Africa Important to Australia's Future

Published on 15th September 2015

In foreign affairs, a course must be charted not for one year, or five, or even ten. The fall of the Berlin Wall did not just shake Germany in 1989, it shaped a generation of Europeans.  The aftermath of September 11 is still changing the world and has changed the course of history. Similarly, the rise of the Asian tiger economies and the transitions of African states to democracy and prosperity are changes which will play out over generations.

Foreign ministers must think in decades. And if we think in decades, it is immediately apparent how important Africa is to Australia’s future. Africa is growing fast. The population of Africa is expected to reach 4.2 billion, more than 35 per cent of total global population, by 2100. Nigeria’s population – already at 180 million will likely be greater than the United States by 2050.

African nations are developing fast, and they are developing at a time when new technologies and the lessons of the past make it possible to leapfrog many economic pitfalls and development challenges.

African nations can draw lessons from traditional growth trajectories which have sometimes led to the ‘middle income trap’ – where economic growth and export markets have stagnated for lack of local demand, sufficient investment, and economic diversification. African nations can draw on these lessons to create more environmentally sustainable growth and more equal growth - the ‘traditional’ growth trajectories of Western and Asian nations do not need to apply to Africa in the 21st century.

Africa has the youngest population in the world.  Two of every three Africans are under the age of 25. And Africa’s population will stay young as developed countries age. Primary school enrolment has risen by 26 per cent in sub-Saharan Africa – which represents more than double the number of children enrolled in primary education between 1990 and 2012, from 62 million to 149 million. In Northern Africa primary school enrolment has reached 99%. The half of the population under twenty will be the best educated generation their nations have ever seen, but their children will surpass them by as much again. In our global economy, and with the right investment, Africa can expect to have a highly educated, high income and mobile workforce.

There are now 25 African democracies, though many are still negotiating the transition, and many more have held elections, imperfect but worthwhile. Conflict is diminishing. The peace dividend to economic growth is being realised by many African nations. For example in the creation of multi-country integrated energy, transport and customs regions - like the East African Community’s Northern Transport corridor.

Global commentators, from the Economist to the World Bank, see Africa on the brink of an economic take-off.

High population growth and strong economic growth mean growing demand, growing purchasing power, and growing opportunity.  But it is not just the rate of growth that matters, it is the quality of that growth. Half of the world’s fastest growing economies may be in Africa, but so are 19 of the world’s 23 poorest countries.

Sub-Saharan Africa’s growth rate, excluding South Africa, is consistently above 5 per cent and has touched 6 per cent in recent years — and yet sub-Saharan Africa still has the highest child mortality rate in the world, with 98 deaths for every 1,000 live births. Economic growth alone will not overcome these challenges – just as economic growth does not guarantee a more equal, or a more free, society. Private sector and free market progress and growth are welcome, but as Jeffrey Sachs, director of the Earth Institute at Columbia University and one of the world's leading experts on economic development and the fight against poverty, argues, there are elements to the poverty trap that require intervention to overcome.

The great news is that tackling poverty is good for economic growth. It is now widely understood and accepted that inequality is a drag on growth. Both the OECD and the IMF have found this to be the case. The OECD found that increasing income inequality by 1 Gini point lowers GDP per capita growth by around one tenth of one percentage point per year, in the long run. If economic growth in Africa disproportionally benefits elites and widens the wealth gap, the continent’s rise will slow and even stall.
Human rights and environmental stewardship are critically important to Africa’s development trajectory. If unregulated resource extraction pollutes and ruins agricultural industries, GNP may briefly rise but poverty will worsen. If citizens can’t rely on the rule of law and their rights before the law, they have no incentive to build their own businesses and invest in others.'
Across the continent, infrastructure investment and strong institutions are patchy. Forty billion potential work hours are lost each year owing to people being unable to open a tap in their homes for water and instead needing to fetch water from another source. Hours of business productivity lost due to power black outs; hours or days are lost in transport time due to poor roads and infrastructure. I saw this first hand in Ethiopia and South Africa a few months ago. I also saw the extraordinary plans for transformation. These plans obviously provide business opportunities for Australian companies.

We are accustomed to talk about digital disruption and new technologies in the context of our own economy, but in African economies these tools are even more transformative. Only 2 per cent of households in sub-Saharan Africa have landlines, but 83% of Ghanaians, 82 per cent of Kenyans, 73 per cent of Tanzanians own mobiles. They use them to check the market price of crops or fish so they can get a better price.  They bank, transfer money, pool information about weather and crop conditions. Mobile phone technology can also be used in health and education.  For example, expectant mothers can receive SMS reminders during pregnancy from medical clinics.  They are a gateway to information, communication and empowerment, 21st century technology vaulting the last hundred years.

Africa’s biggest wind farm and biggest hydroelectric dam are both under construction. The decreasing cost of renewable energy generation as technology develops is making clean energy not only the environmentally best but also the cheapest way to bring power to remote areas.

As well as our expertise in mining, Australia has some of the biggest solar and wind resources in the world. Again, this represents another mutually beneficial business opportunity for Australia in Africa. Our region, the Indo-Pacific is pressing into Africa at a remarkable pace.

Africa's exports to China increased at an annual rate of 48 per cent between 2000 and 2005.China has accelerated its drive to draw Africa into the Maritime Silk Road. Apart from building railroads, highways and airports, China is developing 12 deep water ports, seven of which are along the African coastline.

Returns on investment in Africa are among the highest in the world. Private capital now exceeds official development assistance. This is the time to be increasing our presence in Africa, not pulling away. Unfortunately, the Australian government has reduced our footprint in Africa. The Abbott Government cancelled plans to open an Australian embassy in Senegal, which would have strengthened our engagement with francophone Africa and West Africa.  The previous Labor government decided to expand our diplomatic footprint in Africa in order to build long-term and credible Australian partnerships with the countries of Africa.

We have cut our aid. Sub-Saharan African countries, which have struggled most to meet the Millennium Development Goals, have been very badly affected, with 70 per cent cut to their aid from Australia. The Middle East and North Africa region has been slashed by 82 per cent.

Australia’s development assistance programmes have been known for their high quality and concrete outcomes. Programs like one I visited in Feche, in Ethopia, run by aid organisation Plan, and funded by the Australian Government. That program provides books, through the “donkey library” for children who otherwise would never see them; provides preschool education for children who would otherwise have none; provides information on child and maternal health in an area that has a shockingly high rate of child and maternal mortality.This is just one of the programs that has been defunded.

The damage to Australia’s reputation as a good global citizen is immense, but so too is the damage to our long-term economic interests. We have seen in our own region how emerging economies, given a small amount of assistance at the right moment in history, can move from aid recipients to major trade partners. South Korea is one shining example. Now is the time for Australia, and the international community, to look at the ways in which our private sector engagement, our aid, and our expertise, can marry with new technology to both meet long-standing needs and develop innovative new ways to hurdle the middle-income trap ahead.

Of course aid alone cannot pull nations or individuals out of poverty, aid underpins many of those things that are the rungs on the ladder out of the poverty trap. Education. Health care. Clean drinking water. Aid can also provide expertise that fragile states may not have yet built themselves – not just in health care, in engineering, but in administration, public service, in building the bureaucratic institutions which ensure accountability and promote efficiency.

And while many African nations have benefitted from reduced conflict in recent years, conflict continues in some countries – and new threats emerge, such as Boko Haram.  All countries around the world are grappling with the problem of extremist violence. None of us can meet it without international co-operation and co-ordination.

Many of the strongly growing African economies are heavily based around resource extraction. It will be critical for Africa’s future that those nations manage the long-term sustainability questions around commodities exports, the environmental consequences of resource extraction, and the need for economic diversification. These are questions Australia has grappled with, and expertise Australia can bring to the table. This is a natural area for private sector partnership.

Australian companies have invested heavily in Africa. There are over 200 Australian mining companies with more than 700 projects operating in Africa and our bilateral merchandise trade with Africa more than doubled between 2009 and 2013. Africa is now the largest international market for Australian resource, mining and mining equipment companies.

Civil society, government and business all have a stake in greater transparency in the extractive industries: civil society wants new avenues to pursue an anti-corruption agenda; government must increase its capacity to mobilise domestic resources; and business needs a level playing field and greater trust in the institutions which underpin investment.

Lack of transparency in corporate affairs shelters corruption, and tax avoidance and profit shifting deprive developing nations of desperately needed tax revenue – by one estimate, as much as 4 per cent of their GDP.  Countries receiving the full value of their commodities can build infrastructure and institutions to support further sustainable economic growth.

My shadow parliamentary secretary, Matt Thistlethwaite, has been working with “Publish What You Pay,”an international network of civil society organisations, governments and corporations. They are campaigning for a global standard requiring large corporations – both listed and unlisted – to disclose payments to governments for mining, oil and gas projects.

If more African nations can find the right policy settings, to vault over some of the worst hazards of the traditional development trajectory, not just Africa but the world will benefit immeasurably. If more African nations can find ways to translate their current exceptional economic growth to long-term sustainability, then the 35 per cent of the world’s population living in Africa in 2100 will lead extraordinary lives. But this will require us to do far more than simply hope for the best. Africa’s recent history is cause for hope, but far better, it is cause for enthusiasm. It is cause for deeper, stronger engagement.  It is cause for us to look not five, not ten, but thirty and fifty years ahead and ask what our two ancient continents will achieve together.

By The Hon Tanya Plibersek MP
Deputy Leader of the Opposition
Shadow Minister for Foreign Affairs and International Development Member for Sydney

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