Edward Brown: “Growth with ‘DEPTH’ should guide economic transformation in Africa”

In this interview, Folashadé Soulé and Camilla Toulmin

discuss with Edward K. Brown, Senior Director, Research and Advisory services at the African Center for Economic Transformation (ACET) based in Accra, Ghana, on the effects of COVID-19 on regional integration and economic transformation in Africa, and the role of ACET and African think tanks in advising African governments respond to the crisis.

Given your location in Accra, how do you assess the performance of the government’s sanitary and economic response to the COVID-19 crisis?

The Ghanaian government was very quick in reacting to the pandemic, and by the end of March, lockdown was in force. In the beginning, there was widespread compliance, and the government spent time informing and educating the population about what was happening. It showed strong commitment, and the crisis brought together the various political factions behind a common cause. As elections are planned for December this year, the tension between saving lives and saving livelihoods then began to emerge. Obviously, like all developing countries, the health infrastructure is weak. And the economy is highly informal, with more than 80% of the working population employed in this sector. It was extremely difficult to impose quarantine on marketplaces, and although there was some fumigation done, they had to stay open. Social gatherings, weddings, and funerals were prohibited, but there has been a lot of pressure for government to relax these measures.

Also, the government wanted to get on with its political campaign. I hear the government has stopped testing. There are no new cases being detected, and the number of active cases is falling, either through death or recovery. Is this due to lack of testing or because the case numbers are actually falling? There seems to be an emerging consensus that the epidemic in Africa has not panned out the way the international community thought it would. It has not been as virulent and pervasive as initially feared. Various explanations have been offered – Africa has a youthful population, so they are less likely to die and therefore the impact has been limited. Also, maybe because African countries have endured endemic diseases for so long, they have developed strong immunities, whether to Ebola, malaria or other communicable diseases. Whatever the evidence, it is all pointing to the level of infection being much lower in Africa than elsewhere. The number of deaths even in South Africa, although higher than elsewhere in Africa, are still much lower than in Europe and the US.

Governments have tried relief packages to mitigate both health and economic effects. The Ghanaian government raised over 600m cedis (around US$100m) to be offered as soft loans. They came up with a comprehensive programme to resuscitate the economy, in part by boosting the “One district one factory” policy and offering funds for SMEs. But there are many questions to ask: Was this effective? Did it save jobs? Has it just boosted consumption or has it been productivity-enhancing? The jury is still out on this issue. I don’t yet have the data so we cannot say what the overall impact has been. It’s too early to say. Social distancing and face masks continue, but in a more relaxed manner. Until recently, you could not go into any public area, or even drive a car, without wearing a mask. It is now more relaxed and does not seem to be manifesting in higher death rates or increased numbers in intensive care. The airport has re-opened; they have a testing site there so anybody coming into town is tested. If you can’t show a recent negative test, you are quickly tested, so you’re not quarantined. And the terrestrial borders are also open. We need coordination amongst countries. Closing the border doesn’t solve the problem; we need common policy and regulations across the different countries in West Africa. This would help transboundary mitigation. Rather than looking at national programs, we need a regional or continental approach.

In that regard, the African Union’s Centre for Disease Control CDC has done really good work, coordinating closely with the WHO and each individual country’s health systems. This may be partly responsible for the lower levels of incidence we can see. I am sure we will see a lot of analytical work explaining these differences in performance; scientists and analysts will look at the lower incidence in Africa vs. elsewhere. There may be a second wave as we go into cooler months – we’re in our winter right now. But generally, for a country like Ghana, with a largely uniform temperature all the year round, while there maybe be cooler weather right now, there is no evidence that the incidence is rising; people are going about their work as usual. The only thing there might be some hesitation about regards churches and social gatherings. People are going for shorter hours, with fewer people, but otherwise they’re getting back to normal. Funerals are very important, but there has been no surge in the number of funerals, and no one is hiding to bury their dead, so we can be confident of the death figures.

It seems that far from being the victim, Africa has shown many other parts of the world a strong and effective response we can all learn from. The reaction from the international community betrays an unhelpful attitude. Africa’s performance in the face of COVID-19 has brought a useful reversal of roles.

It is still puzzling. In some countries you can argue that the leadership has been reckless, such as Tanzania and Burundi. In the case of Burundi, the leadership paid for that. It is also reflective of the fact that countries have been constantly struggling to fight infectious diseases. When Ebola came, it was a traumatic experience, but they also developed mitigation measures that probably helped with COVID-19. Do we know the true number of cases? No, and many people are probably asymptomatic. We do need more robust data for better analysis. What lessons can we draw? Social distancing is not easy in crowded traditional markets. It is not clear to me why we’ve had no big spikes with lockdown lifted. In practice, it’s only in major cities Accra, Kumasi and to some extent, Takoradi that lockdown had some impact. In the north, it was much less apparent, and they were mainly untouched, with few cases. The highest incidences were in Accra and Kumasi. My friends who are nurses and doctors confirm case numbers are falling.

How does the pandemic affect the strategy for economic transformation? How should development models be re-thought for the future?

The pandemic has certainly led to a drop in economic growth. Pre-pandemic growth projections were 3.9% for Africa overall. With the pandemic, this has been revised significantly downwards for 2020; the numbers keep changing so I can’t quote the exact number at this time. It important to note that this is the first serious recession Africa has experienced in more than 30 years, equivalent to a total loss of $190 billion in gross domestic product for the continent. This translates into a loss of about 30 million jobs, plunging about 50 million Africans into extreme poverty. These projections, derived from World Bank sources are realistic, and imply a significant drop in aggregate demand as companies are operating at very low capacity.

African countries have been hit hard, including mineral-rich ones. How do we quickly recover? The theory has been: Quell the pandemic and restore growth by providing COVID-19 response measures. So far, the support has been nowhere near what developed countries can do domestically. What COVID-19 has done is to halt temporarily the transformation trajectory of most African countries. But African governments need to prevent this downward decline. The good news is that the pathway to progress will be assured if our leaders step up the momentum for inclusive and sustainable growth by providing the enabling infrastructure: roads and energy, upgrading the skills of the labor force and support for SMEs. In short, they need to step up the momentum to transform their economies.

At ACET, we define “transformation” as “growth with DEPTH”. Let me briefly elaborate. Growth itself is not sufficient to transform economies; we need growth propelled by certain key actions. DEPTH is the acronym for those actions. It means countries must diversify to hedge against internal and external shocks. The pandemic is one big all-encompassing external shock. It has affected practically all aspects of our lives ­– an existential threat. From an economic standpoint, a more diversified economy will be more resilient and better in mitigating associated risks. Countries must be export competitive. This means benchmarking against the best, globally and regionally. The survival of any industry hinges on the extent to which the products are competitive on the global market. The other thing closely linked to transformation is productivity. You cannot create wealth if productivity on the farm, in manufacturing, and in services remains low. And, countries need to constantly innovate and apply Technology; this is key to competitiveness and a hallmark of a transformed economy. Together, the four variables (diversification, export competitiveness, productivity increases and technological upgrading) will enhance human well-being. Yes, we need to reduce poverty, but if we don’t grow the economy, in ways that are sustainable and inclusive, we will be redistributing poverty and not creating an inclusive economy. If we want equitable and inclusive societies, economic transformation as I have defined is key.

One of our biggest challenges in Africa is how to accelerate the demographic transition. We’re not yet there. We have not yet been able to reap the demographic dividend, which will only come with increased education, particularly secondary and especially for women. Only then will we get a significant fall in the fertility rate, when women are actively participating in the labor force. This will add millions of dollars to GDP. We must focus on empowering and upskilling women to become active partners in social and economic development. The next edition of ACET’s flagship report, the African Transformation Report, is being finalized now. Its title is Securing Africa’s Future, and it will look closely at four interconnected issues critical for unleashing growth with DEPTH, including demographics. The others are innovation and technology, climate change, and regional integration.

Embracing digital innovations and technology will be key to Africa’s economic transformation. But as digitization substitutes for labour in some respects, it raises concerns about the bulging youth population – demographics – and exacerbates the challenges of job creation. Africa is the youngest continent, with about 25% of the world’s youth. We have to train the youth to reap the demographic dividend. This means stepping up the momentum to increase access, improve quality and relevant education.

The Mastercard Foundation recently released a major report, to which ACET helped contribute, on this topic – “Secondary Education and the Future of Work”. Universal secondary education was one of the report’s main themes; it will be critical to driving economic transformation and developing a future ready workforce that can responds to labour demands anywhere in the world. Foundational skills and good grounding in STEM subjects, including critical thinking and problem-solving skills are key to taking advantage of the rapidly evolving digital and technological innovations. However, we are far from getting there. The latest Human Capital Index from the World Bank placed most African countries at the very bottom. Less than 20% secondary and university students are enrolled in STEM subjects. We must get the right skills. We need to significantly increase the budget, mobilize more domestic resources, and with creative financial engineering crowd in private capital to finance the public investments in infrastructure, such as schools, roads, electricity, digital connectivity and other infrastructure.

Could you tell us more about the ACET report, which is coming out, the time and details?

We’re just concluding the final round of reviews and putting the final touches on it. We expect to publish it by the end of the year or early 2021. There are the two topics I’ve just talked about: the demographic dividend and what that means for jobs, especially among youth, and skills needs; and then also technology and innovation. Another topic in the report or Africa Transformation Report (ATR) is climate change – one of the quintessential challenges Africa faces. The downside risks are much higher in Africa than elsewhere, due to capacity and governance challenges. The upside is that climate mitigation measures in Africa could be very cost effective. Look at solar energy, which we have in abundance. But we need to make sure governments are catalytic, and not competing with the private sector. Smart agriculture could benefit from drip irrigation, the use of drones, etc.

The fourth factor the ATR will examine in-depth is regional cooperation and integration. Again, this will be in the context of what is needed to transform through growth with DEPTH. The AU’s Agenda 2063 recognizes the importance of integrating to transform. When you look at Africa, we have so many small, fragmented economies, with small markets. Many of these countries can only transform if they integrate with their neighbors. This must be their strategic direction; it’s not an either/or situation. We must come together to ensure effective economies of scale and coordination. This is where the recently ratified African Continental Free Trade Area (AfCFTA) agreement is going to be very critical. The benefits will accrue to all countries.

The ATR puts the spotlight specifically on regional public goods, because they really matter for regional cooperation and for driving the economic transformation of African economies. Benefits of regional public goods accrue to all countries only if everyone contributes. Riparian issues, such as management of big river basins like the Nile, Congo, and Niger are obvious ones, where coordinated use of water, and control of pollution bring many benefits along the watershed. The benefits and challenges to integration are well defined in the forthcoming report. Stay tuned.

Europe and Africa were due to have a big summit, which has now been postponed till next year. It seems there were a number of outstanding areas of disagreement on both the EU and African side, and not enough common ground. What do you think were the main points of difference?

My take is that many countries were not keen on follow-up to the EU’s economic partnership agreements. Countries like Nigeria didn’t want to sign up and, given the AfCFTA, there is the feeling that the EU should align with the protocols of the AfCFTA rather than continuing with bilateral negotiations. AfCFTA has become the new framework for dialogue and negotiations. This will be one of the sticking points.

At ACET, we worked with the German research institute DIE and ECDPM to produce a policy report, which just came out last week, on this topic. The paper identifies ways to move beyond the traditional cooperation niche and areas where Europe and the African Union could act together. Beyond trade issues, you see a decline in bilateral aid, and emphasis shifted to private sector development and crowding in private capital and investment into African economies. Can we use blended finance for crowding-in private investment? Regional integration needs regional infrastructure. Each country is enjoined to build that piece of the infrastructure that passes through its country, but priorities may differ and abilities to finance this also differ. So, you’re not able to get a synchronized approach, due to this mismatch between physical infrastructure and the finance.

It is estimated that about $80b financing is needed each year to bolster Africa’s infrastructure. Landlocked countries like those in the Sahel face tremendous challenges. The cost of imported goods in landlocked capitals of Mali or Niger is sometimes twice or three times the price in coastal countries. Livestock is one of the main natural endowments of Sahelian countries, a great source for the meat, milk and leather industries, linked to regional supply and value chains, so these countries have real potential to transforming their economies. Regional public goods include transport corridors, power pools, river basin management, digital connectivity, etc. For example, in the digital space, cross-border interoperability is very important to expand access and reduce cost to larger populations and expand regional markets for goods and services. Africa still has the highest cost of internet services in the whole world.

ACET is a renowned African think tank. What role can ACET play as regards the resilience and recovery plan post-COVID-19, especially by networking with others?

The broader value proposition of ACET is to transform Africa within a generation. We are a pan-African institution operating in more than 20 countries, through partnerships and cooperation with similar institutions. We pride ourselves on offering African-led solutions to Africa’s most pressing development issues. That’s what we tried to do with regard to COVID-19. We have developed a ten-point policy plan for Africa’s recovery, growth and transformation. These are policy actions that governments could prioritize to speed up recovery and keep the transformation agenda on track at the same time. We summarize them in four areas. The first is enhancing resource mobilization and management, particularly domestic resources. The second is improving governance, including state effectiveness in delivery and transparency. The third is strengthening business and investment environments. And the fourth is supporting digital innovation and entrepreneurship.

As I said earlier, COVID-19 offered an opportunity for different and opposing political actors to come together to address an existential threat. Thus, the recommendations in our policy paper were to encourage governments to heighten attention to transformative policy reforms. In other words, don’t let the crisis go to waste – seize the opportunity to get different factions and political groups working together, which otherwise might have been too difficult. And I should say these priorities have been fully endorsed by the World Bank and many of our research partners in their engagements with governments, as well.

About the COVID-19 and Africa series: a series of conversations conducted by Dr. Folashadé Soulé and Dr. Camilla Toulmin with African/Africa-based economists and experts about their perspectives on economic transformation and how the COVID situation re-shapes the options and pathways for Africa’s development - in support of INET’s Commission on Global Economic Transformation (CGET)

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