How to achieve inclusive growth in Africa

One essential for creating jobs and eliminating poverty in Africa is to focus on developing high-value, inclusive sectors. But many countries lack the requisite management skills and effective links to development partners. This is where, as Jonathan Said and Claudia Fife report, organisations such as the Tony Blair Institute for Global Change can step in.

If Africa is to create sufficient jobs and livelihoods to eliminate poverty at scale, countries need to focus on developing inclusive sectors, such as agriculture, manufacturing, tourism and other high-value services.

The Jobs Gap sets out the basis for how governments and development partners can accelerate such a process. The central premise is that to be successful, this effort has to be driven by the Head of State.

It is therefore essential for proponents of inclusive growth to fully back the vision and strategy of the President so they can help translate that vision into reality.

The case of São Tomé and Príncipe

How can this work in practice? São Tomé and Príncipe, Africa’s second-smallest country by population, is a perfect case study to help answer this question.

Since 2014, the country’s Prime Minister and his team have had a clear vision of how to transform their country. With support from development partners, that have backed public-sector expenditure, the country has made significant improvements in recent years on social indicators such as health and education. This contributed to the UN recommending the country for graduation from Least Developed Country status in March 2018.

As positive as this step may be, it will result in a reduction in aid. The government knows it cannot maintain the current level of public spending without international backing. The only way forward is to bolster its finances by raising revenues from the economy.

The vision is to develop the tourism economy and the blue economy. Both sectors come under the remit of the Ministry of Finance. The former is referred to as the tourism economy, not just tourism, because tourism – which includes hotels, catering and entertainment services – is merely the driver.

Many other sectors can be pulled by it: cosmetics, chocolate, horticulture, arts, transport, retail, ICT, healthcare and construction. Each of these is labour-intensive and involves many small and medium-sized enterprises. This breadth of scope is what makes the tourism economy an inclusive sector, and a good one for the country to anchor its economy on. The same is true for the blue economy.

Four priority areas

While São Tomé and Príncipe’s government is making a lot of progress to turn the leadership’s vision into reality, improvements are needed in four areas:

• development-partner support for outstanding critical infrastructure;

• development-partner support for the tourism and blue economies;

• investment- and flight-targeting support; and

• management support with coordination and delivery.

Firstly, infrastructure is crucial, and significant progress has been made in this regard. The government has electrified over 98% of the country, provided 70% of the country with a piped clean-water supply and secured the first part of the financing needed to extend the airport runway. In addition, the number of annual tourist arrivals has more than doubled over the past decade.

However, the tourism economy needs an upgraded airport terminal with international safety equipment; flight connections to large nearby cities like Lagos, Abidjan and Kinshasa; investors in resort facilities and tourism services; and the regeneration of the capital.

Beyond these crucial enablers, São Tomé and Príncipe’s tourism strategy calls for a range of other issues to be addressed, such as English learning in schools, and better hospitals.

The story is similar for the blue economy, where the main missing enablers are a fishing harbour for industrial and semi-industrial boats and a deep-water harbour.

Funding is missing for the airport terminal upgrade, the fishing harbour and the regeneration of the capital city. So far, China has provided a large grant, part of which is being used to finance the runway extension. The rest is being used for socially important programmes, such as road improvements, healthcare and electricity maintenance.

Secondly, when it comes to developing the private sector in these key sectors, most development-partner support remains focused on the generic enabling-environment approach, epitomised by the Doing Business reforms, and not on developing the specific sectors and value chains that have the potential to eliminate large-scale poverty.

Partners support important programmes in areas such as improved public financial management, food security and renewable energy; but no partner is helping to implement or properly fund a big holistic drive to implement the tourism and blue economy strategies.

Thirdly, there is limited investment-targeting support. The government has set up a new Investment Promotion Agency to conduct full-scale investment targeting.

The aim is to build the agency up into a proper institution with the capacity to prepare bankable investment projects, target international investors, conduct investment facilitation and support existing investors.

So far the agency has developed an investment-promotion strategy, but it has limited resources to implement it. Similarly there is limited capacity to build a working relationship with airlines that could connect to neighbouring cities or destinations in Europe beyond Lisbon.

Finally, management support for coordination systems and delivery needs significant strengthening. This skill set is essential to allow the delivery of the first three factors described above: infrastructure, value-chain development and investment targeting.

It is crucial to ensure the government can collaborate effectively with the private sector and development partners, to align the bureaucracy, mobilise sufficient and suitable resources, gather political momentum, and ensure focused and synchronised implementation.

Currently, the leadership has access to a handful of people with sufficient management skills, but a lot of this resource is spent dealing with crisis after crisis, with little time left to drive the development strategy.

This is the single largest factor that slows down implementation and in São Tomé and Príncipe this has led to slower progress than required four years after the vision was set out.

Towards a common goal of inclusive growth

The solution is to provide sufficient, flexible management and delivery capacity at the centre of government and across the key implementing ministries and agencies.

If visionary government leadership can be provided with such support, São Tomé and Príncipe can focus on bringing in the right human and financial resources it needs to implement its strategy for inclusive growth.

With sufficient management and delivery capacity, São Tomé and Príncipe could understand how its various development partners work and what they require to align their funding and technical support with the government’s strategy.

It could prepare bankable projects for investors. It could reach out to investors, addressing their information gaps, understanding their requirements and working with the relevant domestic agencies to fix bottlenecks.

It could build relationships with development-finance institutions and business developers to provide suitable financing services to local MSMEs. It could secure the data and technology it needs to guide its strategy. And it could ensure proper communication and feedback between ministries and agencies so they can work as a team towards a common goal of inclusive growth.

This management and delivery support is the focus of the Institute’s work in Africa. If it can provide long-term embedded management and delivery support to half a dozen key agencies to plug the management gaps the Ministers and agency directors have, in a way that helps build capacity, then São Tomé and Príncipe can significantly speed up the development of driving sectors.

It is through this type of support that the development community can help São Tomé and Príncipe and other African countries to attain inclusive growth and eliminate mass poverty. NA

*Figures provided by the government of São Tomé in September 2018.