Growth accelerations are pretty commonplace among developing countries. Economist Ricardo Haussman and his colleagues identified 83 growth accelerations of eight consecutive years at two per cent higher than the five-yearly average between the mid-1950s and early 2000s.
But most growth accelerations, especially those in Africa, were shortlived. They did not form the foundation of a long-term step-change to a more diversified growth path.
The risk following the recently ended booms is that, due to insufficient planning and excessive optimism, the windfalls of growth accelerations were wasted.
Since the early 1990s, many African countries have been on a trajectory of higher growth. To the surprise of many observers, the global financial crisis in 2007-2009 did not spell the end of Africa’s growth surge, though the rate of growth moderated.
More recently, African growth has slowed further. At around four per cent in GDP terms it is considerably lower than the six per cent plus for emerging Asia.
Yet growth remains stronger than in the “lost decades” between the mid-1970s and mid-1990s. And Africa’s developmental performance has improved considerably since the early 1990s.
It is evident that African poverty and infant mortality, while still lagging, have improved significantly. There have been similar improvements in education access and infrastructure.
While these have themselves contributed to growth, the current relatively low growth rate inhibits the pace of the improvement in the lives of people.
To get a real sense of why growth has slowed, we first need to ask why the period since the mid-1990s was so much better than the previous two decades.
The commodity super-cycle, centred on China’s huge public and private investments, was the standout economic factor due to the demand for African products. Later China’s capital surplus allowed it to offer huge credits for infrastructure investments.
But indicators show that growth and development improvements began in Africa before the commodity super-cycle, other factors were also at play.
Clearly important was the completion of Africa’s liberation – particularly the democratic transitions in southern Africa. The South Africa factor is a subset of the positive impact of the end of the Cold War.
This allowed greater domestic accountability and improved governance in many African countries. The improvements in governance in turn created an environment that frequently encouraged direct and indirect investment.
The second major economic policy risk is that growth is tempered with high levels of inequality. High inequality reduces the impact of growth on poverty, and growing inequality is slow to reverse.
If these inequality levels cannot be reduced, the sustainability of growth in the region will be compromised. The risks have grown in recent years.
But the developmental improvements of the past two decades may well have generated a sufficient legacy to enable many African countries to move to a stronger footing.