Africa Can Draw Lessons From California’s Economic Turnaround

Five years ago California was pronounced a political and economic disaster. Intelligence Squared famously concluded in 2011 that California “is the first failed state.” California was, in 2011, described in similar terms as the Democratic Republic of Congo — too large and too dysfunctional to work. The American Interest dramatically asserted that “the only hope is to break it up…California is too populous, too diverse, too complicated to flourish as a single state. Unless we carve this beast into something like five more compact and manageable states, Californians will never have decent representative government.”

Two years earlier the Guardian newspaper had written the state off: “from its politics to its economy to its environment and way of life, California is like a patient on life support…And if it were a company, it would likely be declared bankrupt.”

Fast-forward to January 2015. A resurgent California has overtaken Brazil as the world’s seventh-largest economy with a GDP of USD$2.2 trillion. In an interview with Bloomberg, Jerry Brown, the State’s Governor credits the state’s turnaround to what he calls the “incredible array of businesses that make up California business environment, from movies to the Internet to agriculture.” The Governor is too modest to add his own leadership.after change of government. But how exactly did failure turn into success? What insights can Africa and other developing countries draw from California’s spectacular turnaround?

The first lesson for Africa is a broad one, namely, that there is no country or region preordained to becoming, let alone remaining a success or failure. What is most crucial is creation of an enabling environment that permits a dynamic interplay between business, markets, and governments where the latter regulate while the former creates value. When the state, business, and labour do not have a shared purpose, the prospect for broad-based prosperity is nil. At some point California lost the touch, its citizens paid a heavy price in loss of jobs, homes, education, and health; then the state reinvented itself by changing course and players, and got its groove again. With all due respect development is different from “As It Was In The Beginning, Is Now, and Ever Shall Be.”

As just hinted the second lesson in California’s resurgence is the importance of democratic governance. Thanks to democracy, an incompetent government was thrown out of office. Its replacement has since inspired and capitalized on a new consensus among the state’s social and economic partners that account for a successful turnaround. Conversely, a country with an iron-fisted dictatorship with no mechanism for its removal no matter its economic management record is doomed to failure. Regrettably too many of these still thrive in Africa.

The third and I think most crucial lesson for Africa is the fact that California’s success does not hinge on one or two but several sectors, not least agriculture. According to California Department of Food and Agriculture, the state’s 80,500 farms and ranches earned USD$42.6 billion for their output in 2012. The top-10 valued commodities in the state were: milk, USD$6.9 billion; grapes, USD$4.4 billion; almonds, USD$4.3 billion; nursery plants, USD$3.5 billion; cattle, calves, USD$3.3 billion; strawberries, USD$2 billion; lettuce, USD$1.4 billion; walnuts, USD$1.3 billion; hay, USD$1.2 billion, and tomatoes, USD$1.2 billion. Imagine an African country earning a cool USD$3.5 billion from plants or USD$1.2 billion from tomatoes.

Here is an astonishing set of comparative statistics. With a population of 38 million, and 423,970 km² of land mass, California’s agriculture earned in 2012 USD$42.6 billion domestically and exports of USD$18 billion, totalling USD$60.6 billion. With one billion people, in a land mass of 30,221,532 km², Africa in 2012 earned USD$57 billion from its agriculture, mainly in form of exports, according to African Economic Outlook (AEO), 2014.

Add the fact that 60 per cent of the world’s arable is in Africa you get the sense of how indeed the continent could become a global food basket. Yet Africa remains a major food importer and the largest receiver of food aid. The U.S. Department of Agriculture (USDA) describes the situation as follows: “Healthy economic growth and surging food demand in Sub-Saharan Africa pushed food imports to a record high in 2011, with the region’s total agricultural imports from all suppliers reaching $43.6 billion..U.S. agricultural exports to Sub-Saharan Africa have benefited from growing demand, increasing by more than 200 percent. This is a greater rate of growth than U.S. exports to the EU, NAFTA partners, and East Asia.”

Imports by Sub-Saharan Africa (SSA) were USD$16 billion more than India which has a larger population; at nearly $6 billion, wheat was a major contributor to SSA’s agricultural imports in 2011; next was rice, vegetable oil, and dairy products; Nigeria, South Africa, and Angola were the leading importers, accounting for 39 per cent of SSA’s imports.

Paradoxically and sadly, Africa’s economic growth does not appear to lessen food aid. According to USDA’s “International Food Security Assessment, 2013-2023,” SSA’s “share of global food aid increased from 30-35 percent in the early 2000s to more than 60 percent in 2011.” The number of food-insecure people in the region was estimated to be 254 million in 2013 and is projected to reach 373 million by 2023. It is evident therefore that an economic turnaround in Africa is unlikely without transforming agriculture.

Lastly is the question of IT which is almost synonymous with California given its legendary Silicon Valley whose birth was facilitated by the interconnectedness between universities, industry, venture capital, and governments. With the rapid spread of the cell phone in Africa, it has become fashionable to talk of replicating California by building IT hubs. Kenya is said to be building Silicon Savannah. Similar objectives and wishes abound in Nigeria, Ghana and South Africa. Rwanda’s Paul Kagame has branded himself as the continent’s digital president that is leapfrogging from subsistence straight into “knowledge economy.”

The message from California is that growing a tomato is as important as building a smartphone. After all California’s tomatoes fetched USD$1.2 billion in 2012, while for example Kagame’s entire export earnings were less than half of that amount at USD$505 million in the same year. If you can’t build a successful tomato business you can’t build a cell phone industry either. Governor Brown’s words are worthy of paraphrasing — what creates broad-based prosperity is diversity of the business environment, from the Internet to agriculture, democratic governance, leadership, and above all shared purpose among key stakeholders. And Africa is no exception.

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Read the original at Canada Business Blog on The Huffington Post.