Realizing the Potential of Africa
We look at sub-Saharan Africa today and see a region in transition. Many countries struggle and the region as a whole faces larger poverty rates than most of the world, yet we also see a few bright spots, countries moving in the right direction. Though, we do not always see the opportunity for the sub-Saharan Africa to entirely transform itself, this transformation could occur sooner than we think.
The untapped wealth of resources in Africa is huge, and many countries have the opportunity to turn that potential wealth into gains for people living across the income spectrum. Already, we are seeing some signs. A third of African countries’ economies grew by rates exceeding 6 percent in 2012. Global demand on resources is going anywhere but down. What remains to be seen is how the countries tap into that demand. Natural gas could become a major export of Mozambique and Tanzania, and large deposits of iron ore can be found in Guinea and Sierra Leone, copper in Zambia, and cobalt in the Democratic Republic of the Congo.
The question is how all this will be managed. African governments will need to reverse a worrying trend of corruption. In order for the region to see long-term gains, money will need to be reinvested into education, healthcare, and agriculture. Too often the money needed to build up the necessary infrastructure is instead skimmed off the top. However, this problem is not solely the fault of corrupt government. Off-shore registered companies operating in Africa create multiple avenues for tax evasion. These companies, run primarily by foreign investors, extract wealth from the region whilst returning very little in terms of financial support.
The solution then will need to be a combination of stronger local government, investing within to create a stable platform for growth, and also international assistance, in a regulatory fashion. International cooperation on taxation is on the agenda for the upcoming G-8 summit. Cracking down on the extraction of wealth, from both abroad and at home, will be crucial to setting Africa on the path to realizing its full potential.
– David Wilson
Source: The New York Times