The Africa-China economic cooperation has existed for decades. The significance of China’s FDI on economic growth can be observed, using two decades of FDI data. The economic growth of Africa has been impressive despite recurrent structural and technical issues. Any important nugget to take from China? Can Africa rise up to its expectations?
Africa’s Economic Infrastructure VS China’s Economic Infrastructure
In 1978, China was among the poorest countries in the world. Since then, China’s real per capita income has grown, on average, by more than 8 percent each year. In contrast, per capita income in Africa actually fell consistently between 1976 and the mid-1990s. Since then, Africa has experienced consistent growth, but that growth has been differential, across countries rich in natural resources growing much faster than those without.
There are some factors owing to African Growth. Based on factor accumulation, particularly in capital-intensive sectors. There has been a very low poverty-to-growth elasticity. There has been low creation of quality jobs, leading to insufficient income growth. Growth has been more rapid in capital-intensive/low-productivity sectors. Per capita growth has been lower than in other developing countries due to the high fertility rate.
China has enjoyed extremely high increases in productivity over the last several decades. Initially, this productivity growth was driven by the agricultural sector, followed by productivity growth in the township and village enterprises in the 1980s and 1990s, and then by privately-owned firms and a restructured state-owned sector into the 2000s. In contrast, growth in Africa has been accompanied by much slower poverty reduction. In the developing world broadly, a 10% increase in national income translates into a 20% reduction in poverty. In Africa, the same increase in income translates into only a 7% reduction in poverty.
Level of Education
Beyond reforms that increased productivity, China has nurtured a population with high levels of human capital. The average years of schooling for Chinese adults (ages 15 and up) rose from 1.5 in 1950 to more than 7.5 in 2010, a five-fold increase! Clearly human capital has been one of many enabling factors in China’s meteoric growth.
When we look at human capital in Africa by the simple metric of years of schooling during the same period, average years of schooling rose from 1.3 to 5.2, a four-fold increase. Obvious differences arise, however, when we examine the quality of schooling. While there are no direct comparisons of learning outcomes in various regions of China versus individual countries in Africa, there is a keen disparity between learning outcomes – with profound related impacts — in Africa and China.
There is the fundamental importance of improving basic health systems to increase life expectancy, which remains low in most African countries, and creating viable health systems. China has demonstrated, for decades, a commitment to broadening access to health, beginning with the Cooperative Medical Systems. These programs offer valuable lessons in how to provide health care to rural areas that are suffering from inadequate health services.
Model Theory – What Africa is Missing
Manufacturing is not the only way to move up the value chain from exports of extractives. There is also the possibility of producing higher-value agricultural products, such as cassava flour in Nigeria, cut flowers in Kenya, or chocolate in Madagascar. These shifts may deliver some of the agricultural productivity gains that Africa needs. Some African countries have demonstrated success in diversifying exports: Rwanda has expanded exports of vegetables and beverages, while Ethiopia has expanded leather exports as well as horticulture. All three of these strategies – shifting into manufacturing, moving up the agriculture value chain, and diversifying across exports – can help Africa’s economies increase both productivity and resilience to global trends.
Quality education and an emphasis on STEM will be essential to African productivity and income growth. At the same time, Africa needs to get more students into tertiary education so that they have the option of studying science and technology. University (or other post-secondary) enrollment is under ten percent in Sub-Saharan Africa, the lowest of any region in the world. Some of the best evidence on improving lower levels of education comes from China. The World Bank recently reviewed hundreds of studies on improving primary education in middle- and low-income countries, and twenty-five studies from China informed recommendations for improving education in Africa and beyond, especially on effectively incorporating technology into schools.
One of the crucial constraints to growth in Africa is the lack of physical capital. It’s very difficult to develop higher-value, higher-return manufactures or even agricultural goods without access to roads and power. One in three Africans has access to electricity (and only one in seven in rural areas) – in contrast with near-universal electricity coverage in China. Furthermore, consumers in Sub-Saharan African countries face the highest connection charges of any other region. Beyond simple investments in infrastructure, Africa also needs to make essential improvements in the efficiency of trade, such as simplifying border clearance processes and harmonizing customs regulations.
With the outbreak of the pandemic, economic development is rising in a show turn. After getting the vaccine and strengthening their relationship with China, Africa needs to devise a plan to grow more and develop with the new normal embracing all trending growth factors.
African economies must address the challenges of productivity in order to achieve sustainable growth and reduce overall poverty. African nations must determine a way to tap into the educational, technological, healthcare and sustainability gains in China over the coming decades.
What do you think?
Have you subscribed to our newsletter yet? Sign up for updates on content and opportunities.