Amid the Africa hype, a contrarian view

April 12 2012 By Reuters

A growing number of optimists say Africa's economies are set for take-off and decades of Asian-style growth.

A new book takes a more sober assessment of Africa's future based on its past and skewers many projections as bug-eyed, wild and divorced from the region's history.

In “Africa's Future: Darkness to Destiny,” author Duncan Clarke argues that orthodox macroeconomic modelling has little relevance to the African landscape with its complex modes of subsistence and survival.

Clarke, a veteran commentator of the African economic scene, writes that: “It is by no means clear that the pervasive models of economics, macroeconomic analysis or orthodox growth theory have had a sufficiently deep meaning or any realistic application” to the continent.

In part, this is because they have been developed to measure trends in advanced economies and miss the broader picture of subsistence in which 70 percent of Africans still live.

“The concentration on the macro, the modern, effectively the capitalist components of the economy, which are the drivers of growth ... doesn't tell you about the peasants, it doesn't tell you about the urban slums,” Clarke told Reuters in an interview in his Johannesburg office.

“It's not an adequate prism of vision and understanding because it has little to say about production for own consumption,” he said.

This line of thought raises interesting questions against the backdrop of a stream of economic data.

What relevance does Kenyan inflation have for a subsistence peasant if they mostly consume what they grow? What does Angola's oil-fuelled double-digit economic growth mean on the ground for the rural poor or a Luanda slum dweller?

Even in relatively advanced South Africa, interest rate changes may have little direct impact on the daily life of a squatter camp resident with no bank account.

DEMOGRAPHIC DUD?

Clarke is scathing when it comes to the promoters of Africa's “demographic dividend” who argue that Africa's young and fast-growing population will give it a competitive edge.

“In 1900 there were only 110 million people in Africa, now there are over a billion. In 2050 Africa is going to have 2 billion. So there will still be huge problems of poverty, of income scarcity, and most importantly of unemployment,” he said.

“While you are getting this extra huge number of people ... it's not that they are going to be employed with formal wage employment, they are going to grow into the informalised economies, which are going to be increasingly urbanised, and these are going to be very low-income arenas,” he said.

Since Clarke believes much of the economic modelling in Africa is not ground in reality, he takes many of the region's growth projections with a massive pinch of salt.

Clarke notes in his book that the World Bank's strategy for Africa in 2010 concluded that it stood on the verge of an Asian-style take-off of decades of brisk growth. It is not alone.

“Almost all of these forecasts are typically linear, 5 or 6 percent and 40 years forever. These are numbers generated out of a model, of some sort, somewhere, where they seem to just take the contemporary condition and just project,” he told Reuters.

But Clarke's view is staunchly contrarian.

“The political environment in a great number of African countries is now far more conducive to favourable economic growth rates than it was a decade, two decades and three decades ago,” said Thalma Corbett, the chief economist and head of research at cape Town-based NKC Independent Economists.

“The demographic and behavioural changes that are taking place in Africa cannot be ignored. Although poverty levels are still very high in Africa, there has also been definite progress, and the size - and spending power - of the consumer market is expected to expand quickly over the next few years.”

Corbett and others are also encouraged on the job front.

“Encouragingly, foreign investment is increasingly targeting sectors that have more potential to create jobs and boost the local economy - such as banking, and retail as opposed to just the mineral and oil sectors,” she said.

The sub-title of Clarke's book is “How the past is shaping Africa's economic evolution,” and the roots he sees there are not sprouting into a forest of prosperity.

Looking to the past he also sees value for understanding Africa in the work of classical economists such as Thomas Malthus, with his emphasis on subsistence and raw survival.