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Where to from here? Finding the right economic elixir for Africa’s post-Covid recovery

Most developing economies were already battling to grow when the Covid-19 lockdowns came into effect in 2020. How do African economies fix existing problems and change tack as we emerge from the crisis? Nkateko Manganye argues that we need to identify our competitive advantage and strengthen trade relationships in order to grow.

Published 7 August 2020

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COMPETITIVE ADVANTAGE AND TRADE ARE KEY TO GROWTH

I support the idea of free markets, but this does not mean ruling out government intervention. Although many policymakers anticipate a return to national autonomy or disintegration between countries, the world has become highly integrated, making this expected de-globalisation almost implausible. In my view, in order to drive growth in Africa, we must identify our competitive advantages and leverage them.

How African economies can get ahead

What is needed for African economies after the Covid-19 crisis has passed? I believe there are three challenges hampering growth and development in Africa. For growth, we need to build an able labour force, establish efficient institutions and embrace technological progress. As a start, governments should establish institutions that enable efficiency within their jurisdictions. These institutions could protect intellectual property in order to drive growth through innovation. Furthermore, we need a reestablishment of industries within local communities. These industries would operate locally, generate demand and help redirect resources, reducing the dependence of locals on the government. The basic skills required for vocational jobs can be taught at a low cost and usually faster than a mainstream degree or diploma, improving the quality of labour available for these industries.

We need trade, not protectionism

If we can get these things right, there is no need to impose regulations to protect local industries.

We should constantly ask ourselves: What is it that we can do very well? We should determine what our comparative advantage is and lean towards perfecting it. Closing borders in an attempt to grow local industries may be detrimental, because part of our growth lies within trade interactions. Protectionism may also lead to inefficiency in markets due to limited trade markets. Production inefficiencies may also arise when there is a lack of competition pressure. Exports also bring in foreign currency, which we need to be able to settle debt obligations: if there is no trade, we may run out of that supply.

Times of crisis also remind us of the importance of our relations as Africans. We will need to assess what bilateral agreements we can achieve within our regional proximities such as the SADC or the EAC. This can help strengthen us as a continent and prepare us to become a big player in the global market. As it stands, we are often still at the receiving end of the deals.

The world continues to evolve and governments do not necessarily have all the answers. These challenges should incentivise us to find solutions that work for us, and may also be beneficial to other developing nations. The revolution of globalisation has been accelerated. This will change how things are done and will be evidenced by the birth of new industries. Africans should not look at blocking out competition in pursuit of growth, but should rather embrace and establish an environment that allows local enterprises to thrive. If we can get that right, the rest of the equation should work out.

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