Giving Compass' Take:

• Brookings shares in-depth insights into challenges and opportunities for improvement in Africa. Funders can use this information to guide impactful giving. 

• How can funders work to support African countries in their development efforts? 

• Learn how business can accelerate Africa's development. 

Governance: Over the past decade, public governance in Africa remains on average on a moderate upward trajectory, mainly driven by progress in Gender, Health, and Infrastructure. The 2018 IIAG shows that approximately 3 out of 4 African citizens live in a country where public governance has improved over the past 10 years. Many positive trends emerge from this year’s index. Thirty-four out of 54 African countries have improved in Overall Governance over the past decade, with 15 of these having accelerated their pace of improvement in the past five years. Among those, Côte d’Ivoire, Morocco, and Kenya display the most impressive progression, stepping up from 41st, 25th, and 19th ranks out of 54 countries to 22nd, 15th, and 11th over the past decade, respectively. On the continent, improvements stand out in indicators related to Health, the most improved of the 14 sub-categories of the IIAG over the past decade, as well as in Gender and Infrastructure. There are also recent and welcome improvements in Rule of Law and Transparency & Accountability, even if scores in the latter are still low. But despite these improvements, needs and expectations of the continent’s youth are not met.

Finance: In 2019, the economic outlook of sub-Saharan Africa will strengthen, due largely to a combination of higher commodity prices, a stronger global economy, and supportive domestic policies. The latest projections have the region’s aggregate gross domestic product (GDP) growth stepping up to 3.8 percent this year, up significantly from the 2.6 percent average growth rate of the past four years. Thereafter, growth will rise to just over 4 percent by 2023. The aggregate contour masks significant differences across countries. Importantly, despite notable improvements, economic growth remains weak in Angola, Nigeria, and South Africa, the continent’s largest economies, with growth averaging under 2.5 percent—which is comparable to the rate of population growth—over the next five years. These large economies remain at risk of a lost decade (flat per capita GDP) unless policymakers implement significant reforms to reduce dependence on oil in Angola and Nigeria and, in the case of South Africa, to overcome structural problems—many inherited from the apartheid era. In this regard, priorities of President Cyril Ramaphosa and Vice President Yemi Osinbajo (see Viewpoints on pages 35 and 42) suggest strategies that are encouraging.

Youth: By some estimates, Africa’s working-age population will grow by approximately 450 million people—about 3 percent per annum—between 2015 and 2035. By 2050, Africa will have 362 million young people between the ages of 15 and 24 years old. Where will the region find the jobs for such a rapidly growing young population? In the past, the answer has been industry. Historically, industry has led to structural change—the movement of workers from lower to higher productivity employment. In East Asia, large numbers of workers leaving agriculture moved into manufacturing, driving growth, job creation, and poverty reduction. In contrast, Africa has deindustrialized. Today, its share of global manufacturing is smaller than in 1980 and the share of manufacturing in GDP is less than half of the average for all developing countries. As a result, structural change in Africa looks very different from East Asia. In Africa, three-quarters of new entrants to the labor market will work in self-employment or in microenterprises. Some 20 percent will work for wages in the service sector, and only about 4 to 5 percent will find a wage-paying job in industry. If these trends continue, only about 100 million of the 450 million Africans expected to reach working age over the next two decades can hope to find decent work. The growing population of more educated and urbanized youth encountering few jobs is a crisis in the making.

Fragility: The report argues that fragility is a syndrome of characteristics: fractured identities, a lack of state legitimacy and capacity, insecurity, a dearth of formal enterprises, and proneness to shocks. These reinforce each other, creating a trap. That fragility is a syndrome challenges both the conventional diagnosis of a “root cause” (typically some presumed past injustice) and the conventional “solution,” which starts from some future vision of an OECD-style society and deduces an agenda from the differences between that vision and current reality. Foreign troops keep the peace; an election “solves” the legitimacy problem; and in return for aid, the new government “agrees” to a donor wish list of reforms. This approach denies the condition from which the society starts. Foreign troops rapidly become intrusive; an election further divides the society rather than solving the lack of legitimacy; an ambitious reform package cannot be implemented by a state with little capacity. The society is hit by adverse shocks before anything has time to work.

Business: Africa’s fast-growing population and markets present important opportunities for business in an environment of slowing global growth. At the same time, greater innovation and investment from business is essential to meet Africa’s unfulfilled demand for goods and services, close the gaps in its infrastructure, create jobs, and decrease poverty. Here, we describe the extent of the African business opportunities in key sectors and suggest steps investors can take to translate that opportunity into profitable, sustainable enterprises.

Trade: The debate on the benefits of trade has dominated this decade, and Africa has cast its vote for more and better trade with itself. In March 2018, African countries signed a landmark trade agreement, the African Continental Free Trade Area Agreement (AfCFTA), which commits countries to remove tariffs on 90 percent of goods, progressively liberalize trade in services, and address a host of other non-tariff barrier. If successfully implemented, the agreement will create a single African market of over a billion consumers with a total GDP of over $3 trillion. This will make Africa the largest free trade area in the world. What is less known about the AfCFTA is that its scope exceeds that of a traditional free trade area, which generally focus on trade in goods, to include trade in services, investment, intellectual property rights and competition policy, and possibly e-commerce. The AfCFTA is complemented by other continental initiatives, including the Protocol on Free Movement of Persons, Right to Residence and Right to Establishment, and the Single African Air Transport Market (SAATM). The scale of AfCFTA’s potential impact makes it vital to understand the main drivers of the agreement and the best methods to harness its opportunities and overcome its risks and challenges.