Many times over the years, I’ve likened the first four decades of Africa’s post-colonial development to the classic movie, “The Good, the Bad, and the Ugly.” The years after independence were good, with healthy economic and industrial growth and decent levels of investment and domestic savings. But the bad came after the good, and before long, the bad turned downright ugly. We all know the problems coming out of the 1970s, but after the continent’s nadir in the early 1980s, when per capita growth had bottomed out, we began to see a shift. Hope replaced despair.

By the mid-1990s, we saw a number of factors emerge that helped jumpstart the turnaround, beginning with a commitment to better policy structures but also including democratically elected leaders, improved governance, stronger economic management, debt relief, and more effective donor partnerships. The list goes on.

In recent years, hope for a turnaround has given way to expectations of something far greater—lasting change, bolstered by efforts to transform economies, not simply grow them. We’re now in a period of renewed optimism, bolstered by booming growth, but tempered by pragmatic realism. Africa has much more to offer, as long the right steps are taken.

Still, the recent gains cannot be ignored.

The size of the African economy has more than doubled since 2000, the beginning of a decade in which six of the world’s 10 fastest growing countries were African. In that time, several others were above or near the 7 percent threshold for economic takeoff, raising expectations for the future. According to IMF projections for the top 10 growing economies through 2015, seven are again in Africa.

It seems that every month brings a new report about the surge in investor interest in Africa. According to one of the most recent, Ernst and Young’s third Africa Attractiveness Survey, 86 percent of global business leaders with an established presence on the continent believe that Africa’s appeal will keep growing. Those surveyed rank Africa as the second most attractive regional investment destination in the world, behind Asia. The continent’s global share of foreign direct investment increased from 3.2 percent in 2007 to 5.6 percent in 2012, despite the economic downturn that began in 2008. The flow of private capital now exceeds foreign aid.

As Africa’s economic and social prospects have brightened, so has its defining narrative, shifting from a region wracked by war and poverty to one brimming with opportunity and potential, from the hopeless to a hopeful continent.

This is all fantastic news, but even as we celebrate it, we can’t get lost in it. It’s clear that after years of missteps and false starts, Africa is on the right track. But it’s also clear that Africa’s challenges have not gone away. They still exist, in some cases triggered by the accelerated growth we’ve welcomed.

The challenges ahead…

Africa continues to face persistent, structural development hurdles. It continues to lag behind the rest of the world in most economic indicators. So, the overriding question about Africa’s outlook is how to build on the successes so far; how to consolidate the economic gains into something greater?

The recent report of the High–Level Panel of Eminent Persons on the Post-2015 Development Agenda calls for a paradigm shift, a profound structural transformation to overcome obstacles to sustained prosperity. For our discussion today, I would like to mention the big transformative shifts that are, in my view, required for Africa to ensure that continuing growth is sustainable—economically, socially, and environmentally.

First is the lack of economic diversification. In almost all countries, production is dominated by the primary sector, either in agriculture or in minerals. Manufacturing sectors that are internationally competitive barely exist. As a result, productivity remains low, wages remain stagnant, and a majority of economies remain dangerously vulnerable to external shocks and the whims of private capital.

Second is rising inequality amid non-inclusive growth. Africa’s boom is creating disturbing income gaps that will undermine long-term efforts to reduce poverty. A report released earlier this month by JICA at the Fifth Tokyo Conference on African Development (TICAD V) in Yokohama echoed this theme, noting that not only has inequality been high, but it’s been increasing over time. During the 2000s, two-thirds of African countries had a Gini coefficient above 40, the threshold for high inequality.

Third is rapid urbanization and its impact on physical and social infrastructure. Over the last two decades, Africa has experienced the highest urban growth in the developing world. In the long run, increased urbanization is good, because cities fuel innovation and foster social mobility. But cities must be livable. Cracks in the social infrastructure, exacerbated by the rising inequality I just mentioned, are already showing as slums and urban poverty proliferate. 

Fourth is unemployment. Population and economies may be growing, but jobs are not. And that’s a severe problem, especially among African youth. Approximately 10–12 million young people enter the labor market annually, and nearly all of them, even the well-educated, struggle with joblessness or in jobs that are insecure and pay low wages. In addition, millions of Africans lack the skills required for productive sectors, leading to an inefficient and underused labor force.

Fifth is Africa’s adverse climate. Countries must continually cope, adapt, and build resilience to the devastating impact of natural disasters and climate change. It’s encouraging that in Yokohama the UN and the World Bank jointly reiterated the importance of integrating these considerations into development policy and programs.

These challenges are immense, but they’re not insurmountable. That we’re even concerned about a “next wave” of development problems speaks to how far we’ve come. That’s why Africa’s economic transformation, not just its growth, is so critical. Transformation won’t solve all of Africa’s most pressing problems, but it’s a necessary condition to start.

For me, economic transformation is also a personal story. A few years ago, following my 10-year stint as the Executive Secretary of the UN Economic Commission for Africa in Addis Ababa, I founded the African Center for Economic Transformation, based in Accra, to help countries take that next step. At ACET, we assist governments in implementing the right policies and creating the right environment to spur sustainable development in the interest of long-term, structural transformation.

This fall, we will launch our flagship publication, the African Transformation Report, with events in Johannesburg, Addis Ababa, London, and here at the World Bank on the margins of the Annual Meeting. The report provides data and analysis for policymakers and the private sector to spur economic transformation. It will also introduce the African Transformation Index to show how countries are transforming over time and where they stand against each other on measures of five attributes of transformation: diversification, export competitiveness, productivity, technology, and human well-being.

Transformation will have implications for leadership, as well.

At a seminar in conjunction with the recently concluded African Development Bank meeting in Marrakech, a distinguished panel of political leaders, businessmen, and policymakers debated the type of leadership Africa needs if the continent is to attain structural transformation in the face of its major challenges. Their conclusion was that African leaders must combine technical competence, personal integrity, and a commitment to the well-being of the African people above all else.

A key test for Africa’s collective leadership is demonstrating the political will to accelerate economic integration and join the ranks of emerging economies by adding value to natural resources and increasing trade among African countries. That has been the goal since the inception of the Organization for African Unity in 1963, and it will be at the core of the African Union’s Vision 2063, to be set next January. I am sure Amina will have a lot to say on this in the panel discussion to follow shortly.

We should also expect this leadership to propel a transformative shift in Africa’s relations with its development partners and its place in the international economy. Profound changes are altering the global finance system. Investment flows, trade patterns, and the aid architecture are evolving, while the value of South-South cooperation and the influence of the BRICS are rising. These changes demand adroitness on the part of African governments to maximize the quality and quantity of external resources for their continent’s transformation.

In particular, the World Bank’s relations with Africa should continue to evolve, drawing on the institution’s past successes and failures, cognizant of the growing confidence and dynamism among the African people and their governments, and aware of the considerable vulnerabilities that still plague the continent.

Let me conclude this discussion of a vision for Africa’s future with two queries: If economic transformation is truly realized, where will Africa be in another 25 years? What kind of life will the next generation have? These are the questions many of us are working to answer right now.

By Mr. K.Y. Amoako,
Founder and President of the African Center for Economic Transformation.