Capacity development critical to sustaining economic growth in Africa

Improving and enhancing Africa’s capacity to formulate and implement sound economic policies and reforms aimed at creating a better business climate are key to prospects of economic growth and employment creation on the continent, said Beruk Negash, Program Officer, East and Southern Africa at the African Capacity Building Foundation (ACBF). He was speaking today on behalf of ACBF’s Executive Secretary, Prof Emmanuel Nnadozie at the 12th Annual Forum of the Partnership for Development, held in Nairobi under the theme: “Unlocking Africa’s Growth for Productive Employment and Poverty Reduction”.

Africa’s GDP growth rate is expected to increase to 4.5% in 2015 and 4.8% in 2016, but to sustain and improve this growth to the transformational level of 7% – leading to employment creation and poverty reduction – continued capacity development effort remains critical.

“Going forward, consolidating the stability of the macroeconomic environment will be a prerequisite for many African countries,” said Mr. Negash. “The Foundation has contributed to enhancing national capacity for policy formulation and implementation in most African countries through investing in human capital and institutions”.

Mr. Negash added that high domestic demand, increasing exports of commodities and dynamic agriculture and services sectors will continue to drive economic growth in Africa in the coming years. “Private consumption will continue to benefit from remittances and higher rates of credits for the private consumption.  Furthermore, urbanization, an expanding labor force, and the rise of the middle-class African consumer are potential sources of higher domestic consumption contributing to sustainable economic growth,” he said.

Also, despite global uncertainties, prices of commodities are expected to remain high and to be a key driver of African growth over the next few years. The agriculture sector, which employs 60% of Africa’s workforce, and the services sector are expected to be major sources of African growth over the medium term. The services sector will become a major contributor to African economic growth, with sectors such as transport, trade and real estate, telecommunications, financial and insurance services and information technology projected to have a significant impact on Africa’s GDP in the coming years.

Mr. Negash also said that in the context of African countries, the continent needed structural change that, besides upgrading informal trade to formal private sector processes, would also absorb the steadily increasing working age population. “For structural change to meaningfully improve the composition of jobs and absorb the bulk of working age population, various capacity challenges need to be addressed, namely the capacity to formulate adequate policies, to prioritize, to modernize the primary sector, to regularize the informal sector, to innovate, to  develop the private sector and to foster regional integration,” he said.