Inclusive growth is vital to improving the lives and livelihoods of Africans. For development to be sustainable, growth and equity must go hand in hand. We need strong growth to make serious inroads into poverty. But we must also be concerned with the pattern of growth. It must generate jobs and economic opportunities for the majority of Africans. And it must offer brighter prospects to Africa’s growing ranks of young people. 

Africa is going through its most dynamic growth period in recent times. The continent has achieved growth rates above 6% for most of the past decade, making Africa one of the fastest-growing regions in the world today. Despite continuing global financial turmoil, we remain confident that Africa can continue its outstanding growth performance, for a number of reasons. A decade of reform as resulted in better macroeconomic management and a more attractive business climate.  

Africa is making progress on a broad range of development frontiers. Poverty rates are falling, the private-sector environment is improving rapidly, trade is expanding, and more and more people are becoming connected—to roads, electricity, information technology, water and sanitation. Education and health are making steady progress and the number of fragile states has declined.  

However, Africa’s growth is often concentrated in a few sectors and areas, benefiting only part of the population. We need to change the quality of growth, to create more and better jobs and economic opportunities and lift more Africans out of poverty.  

One worrying sign is the rise of inequality. While economic growth has lifted many households out of poverty and the number of middle-income households is increasing, inequality in Africa is still high and growing. Africa’s Gini index—a measure of income inequality—has widened over the past six years, as it has in other developing regions, and is hardly better than it was in 1980. As a result, not everyone benefits from growth. Many are left behind.  

Inclusiveness in Africa has several dimensions: geographical (e.g. rural poor); social (e.g. gender); and economic (e.g. unemployment). Recent political upheavals in North Africa have highlighted the plight of Africa’s youth. Despite rapid expansion in education across the continent, young people remain largely excluded from the formal economy, creating a clash between expectations and reality that may pose a challenge to social and political stability.  

Creating private-sector jobs is one of the most promising strategies for lifting more Africans out of poverty. In recent years, African countries have made significant progress in improving the environment for business and in promoting competition, trade and investment. The average cost of starting a business in Africa fell dramatically from $217 in 2006 to $77 in 2011, while the average time declined from 58 to 35 days. However, limited access to finance remains a problem, together with limited infrastructure and education systems that are sometimes poorly suited to the needs of the labour market.  

Regional integration is essential for sharing the benefits of growth more broadly. With its 54 countries, many of them small and landlocked, Africa is the most economically fragmented continent, making it difficult to build economies of scale and become internationally competitive.  

A high proportion of Africa’s poor lives in economically marginal areas. Isolated by poor infrastructure, they may miss out on the benefits of growth in the more dynamic regions. In recent years, African countries have made high-level commitments to promoting regional integration and have begun simplifying the regional economic architecture. Intra-African trade has more than doubled and Africa’s share of world trade is growing. To build on this momentum, deepen regional integration and sustain the growth in African trade, the level of investment in regional infrastructure needs to increase dramatically.  

Africa still has some way to go to improve its infrastructure. A fifth of Africans live in small, scattered communities, where the costs of providing infrastructure can be prohibitive. Less than half of the rural population has access to all-season roads and the rural electrification rate stands at only 10%. Even in urban centres, population growth has outstripped infrastructure development, and basic services are twice as expensive as in other developing regions.  

Progress on improving water and sanitation has been slow. In sub-Saharan Africa, only 57% of the population has access to an improved water source and only 28% to improved sanitation facilities—an improvement of just 1% on both figures. However, Africans are becoming much better connected to information and communications infrastructure. Mobile telephony will reach 735 million subscribers by the end of 2012, which is helping to promote financial inclusion through mobile banking.  

Agriculture is the foundation of Africa’s economy, employing 60% of the population and contributing 30% of GDP. With 16% arable land—the highest of any continent—but only 21% under cultivation, Africa has enormous potential for agricultural development. Yet with population growth outstripping production, food production per head of population is declining and food prices are rising at an ever-faster rate.  

While output per farmer has been growing at 2% per year in Asia and 3% in Latin America, farm productivity in Africa has failed to improve, leaving rural incomes to stagnate or decline. High food-price volatility now appears to be a long-term problem. This has a serious impact on the poor, who spend most of their money on food and have no cushion against rising prices. Yet Africa’s agricultural problems are not insoluble. Rwanda has demonstrated that intensive investment in agricultural productivity can be a major driver of poverty reduction.  

With two-thirds of its population under 25, Africa is the youngest continent in the world. By 2050, almost 400 million Africans will be between 15 and 24 years of age. If the energy and creativity of young Africans can be harnessed, this may prove to be Africa’s greatest asset. But the challenge is urgent. The ‘youth bulge’ is already generating increasing demands for economic opportunities and political voice. If these demands cannot be met, they could become a source of social and political instability.  

Human development is the key to unlocking this potential. Over the course of a decade, primary enrolment rates in sub-Saharan Africa have increased from 58% to 76%, while primary completion rates reached 67% in 2011. While health outcomes have been gradually improving, the heavy burden of disease on Africa’s poor continues to be a major source of exclusion. African women and girls face a range of additional barriers to their participation in economic and social life. While gender parity has improved in primary school, there has been little progress at secondary and tertiary levels, and access to formal employment has not improved.  

Around the world, countries that are better governed also tend to have less inequality. Africa continues to perform poorly on standard governance indicators, scoring 30% lower than the Asian average and 60% lower than industrialised countries. But the picture is by no means static. The unprecedented economic growth that Africa has enjoyed over the past decade has been in large part a result of improvements in some basic governance areas, including macroeconomic management, business regulation and revenue collection.  

Conflict and political fragility remain serious constraints on Africa’s development. Overall, the level of conflict and fragility has declined in recent years. However, a third of African states—home to over 200 million people—is still classed as fragile. With 50% higher rates of malnutrition, 20% higher child mortality rates and 18% lower primary completion rates, they lag behind on almost all development indicators. No fragile state has yet achieved even a single Millennium Development Goal. 

Environmental degradation in Africa is a serious and growing problem. Parts of the continent are losing 50 tonnes of soil per hectare each year, resulting in stagnating agricultural yields and loss of rural livelihoods. Environmental degradation mostly affects the poor, who are also at the greatest risk from extreme weather events. While Africa has contributed little to the causes of climate change, it is acutely vulnerable to its effects. Paradoxically, however, Africa’s low levels of infrastructure development leave it in a unique position to pursue a sustainable development path.  

Overall, there are good reasons to be optimistic about Africa’s economic prospects. The rise of China and other emerging economies, strong commodity prices, a burgeoning African middle class and the continent’s growing appeal to private investors all suggest that the strong growth performance of recent years is likely to continue. Without this growth, sustained poverty reduction would not be possible. Yet it is also clear that the nature of growth in Africa needs to become more inclusive, to provide more opportunities for a wider cross-section of society.

This article is based on the 2012 Annual Development Effectiveness Review from the African Development Bank.