Are African countries able to manage change and cultivate opportunity?
We are living in an era of constant change and unprecedented events. No government, business, or society is immune to change. Whether it’s short-term negative shocks such as natural disasters, social instability; or long-term change opportunities and risks, the only certainty is that there are more change pressures than ever before and they affect all of us.
Globalisation, industrialisation, automation, and rising production costs can create as many opportunities as risks, while environmental, demographic, and societal change also create new opportunities for governments to leap ahead. The way a country responds to – anticipates, mitigates, evolves, and takes advantage of – change has a significant impact on its ability to both achieve sustained economic growth and share the benefits of that growth with its citizens, through improved living standards for example.
Capitalising on change
Experience shows that those unable to withstand sudden shocks tend to endure longer recovery times and, as a result, under-perform in growth and prosperity over the long-term.
Some countries are better able not only to manage and mitigate the risks associated with change, but also to capitalise on the new opportunities that arise. At KPMG, we believe it’s critical for governments, policy makers, NGOs, civil society institutions, development partners, investors, and private sector enterprises to gain a clearer understanding of a country’s capability to withstand and capitalise on change.
Responding to change
The Change Readiness Index (CRI) provides important insight into the key factors that influence change readiness and examines how individual countries rate against each other, both regionally and across income groups. The CRI identifies areas where policy development and political will could be targeted to strengthen national capability, and provides a framework for enhancing that capability to respond effectively to change.
While the CRI isn’t intended to predict future economic growth, it’s a useful guide to help understand which countries are likely to be more resilient in the face of short-term shocks, and which countries may be more capable of exploiting opportunities and managing structural change.
So where does Africa stand on the Change Readiness Index?
- Namibia – 33rd
- Botswana – 34th
- Ghana – 36th
- Kenya – 37th
- Tunisia – 39th
- Morocco – 40th
- Tanzania – 43rd
- South Africa – 46th
- Zambia – 48th
- Uganda – 51st
Case study: Tanzania
For Tanzania, the last decade has brought notable progress – macroeconomic and structural reforms that helped foster socioeconomic development, greater macroeconomic stability, and sustained economic growth. Tanzania was largely closed off to the outside world until the mid-1990s, after which it launched a range of market-oriented macroeconomic and structural reforms.
Notable advances were made in liberalising external trade and removing agricultural price controls, with more limited progress on privatisation and liberalising its financial sector. However, progress in advancing structural reform was uneven in recent years in Tanzania. Priority areas for structural reform now include bolstering debt management capacity, modernising the tax system, and managing natural resource revenues.
Millennium Challenge Corporation aid
Tanzania has been selected by the US government’s Millennium Challenge Corporation (MCC) as a beneficiary of foreign aid. This aid allocation indicates that Tanzania has met the MCA’s minimum set of independent and transparent policy indicators.
Tanzania received a five-year commitment of more than US $365 million focused on building transport infrastructure by paving and improving high-traffic and rural roads. It’s expected that this will create benefits for more than 1.6 million people while raising national household income by US $427 million.
In terms of its growth trajectory and commitment to improving change readiness, Tanzania’s overall growth performance remains strong (predicted to grow by nearly 7% per year in 2013 and 2014), however this growth has been achieved from a low base. Increased investment in transport and other infrastructure and a solid performance in both the manufacturing and agriculture sectors helped boost growth last year.
Tanzania ranked 43rd in the 2013 CRI overall and 3rd within the low income group of countries. Its overall rank of 43rd compares favorably against an average rank of 68th for other countries in the low income group.