Africa’s unknown success

African economies have been highly successful in recent years. Economic growth averaged over 6 per cent per year before the financial crisis. Despite the gloomy predictions, the continent managed to muddle through the crisis quite well and the economic indicators are showing recovery and progress once again. Growth is not limited to a few rich or mineral rich countries: it goes for almost all African countries except for a handful at war or in deep crisis. Well-known aid recipients like Ethiopia, Uganda, Malawi, Mozambique, Tanzania and Rwanda are doing particularly well. Almost anywhere you go in Africa, you will find newly established firms and new jobs.

Surprised? It’s understandable if you are. Africa’s economic growth has gone largely unnoticed in the Nordic countries. I think that is because economic growth passes under, or rather over, the radar of the ‘aid industry’. Aid professionals are so preoccupied with reaching the very poorest and looking for the greatest problems that they may not see what is happening with Africans in general. When they return home, they report about the poverty they have seen, rather than about any progress.

This is not a matter of manipulation, but a natural consequence of their mission, which is to look for – and help counteract – destitution and need. And it fits very well into their fund- raising strategies and for media initiatives. Headquarters will not ask them to take pictures of newly rich Africans or of new enterprises. Moreover, journalists tend to follow the same paths as the aid industry in looking for destitution rather than progress when going to Africa. As long as there are still poor people in Africa, we will see pictures of them in our media.

In defence of the aid organisations and media, it should be said that it is not too easy to observe the changes. When you start from nearly zero, a few per cent of growth do not make a very visible difference. But it is just because a country is very poor that each new job opportunity means a lot. Millions of Africans find jobs, increase wages or earn more from sales every year. But we don’t get to hear about these people. Except, of course, if a Nordic aid agency claims that its support helped them improve their lives.

The aid agencies may not take much interest in growth because they think it only means that the rich get richer. Whether growth ‘trickles down’ or mainly benefits the richest is a question almost as old as politics; it has made the whole issue of the role of growth in development problematic. Most people would probably agree that the answer is normally ‘both’. However, in the development debate there seems to be more concern about increasing inequality than celebration of new jobs.

Research has not provided solid empirical evidence to conclude in general, but some recent studies indicate that in Africa the proportion of people in absolute poverty decreases almost proportionally with economic growth, and even that income inequality has been reduced lately. Other studies, however, point in other directions. In any case there is no doubt that growth also benefits many poor people. There is also a lot to indicate that better economic conditions are a necessary – albeit not sufficient – precondition for enhanced democracy and better governance.

According to IMF and the World Bank, economic growth in Africa is a result of improved economic policies. Many countries have also had more stable political conditions – some wars have ended – and a lot of Africa’s debt has been cancelled. A remaining obstacle to further growth is the lack of capital available for investment in Africa.

Aid has so far had little to do with Africa’s economic progress. This is not to say that aid is ineffective, only that it is aimed at the wrong things. Around 1990, when things were going very badly, Western aid donors seemed to give up their ambitions for economic growth in Africa. Since then, the share of aid aiming at economic growth has been reduced by more than half. Instead, we have increased the shares of aid for emergency relief, food, health, education and other basic needs for the poorest. A lot of aid funds have also been spent on political reform of the recipient countries towards “good governance”.

So when the critics are claiming that aid does not lead to economic growth, the answer is that aid has not really tried in the last 20 years. On the other hand, aid has been quite successful in what it has tried to do. Millions of poor people have been able to improve their lives as a direct result of Nordic aid.

However, very few new companies have been established as a result of Nordic aid. Thousands of enterprises have instead been established with partial support from Asia; the stream of investors going to African countries are most often coming from China, India or South Africa, while Western companies are mainly looking to Asia for their investments abroad.

That may be related to the pattern of aid. When aid agencies, which supposedly know Africa, fail to recognize the rise in economic growth there – and continue to prioritize aid as if they have lost faith in growth as the way out of poverty – business executives and strategists notice. Many do not even bother to investigate the business opportunities in Africa. As long as the aid industry remains the main source of information, the Nordic image of Africa is still that of war and destitution while people, politicians and investors elsewhere increasingly look to Africa as the continent of economic optimism and opportunities.