EMERGING AFRICA: BEYOND THE SPIN
Talking about the emergence of African economies has become in recent years a cliché of governments’ communication. It may be useful to go back to the basics of this notion to clarify its meaning and stay focused on evidence-based analysis.
The concept of emergence, made popular at the turn of the century, initially referred to certain capital markets and ended up being applied to whole economies, by extension.
Strictly speaking, a capital market is qualified as “emerging” if it is located in a developing country and meets the following requirements: (a) a high potential for sustained growth, (b) a high level of volatility and (c) returns that exceed those of similar investments in the capital markets of developed countries.
What’s remarkable in such a market, is that it is transitioning to higher dimensions in (i) size, (ii) level of activity, (iii) liquidity and (iv) product sophistication on long term basis.
From a larger perspective, is deemed “emerging” an economy meeting a number of quantitative and qualitative criteria.
The quantitative benchmarks are: (i) a GDP per capita under $ 10 000 according to the World Bank or one standing between $ 2 000 and $ 12 000 according to the IMF; (ii) a high GDP growth rate with the potential to remain so over the long term and (iii) a high investment rate with an increasing foreign direct investment content.
However, the most relevant milestones of the economic emergence are qualitative in nature and relate to an economy engaged in an active, planned and staged transition towards:
a voluntary integration to world markets, leveraging the comparative advantage of the country and the improving competitiveness of its economy;
a more structured and competitive domestic market, generating sustained improvements in productivity;
effective institutions and infrastructures – political, physical or legal- providing safety and security to markets to function and investments to take place.
Clearly, for such a substantive transition to take place, the country must benefit from a far-sighted, competent and legitimate State able to bring together the relevant national constituencies and have them work together for the profound transformation from a developing to an emerging economy.
This transformation process must be pursued regardless of the political color of the government in place and can be expected to be lengthy and arduous. Still in its absence, the country may grow but it will not emerge.
These clarifications in mind, it becomes easier to tell the countries that have embarked on a genuine process of economic emergence from those who are merely going through the motions for political spin purposes.