The socio-economic and fiscal fallout of the coronavirus pandemic and the geopolitical and geo-economic ramifications of the war in Ukraine, which threaten food security and Africa’s economic growth, further complicate the regional outlook for peace and political stability.
- Given the huge financial costs and the effect on Africa’s economic growth, it remains imperative to prevent the prevalence of conflicts.
- Economists regard political instability in Africa as a severe malaise harmful to economic performance.
- In addition to immeasurable human suffering, conflicts impose large economic costs.
Political instability and governance impeding Africa’s economic growth
Economists regard political instability in Africa as a severe malaise harmful to economic performance. Political instability shortens policymakers’ timelines, leading to suboptimal short-term macroeconomic policies. It may also lead to a more frequent switch of policies, creating volatility and, thus, negatively affecting macroeconomic performance. Considering its damaging repercussions on economic performance, the extent to which political instability is prevalent across African countries is quite surprising.
Governance has long been suspected to be a major impediment to economic growth. This suspicion arose in the late 1970s when African economies suffered significant setbacks after independence. The 1981 Berg report highlighted poor governance as a primary culprit responsible for the poor state of Africa’s economic health.
Economic growth remains a critical element for development. It has been the main engine for poverty reduction in sub-Saharan Africa. Further, growth provides a major explanation for improvements in human development in African countries. Thus, there is a need to reemphasize sustained economic growth in Africa.
Conflicts have marred Africa during the past several decades. The intensity of conflicts in recent years remains lower than that observed in the 1990s. However, the region remains prone to conflicts with the scourge of armed conflict in 2021 and early 2022. According to the Institute for Economics and Peace’s Global Peace Index 2022, five of the ten least-peaceful countries globally were in Africa.
In addition to immeasurable human suffering, conflicts impose large economic costs. The socio-economic and fiscal fallout of the coronavirus pandemic and the geopolitical and geo-economic ramifications of the war in Ukraine, which threaten food security and Africa’s economic growth, further complicate the regional outlook for peace and political stability.
Ethiopia’s Tigray Conflict’s costly economic ramifications
Ethiopia represents a prime example of how political instability impedes Africa’s economic growth. Once one of Africa’s fastest-growing economies, Ethiopia has recently struggled due to civil conflict. In 2022, Ethiopia experienced the highest inflation in a decade. Foreign exchange restrictions and mounting debt stretched the Horn of Africa country’s economy amid reports of massive government spending on the war effort.
Internal conflicts have resulted in infrastructural destruction and uncontrolled spending, hurting Ethiopia’s economy. Ordinary citizens have faced weakening incomes and rising poverty. One could easily forget that Ethiopia was once seared into the global consciousness with an overwhelming famine in the 1980s. The country turned around its economy with mega-projects like the Grand Ethiopian Renaissance Dam, the largest in Africa, and large-scale construction projects in Addis Ababa, Africa’s diplomatic capital.
Ethiopia’s economic growth averaged 11 per cent over the past decade. However, the war in the northern Tigray region, which began in late 2020, resulted in immense disruption. In June 2022, the International Monetary Fund said growth likely fell to 3.8 per cent for 2021-2022 because of the war, a sharp fall in donor financing, and strained economic activity from the conflict.
Conflict overshadows the wealth of DRC’s natural resources
Africa’s second-biggest country by land mass also has Lithium and cobalt, crucial in the world’s fourth industrial revolution and the green energy transition. Indeed, the territory of the DRC is also rich in vast natural resources, including timber, oil, and gas, and one of the world’s most biodiverse regions.
The mineral wealth that the DRC boasts has the potential for its economic liberation and Africa’s economic growth on a large scale. However, the DRC has endured decades of violence and conflict throughout the Great Lakes region. DRC’s political instability is built upon fighting on account of ethnic and political tensions, economic greed, and mismanagement.
Civil unrest in the DRC has a link to various state problems. In many cases, this turmoil is linked to the fact that resource wealth ‘is closely associated with poor governance, clientelism, and the absence of a social contract between the citizens and their leaders. Over the years, diplomatic efforts have focused on finding solutions to the insistent conflict with little success. A conflict ceasefire and permanent solution to DRC’s political instability would unlock the country’s potential and Africa’s economic growth.
Libya’s conflict and the far-reaching economic costs
During the late Muammar Gaddafi’s reign, Libya had one of Africa’s highest political and economic stability levels. Gaddafi ruled Libya for 42 years, leading the North African nation to significant social, political, and economic growth. During that period, many African and Arab countries recognized and admired Libya. Gaddafi moved his government to utilize oil income to lift redistributive measures among the Libyan population, creating a new economic and social development model.
According to analysts, Gaddafi implemented measures and policies to drive economic sovereignty. These included the nationalization of several Western oil companies, such as the creation of the National Oil Corporation (NOC) and the British Petroleum (BP). This represented the configuration of a more socialist approach.
Throughout Gaddafi’s reign, the administration launched ambitious social programs in housing, health, education, public works, and electricity. These policies resulted in substantial improvements in the living standards of Libyans. Consequently, the North African nation rose from one of Africa’s poorest countries to a continental leader in its Human Development Index in 2011.
In that period, global analysts considered Libya a high-development nation in North Africa and the Middle East. This elevated status translated to literacy levels of 88.4 per cent, a life expectancy of 74.5 years, and gender equality. At the time of Gaddafi’s ouster, Libya had Africa’s highest life expectancy and GDP per capita. Fewer people lived below the poverty line in Gaddafi’s era compared to leading countries like the Netherlands.
READ MORE: Ending Libya’s political impasse could unleash limitless economic potential
Civil conflict draws back the economic gains
Libya’s conflict has persisted with fluctuating intensity since the fall of the former regime after the popular uprisings in 2011. Libya’s situation quickly descended into a destructive conflict during its political transition. Attempts to build a democratic state post-Gaddafi rule disintegrated into a new civil war between rival governments in 2014.
Political instability and governance challenges have caused a significant loss of economic potential in Libya, estimated at $170 billion since 2011. The conflict has affected all levels of economic life in the country. It has diminished the macroeconomic outlook with a significant drop in growth. Moreover, Libya’s conflict has caused a sharp fall in government revenues, expenditures, and investment. The conflict also affected the economy’s productive sectors, hydrocarbons, construction, and agriculture.
Regional cooperation that would have propelled Africa’s economic growth in the larger context has also taken a blow from Libya’s conflict. Libya’s conflict and political instability have also had a major economic impact on neighboring countries. Egypt, Sudan, and Tunisia had important economic relations with Libya for years. These relationships involved investment, trade, and the presence of migrant workers from the three countries in Libya.
Prospects for political stability and Africa’s economic growth
After declining at the turn of the century, there has been an uptick in conflicts political instability in Africa in recent years. A closer look highlights the large economic costs imposed by conflict. In addition, conflicts put pressure on public finances by reducing revenue, shifting focus away from capital investment to military spending, and increasing public debt. This further jeopardizes socioeconomic stability and increases the risk of prolonged conflict.
Given the huge financial costs and the effect on Africa’s economic growth, it remains imperative to prevent the prevalence of conflicts. Several economic and structural factors, including low-income levels, poor growth outcomes, weak governance, state capacity, and inequality of opportunity—especially across ethnic, religious, and regional groups—increase the likelihood of conflict. Addressing these challenges would address prevent conflict and political instability in Africa.
For countries in conflict, efforts should focus on limiting the loss of human and physical capital. Governments should protect social and development spending. Moreover, they should maintain well-functioning institutions to lessen conflict’s harmful long-term economic effects. This could prove a challenge considering the prevailing fiscal pressures. However, well-targeted and coordinated humanitarian aid and concessional external assistance can help to create room to respond to the ravaging effects of conflicts. Swift responses should be in place to protect displaced populations and alleviate the economic and social strains often generated in host countries.
