So African economies can’t grow with external funding


The past week has been characterised by several news articles in leading global journals suggesting that African economies will continue to grow this year and in 2016.

Tapiwa Gomo

These feel good news articles were triggered by a recently-
released joint report which projected that African economies were likely to grow by 4,5% in 2015 and 5% in 2016.

The goal of writing this piece is not to rehash what other articles have already covered, but to question some of the narratives emerging out of them and the factors highlighted to be behind this projected growth.

Implied and also stated in the report is that African economies will grow because of a number of factors.

Among them include the projection that cash flowing into Africa will likely increase and reach $193 billion, with remittances from the African Diaspora expected to contribute $64,6 billion in 2015.
This makes remittances the most vital lifeline for African economies.

The second factor is that foreign investment into the continent is expected to grow to $55,2 billion in 2015 after it slumped the past few years due to the global financial crisis.

The third factor is that foreign direct investment into Africa is predicted to grow as well to reach $73,5 billion in 2015.

While these factors may either be an accurate representation of the situation or they were crafted with the goal of soothing and romanticising the minds of Africa to open their markets as happened a decade ago, they raise interesting questions.

What emerges from these factors is that they are portraying and reinstating the stereotype that Africa is hopeless
without external cash inflows.

With that narrative handy, Africa’s economic growth is only linked to the African Diaspora, the private foreign investment and foreign direct investment and not anymore the other internal economic dynamics.

And without these, as the narrative suggests, economic growth cannot happen.

Thus the African economies are framed as only dependent on external lifelines and the West as the Samaritan by allowing cash from block to rescue the hopeless African economies.

While the role of external cash inflows in bolstering economies is beyond dispute, money alone is not an adequate factor to propel and sustain growth.

During the peak of the economic crisis in Zimbabwe, for example, the Diaspora contributed an estimated $2 billion, but because of bad political and economic environment, that money flew out of the country to pay for food stuffs in South Africa.

My point here is that money alone cannot grow an economy in the absence of appropriate environment, the availability of skilled labour and resources to sustain an economy.

And these should not be seen as part constructing a passive African waiting to receive foreign money to develop.

Even several decades after the West withdrew its colonial administrations from the continent, the Western mindset has struggled to accept that African countries are now
independent and therefore their development cannot be exclusively tied to them and their money.

The West has struggled to acknowledge the positives in Africa which are part of that projected growth.

This is why the economic relationship between the two blocks has remained one built on the sale of raw materials to raise cash for consumption and not to provide the equipment needed to process the raw materials in Africa.

To a country that is starved of cash, an increase in inflow may look like a cool lifeline, but history has shown that when terms are at loggerheads, the West is very quick to turn off the taps of those cash inflows.

And that has proven disastrous to countries that have depended on a cash economy neglecting the productive sector.

That is also one reason Zimbabwe failed, during the peak of the economic crisis, to take advantage of the Diaspora remittances because our production was next to zero, we depended on externally produced supplies for our national and family consumption.

While external cash inflows can bolster economies, nothing beats establishing a home-grown and productive economy.

And to achieve that, governments do not need to bed hop with the East or the West, but invest in their productive sectors and produce for its national consumption.

That way the inflows from the West can only be ice on the cake and not the mainstay of the economy as portrayed.

That is also one way of ensuring that African economies are not exposed to the whims of the West.

Tapiwa Gomo is a development consultant based in Pretoria, South Africa