New thinking is needed to unlock Africa’s development traps

Africa has stagnated for 40 years and now needs a ‘big push’ to escape from four mutually-reinforcing development ‘traps’ –  conflict, corruption, dependence on primary commodities and fractionalised societies. Aid alone cannot turn things round. Africa’s development prospects depends on security, good governance and trade preferences.

Research from Oxford University, in the UK, calls on donors to consider bold non-traditional policy instruments to increase the role of aid in promoting the creation of an enabling environment for African development.

The odds are stacked against Africa, not least because a third of its population lives in landlocked, resource-poor countries. However, even Africa’s coastal economies have performed much worse than other low-income coastal economies. During the 1980s, when other coastal economies were starting to break into world markets, almost all of Africa’s coastal economies were held back by one or other of four policy ‘syndromes’ that made diversification impossible – excessive economic regulation, ‘boom-bust’ cycles, inter-ethnic redistribution and violent conflict.

Africa is now so far behind other regions that it cannot relate to other economies apart from through resource extraction. Market mechanisms alone cannot enable Africa to catch up with Asia as an exporter of manufactured goods.

Violence is a trap because civil wars, once started, are hard to stop – Angola, Sudan and northern Uganda are prime examples. African peace treaties often break down as protagonists have strong incentives to go back on their agreements. The typical African conflict lowers Gross Domestic Product by about 15 to 20 percent. Once a country has had one ‘coup d’etat’, further illegitimate regime change becomes more likely.

The paper also examines:

• Corruption: once a society has become corrupt, it tends to remain so. Africa needs infrastructure, but corruption lowers expenditure on infrastructure, reduces its productivity and quality, and limits access, especially for people living in poverty.
• Dependence on natural resources: Africa’s primary commodity-dependent economies are prone to economic shocks. This volatility discourages investment in other export activities because of the risk of unprofitability during spells of exchange rate appreciation.
• The ‘low-scrutiny, fractionalised society trap’: Africa has an unusually high degree of ethnic diversity with an unusually low degree of political accountability to citizens – a combination which is bad for growth.

The author urges the Organisation for Economic Cooperation and Development (OECD) to move beyond its traditional role regulating aid transfers. Donors should switch from imposing policy conditions on aid recipients to imposing process conditionality – requiring governments to prove accountability to their citizens.

The OECD must press member governments to promote high-level coherence between security, banking, governance and trade policies. They must:

• recognise the risk of focusing on infrastructure in isolation from efforts to address corruption
• rapidly deploy military forces to help the African Union and United Nations reverse coups against democratically-elected governments and stabilise post-conflict societies
• help low-income states develop economic rules, standards and norms, especially for transparent awarding of contracts, accounting for revenue and negotiating with oil and mining companies
• advise resource-rich countries wishing to diversify their exports
• make it more difficult for the proceeds of corruption to be deposited in international banks
• devise temporary trade preferences to encourage export diversification and short-term protection against Asian competitors.