Africa is the most popular destination for human resources and business. It is also an important source of revenue for emerging economies. The political, economic and geo-political conditions in Africa have a direct impact on the export sector. Economic growth and development in Africa therefore, depend upon the correct mix of drivers.
African countries are progressing economically and adopting complex policies to promote economic growth and development. However, the policies and procedures are still hazy. They rely heavily on donor support, which has been a major problem in the past. Political stability and commitment to reforms have improved over the years but corruption still prevails in some areas.
The governments are concentrating on promoting growth and diversification in terms of exports. Several strategies are being chalked out. Multinational companies are showing more interest in establishing manufacturing units in sub-Saharan Africa. For small and medium-sized enterprises (SMEs), the government is offering tax rebates, technical assistance and information technology infrastructure to improve market access and increase business exposure. These measures help SMEs to expand their business to non-Asian countries and earn greater revenues.
Economic growth and development in Africa depend highly on the export sector. Multinational companies from Europe, United States and Japan are investing in infrastructure, manpower and production facilities to produce goods in low-income countries at competitive prices. Some of these goods are not produced in Africa. The main drivers of growth in the export sector are technological advancement, better transportation systems, liberalization, lower labor costs and opening up of the market.
Economic growth and development in Africa are also facilitated by the increase in inter-regional trade and investment. This has increased employment opportunities, financial diversification, reduced cost of living and improved standards of living. For companies, investment in equipment, machineries and workforce is a key factor. The growth in sub-Saharan Africa is contributed mainly by the commercialization activities of Chinese companies. In addition, the major beneficiaries of economic growth and development in Africa are poor country groups that have suffered from political and economic mismanagement for decades.
Economic growth and development in Africa can be significantly promoted through improved infrastructure, better distribution of income and products and higher employment rates. Improvements in infrastructure include development of roads, electricity, telecommunications, water and other basic services. Technological advances such as the IT revolution, mini and large scale manufacturing of textile products, agricultural products and construction materials have increased employment opportunities in many sectors across the continent.
Economic growth and development in Africa can also be achieved by diversifying the local production. There is a potential to increase regional production by improving irrigation, agricultural and industrial practices and policies. Companies can increase productivity by investing in new plant, machinery and tools. More investments in research and development for the pharmaceutical and bio-tech industries are expected to provide impetus to regional economic growth. The governments should take a series of steps to diversify the sources of foreign direct investment in the country. A major focus should be on improving the business climate so that business activity is not hampered by high taxes and subsidies and excessive licensing and patenting requirements.
Africa is an area of great economic potential with an excellent resource base. The large number of people living in poverty, coupled with the lack of developed infrastructure has resulted in the region being classified as a developing country. However, with appropriate policy interventions and additional reforms, African countries can enjoy significant economic growth and development.
Policy reforms in most African countries are lagging behind . . . . . . in terms of polity and government structure. This impairs economic efficiency and impedes progress towards improved governance. The key drivers for this include the need for restructuring and downsizing of public sector employment, budgetary consolidation and introduction of fiscal policy frameworks to support economic recovery. Policy frameworks should include sound debt relief provisions. African governments are required to undertake a coordinated effort to achieve sustainable economic growth and development.
Africa has huge oil and gas potential. Given the right policy mix, companies operating in the region can exploit its natural wealth and benefit from large potential tax revenues. However, most African governments have been unable to develop policies that will support the extraction of natural resources, resulting in underutilization of these resources by local companies. For example, despite promises to address issues relating to indigenous peoples, limited resources have limited tax revenues.
Economic growth and development in Africa face serious challenges due to lack of policy frameworks, limited infrastructure and inadequate market access. Only the comprehensive development of African countries can ensure sustainable economic growth and development. In view of these challenges, there is an urgent need for African countries to implement policies that set out acceptable compensation and return to investors. This will improve competitiveness, improve the business climate and allow businesses to increase their operations internationally. Such measures should be in line with the norms of international trade.