Growth, Governance and Good News in Africa
There’s good news out of Africa these days, and not surprisingly, it includes a governance-growth connection.
The Center for Global Development’s Steve Radelet has just published “Emerging Africa: How 17 Countries Are Leading the Way,” a book that examines the forces behind the sustained economic and political success of a group of countries in sub-Saharan Africa (SSA). As growth has stagnated in the rest of SSA, these countries* have seen a 50% rise in income per capita since the mid-’90s, with annual investment in real terms more than doubling, and total trade tripling.
Notably, these gains have not been fueled by commodity booms subject to resource rent problems; Radelet specifically excludes oil-exporting nations from the list. Making the list are countries such as Zambia and Mali, Ethiopia and Mauritius-a diverse group that nevertheless shares a common story. And a key factor in that story? With certain notable exceptions: democratic and accountable governance.
Triggered by the economic crises of the 1980s, which crippled national treasuries and bolstered public outrage, many autocratic regimes in Africa began to fall. The new, more accountable governments tended to implement wiser, less self-interested economic policies that returned tangible benefits to ordinary citizens-thus strengthening civil society and democratic practices. As Radelet writes, “(S)ince the mid-1990s democracy, stronger governance and improved economic performance have created a positive self-reinforcing cycle, with each supporting improvements in the others.”
Indeed, the “emerging 17” show markedly superior governance indicators than their SSA counterparts, in addition to stronger economic growth. In the six measurements of governance quality compiled by the World Bank (rule of law, control of corruption, government effectiveness, etc.), Radelet’s 17 standouts outperform other SSA countries handily on every one. On the “Rule of Law” indicator alone, the emerging countries score over 10 times higher than other African nations.
While Radelet explains several factors that have contributed to these 17 success stories, Liberian President Ellen Johnson Sirleaf, in the introduction to the book, singles out one:
For me the most important is the change in political systems, leadership, and governance. I’ve often said that Liberia is not a poor country, but rather a rich country that has been poorly managed. The same is true for most of SSA…[It] is rich in resources, talent, energy and spirit. But it has not been rich in leadership. It is made up of rich countries that were poorly managed, and the results have been disastrous.
Not surprisingly, better leadership and governance also create a better environment for business. The “emerging” African nations, with their superior governance records, receive much higher marks from the World Bank on ease of doing business than other countries in Africa-and even low-income countries worldwide. Taking into account indicators such as access to credit, contract enforcement, registering property and protecting investors, the emerging countries, on average, rank 104th out of 181 countries worldwide. Not stupendous, but poor countries worldwide rank, on average, 123rd-and the rest of Africa ranks 159th.
Certainly governance is not the only factor that contributes to a successful economy, and many of the governments of these 17 emerging nations are far from perfect. But for those working to improve the business climate in developing nations, “Emerging Africa” is yet another reminder of the inextricable connection between governance and growth.
*The complete list includes: Botswana, Burkina Faso, Cape Verde, Ethiopia, Ghana, Lesotho, Mali, Mauritius, Mozambique, Namibia, Rwanda, Sao Tome and Principe, Seychelles, South Africa, Tanzania, Uganda, and Zambia.