Economic Growth and Diversification Fuelling Development in Africa

Abstract

The question as to whether economic growth reduces poverty and inequality is a highly debatable and controversial topic in Africa. Much of the African population still earns their living in the primary sectors and the traditional economy, while GDP growth is mainly attributed to oil and mineral extraction, and dependence on these commodities makes many African countries susceptible to boom or bust cycles. This chapter describes the necessity for economic transformation, normally driven by government, that promotes diversified production and export competitiveness, and which should facilitate social well-being through more equal income distribution, skills development and employment. Kenya and Nigeria are evaluated to determine the impact China has had on these regional ‘powerhouses’ in East and West Africa, and some of the conclusions drawn are the following: China’s funding of strategic road and railway links is creating an enabling environment for growth and diversification; skills transfer is not occurring at a satisfactory level due to the respective governments not providing the capacity and structures for the transfer of those skills; government inefficiency and corruption, safety and security remain a barrier to investment and growth; China’s investment in Nigeria has boosted the extractive sector at the expense of the agricultural sector; the trade deficit in favour of China is a concern; and these African governments need to introduce more effective industrial and other policies to direct investment in priority areas.