Policy brief the aftermath of the great recession: Can Africa converge, catch up and leapfrog?

Abstract

This policy brief looks at policy options that can facilitate Africa’s convergence, catching up and leapfrogging using industrial policy instruments in the post-Great Recession period. During 1990-1999 the development policies recommendations shifted from the state to the market, from import substitutions to outward-oriented policies, from price controls to ‘getting the price right’.¹ Africa had withstood both the Y2K and the subsequent dotcom bust. The upward movement in commodity prices during 2001-2007 was accompanied by massive capital inflows into the continent. The capital inflows continued after the crisis, chasing growth and better yields in Africa as a result of the Great Recession in the developed world. The capital inflows went into a variety of sectors including commodities, information technology and telecommunications, as well as financial services and retail. The United States (US) government and the European Union (EU) and its member countries embarked on the most aggressive fiscal and monetary policy deployment in history during the crisis². In Africa, during the period before and after the crisis, a debate ensued among scholars and others as to whether Africa could converge, catch up and leapfrog the rest of the developing world. If so, what policies could support the necessary structural change?