Who will be Africa’s Brazil?

Travel around Africa these days and you’ll feel a sense of expectation, a sense that prosperity is just around the corner. High prices for — and new discoveries of — oil, gas and minerals are turning much of the continent into one giant boom town. Investors are snapping up assets with gusto, from exploration rights to real estate.

Financiers are rushing to open offices in cities where their Blackberries do not work yet. The Diasporas worry about their savings — their dollars and Euros are losing buying power back home. And old colonial masters like Britain and France vie for strategic space with new entrants like China and India. Behind the euphoria, sensible government officials look for ways to turn the bonanza into lasting development. They scan the world for a country that could serve as a “model” of success, as a user’s manual for their own decisions. In that search, nobody commands more respect than Brazil — a vast country that, in about one generation, harnessed its natural wealth into a diversified economy with growing social inclusion and a role in global leadership.

Will there ever be an “African Brazil”? Who will that be? Angola? Congo? Ethiopia? Nigeria? South Africa? Flip that question: what will it take for an African country to become a new Brazil? A lot. First, it will take governments that do not spend or borrow too much, and independent central banks that keep inflation low. That is, the first order of business is a stable “macroeconomic framework.” Brazil managed to do that, but only after decades of rampant inflation and financial crises. Many African countries are making progress in that direction, but none is quite there.

Second, investors — local and foreign, big and small — need to be treated fairly. That means laws, regulations and institutions that protect their property and let them do business, make profits, pay taxes, and create jobs. The issue is not about whether big state-owned companies and banks can or should exist — in Brazil, they do — but how professionally they are managed, and whether they exist to help or to compete with private ones. Yes, Brazil produces top-notch airplanes through a government-sponsored firm (Embraer), but the firm is forced to compete head-on in the international market and has become a source of technological excellence for the country as a whole. (Believe it or not, those swanky small planes that take you up and down the U.S. East Coast are all Brazilian-made.)

Third, you have to stay open. You can’t become an international heavyweight if your economy is closed to foreign competition. This is not just about free-trade agreements with far-away super powers — good as those may be. This is also about integrating with your closest neighbors. Brazil led the way in Mercosur, the trade block it formed with Argentina, Paraguay and Uruguay in the 1990s. Here Africa is miles behind. It has many supposedly free-trading areas — like the East African Community and the Southern Africa Customs Union. But, in practice, relatively little trade happens within them, and the region remains highly fragmented.

Fourth, in the “African Brazil”, agriculture will need to undergo a new revolution — one driven by knowledge and commercialization. That’s what happened in Brazil. A public agency (Embrapa) relentlessly pursued technologies that, against all odds, made the country’s savannah (the so-called Cerrado) fit for farming. Private investment then poured in. The small plot-holder working with basic tools was linked to, and at times absorbed by, large corporate producers able to bring equipment and market access. This may have led to less employment in agriculture, and some migration toward cities. But it raised the income of rural families. Which African country has, or can create, an Embrapa?

Fifth, if it is to be politically sustained, economic progress needs to be shared. Markets are not very good at sharing. So you need smart government action — “smart” as in “don’t-scare-investors-away.” Brazil understood this. Back in the early 2000s, it began to transfer cash to its poor — on the condition that they would help themselves by, for example, keeping their children in school. This forced the government to begin to know the poor individually, one by one. The information helped target other social programs — now you know who really needs what assistance, and who doesn’t. To give you an idea, today, Bolsa Familia, the flagship cash transfer, reaches a quarter of the Brazilian population. Its cost is half of one percent of GDP per year — a bargain, if you compare with the cost of social exclusion, not to mention social unrest. Knowing Africa’s poor by name is, of course, a pending task, although some 35 countries in the region are already trying.

Finally, Brazil achieved its socio-economic success in a democracy. This is about political alternation — read, presidents that leave office peacefully and with dignity when their terms end. (Beyond the great Nelson Mandela, how many living former-presidents does Africa have whose popularity or professionalism compares with Lula da Silva or Fernando Henrique Cardoso?) It is also about decentralization of decision-making to those who are closer to the voter — Brazilian state governors and municipal majors decide over half of all public expenditures, and are responsible for key services like education, health and security. In both cases, there is an implicit devolution of power. That has so far been a tough assignment for the average African country to complete.

So, all in all, the Brazilian “model” is one of balance — between economic discipline and social solidarity, efficiency and equity, markets and people. From that balance came political stability. And from that came a national vision that is guiding all Brazilians. To be sure, the country still has lots of problems, like high inequality, shortage of infrastructure and an oversized civil service. But it has a system in place to solve them. That’s worth imitating in Africa.

By Marcelo Giugale
World Bank’s Director of Economic Policy and Poverty Reduction Programs for Africa

Source: Huffington Post