The Africana World: From Fragmentation to Unity and Renaissance

Chapter 10 - Economic Integration in Africa: The Systems of Innovation Approach

Economic Integration in Africa | 217 The 2010 McKinsey Global Institute (MGI) report on the performance and prospects of African economies points to the accelerating growth rates of African economies in the first eight years of the twenty-first century, the almost seven-fold increase in foreign direct investment over the same period, as well as the rapid rate of urbanisation, as strong indications of a take-off onto a steep growth and development trajectory.1 Combined with projections of various dimensions of the economic size and performance of the continent as a whole, Africa is placed alongside China and Brazil as a new emerging economic giant. These indicators are certainly a welcome sign of a potential break with the continent’s dismal performance trajectories in previous decades and offer the hope that a take-off onto a sustainable development trajectory is now possible. However, a few cautionary notes are necessary if we are to uncover the main remaining bottlenecks and impediments in the path to sustainable long-term development. The MGI report classifies African economies into four categories, in order of their potential for take-off: diversified economies, oil exporters, transition economies and pre-transition economies. Egypt, Morocco, South Africa and Tunisia are listed in the first category and much is made of the role of these economies in leveraging the shunting of the growth and development path of the continent onto a new track of self-sustaining expansion and structural transformation. The major part of the economic growth of these countries is accounted for by the services sector (construction, banking, ICT and retailing), urbanisation is proceeding at a rapid rate and consumer spending is increasing. Because of these features, in spite of the acknowledged problems of high unit labour costs, due mostly to a skills deficit, these economies are seen as the ‘growth engines’ of the continent. Algeria, Angola and Nigeria are the continent’s main oil and gas exporters, but are still seen as caught up in the resource trap, with a low level of diversification of their economic base. The transition economies are those such as Ghana, Kenya and Senegal, which are in the process of diversifying away from their dependence on the agricultural sector towards manufacturing. The pre-transition economic category covers countries with very low GDP per capita figures (at $535 per annum), where the main impediment to development is posed by weak governments and public institutions, poor macroeconomic performance and sustainability problems in their agricultural sectors. Economic Integration in Africa: The Systems of Innovation Approach Mario Scerri 10 Chapter 218 | The Africana World: From Fragmentation to Unity and Renaissance The growth rates recorded in the 2000s have been spread across sectors, with growth rates in most of the services sectors exceeding those in the resources sector, and across 27 of Africa’s economies. Inflation, government debt and the budget deficit as percentages of GDP all improved considerably in those economies that recorded high growth rates. Overall, the MGI report presents a continent where the performance of the leading diversified economies seems to be having ripple and demonstration effects across the continent, pulling an increasing number of African economies onto a promising development trajectory. However, the evidence for this encouraging portrayal of the development prospects for the African continent can be read in a number of ways and through different analytical lenses. The one immediate fact that commands attention is the small number of diversified economies that are supposed to offer the model for economic development across Africa. The second is that three of these four economies are in North Africa. The third fact, emerging from recent events, is that the political economy of two of these countries has collapsed. The question then arises as to the manner in which we interpret information and even the choice of information that is judged as relevant to the understanding of economic performance. While standard economic indicators may yield encouraging signs of economic development, a political economy perspective may perhaps enable us to understand developing economies better. One such approach is based on evolutionary economics2 and the adoption of a particular version of the systems of innovation approach3 to development economics. 10.1 The Systems of Innovation Approach to Economic Development Progressively, in the search for a new unifying framework for a ‘new’ development economics, innovation has come to the fore as a theoretically plausible explanation of change. The concept of national systems of innovation owes its origin to List...