get our act together is running out fast.
I agree that a bright future can be achieved. But I think it’s also important to acknowledge that right now our prospects are bleak, and to sit with the possibility our grandchildren may never know prosperity. A positive outlook in the face of adversity has to be wed to a dispassionate view of our situation if we are to have a chance at meeting the challenges ahead. Pessimism of the intellect, optimism of the will, as Gramsci put it.
My only comment would be that the fact that Africans are living a full 20 years than they did decades ago is real. The fact that secondary school attainment rates are up is real. The fact that incomes are higher and economies getting more complex is real.
Many African countries are projected to grow at 2-5% over the next few years. That, too, is real.
Which is to say that we should avoid the temptation to conflate dispassionate analysis with blanket pessimism that minimizes reality on the ground. In the same vein, we shouldn’t be quick to imagine that the region’s achievements are perpetually fleeting. A lot of the changes that have occurred are reliably sticky.
This comment is a bit late as I am only seeing this now, but I feel like I should respond to this pessimism. Your pessimism is understandable, given the current ‘low’ point of tightening global interest rates and overall global slowdown. This tends to be really bad for developing countries given the large amount of foreign denominated debt, forcing countries to cut back on spending when they should be doing the opposite. But don’t assume that the era of cheap credit is over. I think that it will return — mainly due to the aging population in rich and middle-income countries, providing a vast amount of excess savings.
Automation and AI — assuming it doesn’t kill us — will drive economic growth around the world, increasing the demand for African goods and services. This means more trade and more tourists. AI will also make knowledge and education more accessible.
Yes, much of Africa is locked out of the energy revolution, I think due to the lack of capital to invest. But this will change if the trend of cheaper renewables continues, which I think will be the case. South Africa has already started this, with solar imports in Q1 of 2023 the highest ever. Renewables will likely eventually rescue South Africa from its energy crisis. And when they become cheaper, they will do the same for the rest of Africa. This expansion in electricity will be transformative for Africa’s manufacturing industry. This will be hard to stop, as cheaper solar favours a more decentralised system of energy generation.
I also get the sense that Africa’s democracies are becoming more mature and competitive. In Nigeria, there was a new party that disrupted the political duopoly and won in the two richest states. Zambia saw political change, even if it was at a tough time. And we could see some interesting things in Zimbabwe this year, and South Africa next year.
Africa’s demographics are on the side of future growth. Declining fertility should mean an increasing amount of excess savings to use for domestic investment. With the exception of the DRC and Sudan, the worst instability and violence seems to be on the periphery of the continent. Ethiopia seems to have shaken off the civil war. Egypt should soon see a return from all its investment and Morocco seems to be thriving. Overall, while things are difficult at the moment, I don’t see a repeat of the 80s and 90s in the decade ahead. There is a lot to be hopeful about.
An aging rest-of-the-world will mean higher welfare spending, fewer workers supporting more dependents. That means less money for FDI, not more. Countries are having to raise retirement ages and cut pensions because they don’t have the fiscal capacity to support so many old people. That’s before taking into account the costs of the pivots in industrial strategy and energy policy now underway. In any case, I think it’s become clear that for better or worse the era of global capitalism unmoored from geopolitical considerations or national interests is over. Rates may well come down from here but a world of blocs of ‘like-minded countries’ will be less open and more expensive to trade in than the one we grew up with.
If history is any guide, automation will primarily be used to disintermediate labor, domestically and internationally. That’s bad news for young Africans. As for making education more accessible through artificial intelligence, that’s a tough sell given half of Africa still doesn’t have access to electricity, much less the internet. That’s without even touching all the thorny ethical and practical questions that deliberately incorporating AI black boxes into our education systems would raise. I’m reminded of the enthusiasm for cryptocurrencies from parts of African societies: papering over state failures and calling it modernity, hoping that technology we didn’t build and don’t control will save us the trouble of creating systems that work. Tourism is not a development plan for a continent: if our future does indeed rest on being an amusement park for the rest of the world that’s hardly worth celebrating. We’re already seeing communities being violently evicted from their lands in the name of tourism and conservation.
Regarding renewables, I’ve linked a recent report on the massive implicit subsidies that have been required to scale such projects in Africa. Underneath the enthusiasm for ‘derisking’ and PPPs for renewable energy are huge scandals waiting to emerge. As for solar power rescuing South Africa from an energy crisis, a less charitable way to put that would be that everyone has given up on Eskom getting its act together.
On to manufacturing: our energy costs will remain higher than the rest of the world if for no other reason than that as you point out, inputs like solar panels and wind turbines are imported. Our labor costs are still high relative to productivity and that combined with the infrastructure gaps will render exports uncompetitive globally. Domestic markets are too small and there aren’t enough business coalitions with the vision and heft and coordination to attempt the useful sort of protectionism.
You mentioned Nigeria’s recent elections as pointing to African democracies maturing. Through all the hype I was distinctly unimpressed by LP: to me they just sounded like another NGO. In my opinion they didn’t fully grasp the severity of Nigeria’s situation, didn’t table any convincing solutions and didn’t have enough structure to credibly challenge the establishment parties. Peter Obi was obviously head and shoulders above the rest of the field, but that just speaks to the depths to which Nigeria’s leadership has sunk. He’s not a drug baron, which is more than can be said for certain other candidates but surely the bar for leading Africa’s largest state ought to be far higher. He had no chance of winning, and had he won he would have had no chance of turning Nigeria around. I feel similarly about Hichilema: his rise said more about the figurative and literal bankruptcy of his predecessors than his own talents. He won’t do much more than deliver the IMF’s medicine.
I disagree that it’s the ‘periphery’ that’s destabilizing. Every government between Senegal and Eritrea is facing some sort of insurgent movement. Nigeria, DRC and Ethiopia are the largest African states and have each had devastating security crises.
I’d be surprised if Egypt managed to recoup the investments into its various white elephants. Morocco’s managed to plug into EU value chains, their development is uncorrelated to the rest of the continent.
I understand the need to counter pernicious preconceptions about perpetual stagnation. But it’s also important to recognize the scale of the challenges ahead and the immense amount of work that has to be done. The next few generations of Africans have an historic, unprecedented burden on their shoulders. Building Africa’s future will be hard and messy and painful and what worries me is I don’t see the requisite level of urgency and focus anywhere: not in governments, oppositions, activists, civil society groups, businesses, students, academics or militaries. Even our insurgents aren’t actually serious. Diminishing the tasks ahead won’t make them go away. Lowering our expectations to ‘better than the 80s’ - with famines and crises and defaults and ‘We Are the World’ - isn’t optimism, it’s resignation.
Thank you for your thoughtful response. I recognise the need to avoid blind optimism and not ignore the very real challenges. But I also don’t want to be pessimistic for its own sake. I want to be realistic, but predicting the future is not easy.
My response to some of your points:
The effect of aging on the welfare state is a bit more complicated. Many countries rely on a compulsory private pension system, reducing the risk of pensions on the fiscus. While an aging population would likely reduce interest rates, increasing their fiscal capacity — I think of Japan as an example here. Many aging countries struggle with labour shortages and low unemployment. This has increased the labour force participation rate, including at older ages. A shift to a more knowledge driven economy and longer lifespans have also increased the working life, look at Charlie Munger and Warren Buffet.
I also don’t see the era of globalisation ending. Despite all the talk, China and the US continue to trade vast amounts with each other. And China’s vast excess savings will continue to flow to the rest of the world, including vast amounts into Africa. Tourism is important and useful; it is the primary form of services trade in the world.
The history of automation and labour is also more complicated. Yes, in rich countries automation, in the past 50 years and the first half of the 1800s, was used to weaken labour and increase income inequality. But automation after the 1870s helped to support labour and reduce income inequality, mainly driven by improvements in education. I’ve already written about this in more detail: (https://lylesmusings.substack.com/p/automation-and-work ).
As for energy:
As I’ve stated, investment in energy generation will be hard in Africa due to the lack of domestic capital. One benefit of newer solar technologies is that it doesn’t need to scale to the same extent as other sources, think of rooftop solar combined with cheaper batteries. Solar no longer needs subsidies to be competitive with other energy sources, look at the vast amount of investment in solar in Texas — a state with very little love or political support for renewable energy.
The possibility of abundant cheap energy throughout the world is very real (https://www.noahpinion.blog/p/techno-optimism-for-2023), this will benefit Africa the most as it is the last continent without universal electricity access. This will vastly benefit the manufacturing industry in Africa, as it is impossible without energy. Yes, renewable energy inputs will likely be imported. I am not enthusiastic about crpytocurrencies, but foreign technologies and imports can play a role in improving lives in Africa. Look at the effect of cellphones despite being entirely imported.
Overall, I have not responded to all of your points as it does take time to write this out. My point is that predicting all possible futures is complicated. There are real challenges, but also many actually realistic things to be hopeful about.
Nice piece grounded in reality, i am Nigerian living in Nigeria and i can say that the picture that the west and their academics paint about Africa is not accurate, just within the last 5years we have produced 5 startup fintech companies valuated more than a billion dollars(e.g. Flutter wave), and we have a very high number of female entrepreneurs.
Global development definitely isn't dead. World bank 2022 data just came out. Kenya, Ethiopia and Ivory Coast are clearly doing well with explosive growth rates. (It's also good that the Tigray war is over). Also, SouthEast Asia and Bangladesh is exploding as well.
I’m afraid I still find the case for a deep cynicism on African development convincing.
If the crises of the 80s came at a particularly vulnerable time for most of the continent, the ongoing wave of mercantilism and deglobalization may prove no less inopportune. Virtually no African states put the era of cheap credit and global markets that’s now ending to any use except to get foreign companies to export their raw commodities. I’m not at all convinced we’ll navigate the much rougher seas ahead with any more skill: many countries likely already have their best years of growth behind them. Much of the continent will be locked out of future regional manufacturing supply chains, and with the advances in automation taking place there couldn’t be a time when a massive labor surplus would be less of an asset. We’re simultaneously being cut out of the renewable energy revolution and losing access to financing for fossil fuel projects except for export.
Even assuming these states had workable development plans, there’s been a eye-watering interest rate hike that may not come down for a long while. Governments are accessing credit on usurious terms. That means very little investment, foreign or domestic, will be possible on any of our most pressing needs. We’re already seeing signs of another 80s style spate of sovereign defaults, except in a more ambiguous, more hostile international environment. The limited gains made in food security, education and healthcare are stalling and all now risk being unraveled.
As for African states being more coherent or resilient, I’d argue some have learned to maintain appearances better but are still hollow. Looking around, Ghana and Zambia are in default. Kenya is stagnating, and will likely soon follow them into bankruptcy. Egypt is in an IMF straitjacket, and won’t get out without reining in its military, which seems unlikely. Nigeria’s economy is in bad shape and it still hasn’t got a grip on its security situation. South Africa can’t even keep the lights on. Whatever momentum Ethiopia gained in the last two decades was lost in Tigray. Sudan will probably be a war zone for another fifteen years. The DRC is too lucrative to too many parties to ever be stable. Rwanda is growing, but too small and starting from too low a base to make a difference to the overall picture.
Zooming out, the entire Sahel region is imploding, and the free flow of weapons and fighters means this probably cannot be arrested even in the medium term. The AU is moribund and too easily bounced by external actors to be a meaningful force. Regional integration isn’t happening with any of the urgency required. The AfCFTA is making very little progress. Our geopolitical prospects may be improving, but that just increases incentives for elite subversion. Imperial powers old and new are tightening their hold on their interests. The current crop of leaders is as spineless and short-sighted as any before it, and it doesn’t look like the next is up to the job.
An instructive reference point for me has been India: its fundamentals are incomparably ahead of most of Africa yet I still would predict a long and uncertain path to relative prosperity for it. Even China arguably hasn’t completed its development, miraculous as its rise has been. I find it very unlikely a substantial proportion of the continent will experience strong enough growth to achieve reasonable average living standards before running into demographic headwinds. Birth rates aren’t plummeting as sharply as Asia but they’re still dropping fast, and Africa may hit its peak population in as little as 20 years. The time to get our act together is running out fast.
I agree that a bright future can be achieved. But I think it’s also important to acknowledge that right now our prospects are bleak, and to sit with the possibility our grandchildren may never know prosperity. A positive outlook in the face of adversity has to be wed to a dispassionate view of our situation if we are to have a chance at meeting the challenges ahead. Pessimism of the intellect, optimism of the will, as Gramsci put it.
Thanks for these very thoughtful comments.
My only comment would be that the fact that Africans are living a full 20 years than they did decades ago is real. The fact that secondary school attainment rates are up is real. The fact that incomes are higher and economies getting more complex is real.
Many African countries are projected to grow at 2-5% over the next few years. That, too, is real.
Which is to say that we should avoid the temptation to conflate dispassionate analysis with blanket pessimism that minimizes reality on the ground. In the same vein, we shouldn’t be quick to imagine that the region’s achievements are perpetually fleeting. A lot of the changes that have occurred are reliably sticky.
This comment is a bit late as I am only seeing this now, but I feel like I should respond to this pessimism. Your pessimism is understandable, given the current ‘low’ point of tightening global interest rates and overall global slowdown. This tends to be really bad for developing countries given the large amount of foreign denominated debt, forcing countries to cut back on spending when they should be doing the opposite. But don’t assume that the era of cheap credit is over. I think that it will return — mainly due to the aging population in rich and middle-income countries, providing a vast amount of excess savings.
Automation and AI — assuming it doesn’t kill us — will drive economic growth around the world, increasing the demand for African goods and services. This means more trade and more tourists. AI will also make knowledge and education more accessible.
Yes, much of Africa is locked out of the energy revolution, I think due to the lack of capital to invest. But this will change if the trend of cheaper renewables continues, which I think will be the case. South Africa has already started this, with solar imports in Q1 of 2023 the highest ever. Renewables will likely eventually rescue South Africa from its energy crisis. And when they become cheaper, they will do the same for the rest of Africa. This expansion in electricity will be transformative for Africa’s manufacturing industry. This will be hard to stop, as cheaper solar favours a more decentralised system of energy generation.
I also get the sense that Africa’s democracies are becoming more mature and competitive. In Nigeria, there was a new party that disrupted the political duopoly and won in the two richest states. Zambia saw political change, even if it was at a tough time. And we could see some interesting things in Zimbabwe this year, and South Africa next year.
Africa’s demographics are on the side of future growth. Declining fertility should mean an increasing amount of excess savings to use for domestic investment. With the exception of the DRC and Sudan, the worst instability and violence seems to be on the periphery of the continent. Ethiopia seems to have shaken off the civil war. Egypt should soon see a return from all its investment and Morocco seems to be thriving. Overall, while things are difficult at the moment, I don’t see a repeat of the 80s and 90s in the decade ahead. There is a lot to be hopeful about.
Thanks for responding. A few points:
An aging rest-of-the-world will mean higher welfare spending, fewer workers supporting more dependents. That means less money for FDI, not more. Countries are having to raise retirement ages and cut pensions because they don’t have the fiscal capacity to support so many old people. That’s before taking into account the costs of the pivots in industrial strategy and energy policy now underway. In any case, I think it’s become clear that for better or worse the era of global capitalism unmoored from geopolitical considerations or national interests is over. Rates may well come down from here but a world of blocs of ‘like-minded countries’ will be less open and more expensive to trade in than the one we grew up with.
If history is any guide, automation will primarily be used to disintermediate labor, domestically and internationally. That’s bad news for young Africans. As for making education more accessible through artificial intelligence, that’s a tough sell given half of Africa still doesn’t have access to electricity, much less the internet. That’s without even touching all the thorny ethical and practical questions that deliberately incorporating AI black boxes into our education systems would raise. I’m reminded of the enthusiasm for cryptocurrencies from parts of African societies: papering over state failures and calling it modernity, hoping that technology we didn’t build and don’t control will save us the trouble of creating systems that work. Tourism is not a development plan for a continent: if our future does indeed rest on being an amusement park for the rest of the world that’s hardly worth celebrating. We’re already seeing communities being violently evicted from their lands in the name of tourism and conservation.
Regarding renewables, I’ve linked a recent report on the massive implicit subsidies that have been required to scale such projects in Africa. Underneath the enthusiasm for ‘derisking’ and PPPs for renewable energy are huge scandals waiting to emerge. As for solar power rescuing South Africa from an energy crisis, a less charitable way to put that would be that everyone has given up on Eskom getting its act together.
https://www.energyforgrowth.org/wp-content/uploads/2023/05/2023-05-08_Emery_Scaling-Solar.pdf
On to manufacturing: our energy costs will remain higher than the rest of the world if for no other reason than that as you point out, inputs like solar panels and wind turbines are imported. Our labor costs are still high relative to productivity and that combined with the infrastructure gaps will render exports uncompetitive globally. Domestic markets are too small and there aren’t enough business coalitions with the vision and heft and coordination to attempt the useful sort of protectionism.
You mentioned Nigeria’s recent elections as pointing to African democracies maturing. Through all the hype I was distinctly unimpressed by LP: to me they just sounded like another NGO. In my opinion they didn’t fully grasp the severity of Nigeria’s situation, didn’t table any convincing solutions and didn’t have enough structure to credibly challenge the establishment parties. Peter Obi was obviously head and shoulders above the rest of the field, but that just speaks to the depths to which Nigeria’s leadership has sunk. He’s not a drug baron, which is more than can be said for certain other candidates but surely the bar for leading Africa’s largest state ought to be far higher. He had no chance of winning, and had he won he would have had no chance of turning Nigeria around. I feel similarly about Hichilema: his rise said more about the figurative and literal bankruptcy of his predecessors than his own talents. He won’t do much more than deliver the IMF’s medicine.
I disagree that it’s the ‘periphery’ that’s destabilizing. Every government between Senegal and Eritrea is facing some sort of insurgent movement. Nigeria, DRC and Ethiopia are the largest African states and have each had devastating security crises.
I’d be surprised if Egypt managed to recoup the investments into its various white elephants. Morocco’s managed to plug into EU value chains, their development is uncorrelated to the rest of the continent.
I understand the need to counter pernicious preconceptions about perpetual stagnation. But it’s also important to recognize the scale of the challenges ahead and the immense amount of work that has to be done. The next few generations of Africans have an historic, unprecedented burden on their shoulders. Building Africa’s future will be hard and messy and painful and what worries me is I don’t see the requisite level of urgency and focus anywhere: not in governments, oppositions, activists, civil society groups, businesses, students, academics or militaries. Even our insurgents aren’t actually serious. Diminishing the tasks ahead won’t make them go away. Lowering our expectations to ‘better than the 80s’ - with famines and crises and defaults and ‘We Are the World’ - isn’t optimism, it’s resignation.
Thank you for your thoughtful response. I recognise the need to avoid blind optimism and not ignore the very real challenges. But I also don’t want to be pessimistic for its own sake. I want to be realistic, but predicting the future is not easy.
My response to some of your points:
The effect of aging on the welfare state is a bit more complicated. Many countries rely on a compulsory private pension system, reducing the risk of pensions on the fiscus. While an aging population would likely reduce interest rates, increasing their fiscal capacity — I think of Japan as an example here. Many aging countries struggle with labour shortages and low unemployment. This has increased the labour force participation rate, including at older ages. A shift to a more knowledge driven economy and longer lifespans have also increased the working life, look at Charlie Munger and Warren Buffet.
I also don’t see the era of globalisation ending. Despite all the talk, China and the US continue to trade vast amounts with each other. And China’s vast excess savings will continue to flow to the rest of the world, including vast amounts into Africa. Tourism is important and useful; it is the primary form of services trade in the world.
The history of automation and labour is also more complicated. Yes, in rich countries automation, in the past 50 years and the first half of the 1800s, was used to weaken labour and increase income inequality. But automation after the 1870s helped to support labour and reduce income inequality, mainly driven by improvements in education. I’ve already written about this in more detail: (https://lylesmusings.substack.com/p/automation-and-work ).
As for energy:
As I’ve stated, investment in energy generation will be hard in Africa due to the lack of domestic capital. One benefit of newer solar technologies is that it doesn’t need to scale to the same extent as other sources, think of rooftop solar combined with cheaper batteries. Solar no longer needs subsidies to be competitive with other energy sources, look at the vast amount of investment in solar in Texas — a state with very little love or political support for renewable energy.
The possibility of abundant cheap energy throughout the world is very real (https://www.noahpinion.blog/p/techno-optimism-for-2023), this will benefit Africa the most as it is the last continent without universal electricity access. This will vastly benefit the manufacturing industry in Africa, as it is impossible without energy. Yes, renewable energy inputs will likely be imported. I am not enthusiastic about crpytocurrencies, but foreign technologies and imports can play a role in improving lives in Africa. Look at the effect of cellphones despite being entirely imported.
Overall, I have not responded to all of your points as it does take time to write this out. My point is that predicting all possible futures is complicated. There are real challenges, but also many actually realistic things to be hopeful about.
Nice piece grounded in reality, i am Nigerian living in Nigeria and i can say that the picture that the west and their academics paint about Africa is not accurate, just within the last 5years we have produced 5 startup fintech companies valuated more than a billion dollars(e.g. Flutter wave), and we have a very high number of female entrepreneurs.
Global development definitely isn't dead. World bank 2022 data just came out. Kenya, Ethiopia and Ivory Coast are clearly doing well with explosive growth rates. (It's also good that the Tigray war is over). Also, SouthEast Asia and Bangladesh is exploding as well.
https://yawboadu.substack.com/p/world-bank-data-2022-update
"faddist navel-gazing instead of serious investments in knowledge production and policy focus on structural change". nice.