ENVIRONMENTAL CHANGE AND SOCIOECONOMIC FACTORS

ECONOMIC CHANGE

Equitable and environmentally sustainable growth can improve human well-being and increase the range of opportunities available to people, including those who are most disadvantaged.

Africa has
experienced its best
economic
performance in many
years – in 2004 it
grew at 5.1 per cent.

OECD Development Centre
and AfDB 2005

Africa has experienced its best economic performance in many years. In 2004 Africa grew at 5.1 per cent (OECD Development Centre and AfDB 2005), up from 3.7 per cent in 2003 (AfDB 2004). Between 1990 and 2003, Africa’s economies grew at an average of 2.6 per cent annually. This improved growth has had a mixed bag of consequences, increasing opportunities to meet key MDG targets and improving human well-being, which can have positive spin-offs for the environment as options increase. However, SSA must grow on average at 7 per cent per year to reduce income poverty by half by 2015 (AfDB 2004). Only six African countries, mostly in north Africa, are likely to meet the MDG goal of halving the number of people living on less than a dollar a day. The MDGs remain underfinanced – by more than US$40 000 million overall (OECD Development Centre and AfDB 2005). See Annex 1, Table 2: Progress to meeting the MDGs.

There is considerable variation between the economic achievements of countries in the region – with prices of oil and metals, low cotton and cocoa prices, dollar depreciation and euro appreciation, the locust plague in the Sahel region, rainfall, corruption, and political conflict and instability being important contributing factors (OECD Development Centre and AfDB 2005). Solid growth is expected to continue between 2005 and 2007 at an average rate of 4.7 per cent as the effect of new oilfields in Central Africa wears off. The high level of vulnerability to external shocks (such as prices and the loss of preferential treatment), environmental factors such as weather conditions, and conflict make these key areas for policy focus and collaborative initiatives (OECD Development Centre and AfDB 2005). This close relationship to the environment is indicative of the need for better environmental monitoring and, in particular, risk and disaster warning systems to support greater preparedness and more effective responses.

Production and consumption

Changing production and consumption patterns, globally and in Africa, and the way in which growth is achieved have direct implications for African livelihoods and their sustainability.

Global economic policy dealing with tariffs, import quotas and crop subsidies has direct impacts on the livelihoods and opportunities of people in Africa (WRI and others 2005). The relationship between global economic policy and practice and economies, livelihoods, human well-being and the environment in Africa is discussed in Chapter 8: Interlinkages: The Environment and Policy Web.

At the national level, growth of the economy can result in both positive and negative effects on well-being and environmental resources. For example, economic expansion may provide new livelihood opportunities to more people through job creation as well as through diversifying livelihood options. Growth must be equitable and specifically focus on delivering benefits to poor people. However, growth may endanger the sustainability of livelihoods depending on how it is carried out with respect to environmental integrity. For instance, when fishing is done in an unsustainable manner, short-run benefits will be accrued, but at the same time sustainability of catch will be impaired through depletion and, therefore, affect long-term benefits.

Although in 2000 Africa accounted for 13.6 per cent of the world population, its gross domestic product (GDP) was just under 1.7 per cent of the world’s GDP (UNDP 2005). For SSA, GDP per capita, using purchasing power parity (PPP), amounted to US$1 856 compared to the average for countries with high human development of US$25 665 (UNDP 2005) This is significant for purchasing power, savings and investment growth rates as well as resources available to governments and individuals, making them more reliant on the natural resource base for their basic needs. The GDP per capita (PPP) across the region varies considerably, with Equatorial Guinea having an average GDP per capita of US$19 780, South Africa US$10 346 and Sudan US$1 910 (UNDP 2005). Inequity within a particular country is clearly important for how this benefit is actually spread. Unequal growth remains a major challenge for Africa – income distribution is highly skewed, with 40 per cent of the population receiving only 11 per cent of income, while the richest 20 per cent gets 58 per cent of income (FAO 2003). Income inequality is particularly evident across the urban-rural divide (World Bank 2005b).

Export of natural resources remains a major factor in the economies of many countries. Instability and adverse price trends drive countries to exploit more resources to meet their domestic and foreign obligations, including debt servicing, at the expense of long-term sustainability of the resources.

Africa’s economies are more reliant on agriculture than those of any other region, with around 70 per cent of Africans working in the agricultural sector (FAO 2003). About three-fifths of African farmers are subsistence farmers tilling small plots of land to feed their families, with only a minimal surplus that can be sold. Although agriculture is a major employer, employing 56.5 per cent of Africa’s total labour force (FAO 2004), it contributes only 14 per cent of GDP, while industry and services contributed 29 per cent and 57 per cent respectively (see World Bank, Annex 2, Table 1b: Sub-Saharan Africa Region Socioeconomic Indicators). This table also shows that agricultural productivity, in terms of value-added per agricultural worker in 1995 dollars, declined between 1988-90 and 2000-2002 periods from US$382 to US$360. This means that, with high dependency on agriculture and falling productivity at the same time, poverty is increasingly entrenched in rural Africa. The contribution of natural resources to GDP is often undervalued.

In terms of mining and drilling, Africa’s most valuable exports are its minerals and petroleum. These activities are concentrated in only a few countries. South Africa, Namibia, Botswana and the Democratic Republic of the Congo have substantial reserves of gold, diamond and copper. Nigeria, Angola, Gabon, Libya, Algeria and others export significant amounts of petroleum. These areas make up the vast majority of mineral and petroleum exports from Africa (OECD Development Centre and AfDB 2003). This has been the focal point for foreign direct investment (FDI) which has been driven primarily by developed countries’ needs.

With respect to manufacturing, Africa is the world’s least industrialized region. Despite large local supplies of cheap labour, almost all of the region’s natural resources are exported elsewhere for secondary processing. The lack of value-adding activities means that the full potential from natural resources is not being earned within African countries. Only about 15 per cent of employment is generated by the manufacturing sector. Industrial sector restructuring and reform measures have led to a collapse of industries in some countries and hence the declining share of manufacturing to total economy. While industrial development offers important opportunities, it also creates certain risks, particularly in the management of pollution and human health. There is evidence that developed countries are relocating their chemical industry to developing countries.

The 1980s and early 1990s witnessed serious economic decline or stagnation in most African countries. Agricultural productivity failed to keep pace with the growth of population and suffered particularly from falling productivity in the export sector and from declining markets and prices. Population growth rates in the period 1990-2003 were higher than the growth of GDP per capita in 2003 at 2.5 per cent and 1.3 per cent respectively (World Bank 2005b). Food imports were and still are essential in most countries to maintain an adequate total food supply and, in certain cases, to keep food costs down. Debt has mounted and pressures on resource use have increased.

In response to the economic hardships of the 1980s, many African countries undertook programmes of economic reform with guidance from the International Monetary Fund (IMF) and the World Bank. These reforms, spearheaded by the Structural Adjustment Programmes (SAPs), aimed at stabilizing the economies, liberalizing exchange rates, freeing the productive energies of the private sector and opening up to trade and investment. As the negative impacts of these policies were realized, new approaches to economic planning and development have been adopted, including the now widely used Poverty Reduction Strategies (PRS).