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African Economies Benefit from Economic Reform

Since the end of the Cold War in 1989 a movement toward democratic government has swept across Africa - inspired, in part at least, by the promise that economic renewal and eventual prosperity are the natural fruits of democracy. Africa has learned that while democracy creates favorable conditions for economic growth, it does not guarantee it.

After a lengthy period, in which annual economic growth in sub-Saharan Africa languished at around two percent, the region has experienced a modest improvement over the past two years to around 3.2 percent. For some analysts, this is an indication that sub-Saharan Africa is beginning to benefit from its progress toward democracy. In the past 15 years, all but two sub-Saharan African countries have held multi-party elections.

Economist, and Chief Executive Wiseman Nkuhlu of the New Partnership for Africa's Development, or NEPAD, is one of those analysts. He says these figures are evidence that democratic change in Africa is taking root and is slowly starting to bear fruit in economic renewal. But writing in a paper presented at a conference earlier this year, Mr. Nkuhlu said it has taken a complicated mix of the right leadership, the right vision, the right policies, and a shift toward Africa setting its own agenda and imposing its own standards to get there.

Professor John Luiz of the University of the Witwatersrand also argues that the nexus between democracy and economic growth is far more complex than what is widely accepted.

"There is another very important debate as well, which is whether economic development needs to precede the transition to democracy," said Mr. Luiz. "In other words, whether democracy is only sustainable once you have achieved certain thresholds of economic activity. There are different sort of cause/effect routes here, its actually quite an interesting area, precisely because its not clear what is cause and what is effect in this whole discussion."

An example of the complex relationship between democracy and economic growth is South Africa, which already had a well-developed infrastructure, an excellent banking system, relatively good communications, good transport and other systems in place to underpin an economic revival. But this has been slow in coming.

While experts say the country is currently poised for major economic expansion, South Africa enjoyed just a moderate growth rate averaging around three percent in the first decade of its democracy, and this did not result in the creation of new jobs. On the contrary, the number of unemployed has risen with the official rate currently stable at around 28 percent.

Professor Luiz, who is the director the university's Business School, says that ironically South Africa experienced its highest growth rates of 6 and 7 percent in the 1950s and 1960s under a very repressive regime. He says it is this kind of data that illustrates the complex link between democracy and economic revival.

"So the evidence here is a little mixed," he noted. "I think what one can conclude, is that authoritarian governments find it very hard to sustain economic growth. And I think that really what one saw under apartheid as well - is that you had a repressive regime which in the short run was able to generate very high levels of economic activity, but in the long run that model runs out of steam very quickly; whereas democratic governments do not seem to face those sorts of constraints."

Professor Luiz says that in the long term democracies are much more likely to sustain economic growth, such as in Botswana, which has enjoyed growth rates of around nine percent for 35 years. But, he says, it is equally important that economic growth is evenly spread and does not lead to even greater inequality where the rich become richer and the poor, poorer. This, he says, poses a great threat to the survival of the democracy.

"What you find when, with countries which have high levels of inequality, it very often leads to high levels of instability, and in fact there is very conclusive evidence [of the relationship] between inequality and instability," he added.

In the past decade of South African democracy many blacks have moved into positions of power and influence in government and business and from which they were formerly excluded by law. Some of them have become fabulously wealthy but most black South Africans have yet to reap the economic benefits of democracy.

Professor Luiz says the government is aware of these imbalances and has developed policies and laws, known as "black economic empowerment" measures, to spread the country's wealth more evenly. But, he says, whether in South Africa or elsewhere on the continent, democracies must do much more to reduce inequality.

"It is absolutely essential for citizens to enjoy the benefits of democracy because in the end they are going to have to be the major custodians of the democratic system," he noted. "Whilst constitutions are important, eventually it is up to the citizens of a country to defend those democratic values."

Both Professor Luiz and Professor Nkuhlu say that democracy can create the potential for sustained economic growth, not least because true democracies create the environment in which people are able to make the choices that decide both their individual and their country's futures.