Policies to increase economic development are highly dependent on the socio-economic landscape of a country and must be treated with nuance when evaluating existing problems. Using the title question, it is necessary to set and define the assumptions made to generalise better an idea of the types of policies one might implement.

The bounds defined by the following question will assume that the socio-economic landscape of said hypothetical country will be characterised by several key bounds and assumptions, Geographic, Economic and developmental. Economic development will refer to the sustained improvement of living standards through GNI (Gross National Income), level of infrastructure, and level of development. For this, there will specifically be a focus on LICs (Low-Income Countries)- countries with low GNI per capita, and existing but limited infrastructure. Furthermore, the geographical bounds set will only assume the country is “small” in size physically, regardless of population density.

Some of the largest contemporary challenges posed for developing nations can be characterised by several factors. A lack of strong political institutions, human capital, and diversification in an economy will hinder productivity and growth. It is pivotal to look at existing problems and policies within developing countries to what policies are appropriate to implement when trying to increase economic development.

Economic development can often be linked to problems societal in nature. Although policies in developing human capital are implemented by most Sub-Saharan African countries, outwards migration, or brain drains, still prove to be one of many challenges faced by similar developing economies. A report from the IMF found that migrants from Sub-Saharan Africa could increase from 7 million in 2013 to 34 million by 2050 1 . One of the largest demographics of outward migrants is young, educated workers, where shortages in public and professional services are caused by the loss of human capital within the region. This exacerbates existing structural problems. Despite holding 25% of the world’s disease burden, Sub-Saharan Africa holds only 3% of global healthcare workers, with 32 Sub-Saharan African countries below the WHO threshold of 23 healthcare workers per ten thousand people 2 . The predominant cause of this is driven by a lack of career prospects, working environment and quality of life 3 .

Therefore, policies that mitigate outward migration to increase economic productivity and growth must include increased opportunities for career advancement. This is in addition to increased state support for healthcare workers’ and their families to incentivise staying in their home country.

Moreover, policies which increase incentives and opportunities for young, educated workers must be implemented to retain the human capital necessary for economic innovation and development. One policy implemented by the African Union includes targeting economic development programmes to produce employment and professional development for educated nationals. suggests countering the effects of brain drain by encouraging nationals abroad to migrate back for the development of their home state. However, such policies do little to solve the issue, choosing to mitigate and minimise instead. Thus, policies which increase frictional barriers for migration must be implemented to properly clamp down on the issue.

Currently, 40% of African venture capital funding comes from the US, led by expat or foreign founders 4 . To further ensure the security of economic development, it is necessary to focus on retaining wealth generated within borders rather than being repatriated to foreign countries. A foreign-reliant domestic investment ecosystem will not only prevent the growth of local financial markets – stalling the development of entrepreneurial foundations and increase the risk of economic dependency on external actors. This dependency exacerbates the existing vulnerabilities of developing economies to the foreign policies of other countries. Therefore, it is necessary to build strong local institutions and infrastructure to reduce the effects from external shocks.

To do this, policies which are implemented must strengthen the private sector, whether it be supporting low-interest loans and tax incentives to SMEs or individuals. This would both foster local entrepreneurship and provide incentives for skilled talent to stay within the country. One key example is Ghana, where the government prioritised support to local industries and small and medium-sized enterprises (SMEs) to reduce aid dependence by introducing measures to enhance the competitiveness of domestic manufacturing and industry 5 .

Sub-Saharan Africa’s economic development policy has historically focused on industrial development as a drive for economic growth. However, challenges such as limited and weak infrastructure, high dependencies on certain industries, and vulnerabilities to external shocks stifle efforts for major development, as seen in examples such as Zambia, Tanzania and Nigeria. One article stated that Sub-Saharan African economies have expanded at an average rate of 5% a year 6 , with another stating the output within Sub-Saharan Africa grew by 91% in real terms since 2000 7. Despite this, high growth, foreign competition and higher commodity prices meant that employment within Nigeria’s textile industry fell from 350,000 to a tenth of that value in 2015, diminishing efforts to expand manufacturing. This was mostly accredited to increased demand for goods resulting from booms in the Chinese economy, where demand for Arican-made commodities may be too reliant on foreign economies. Furthermore, poor transport links and infrastructure are cited to have driven up costs of production.

A similar country that has achieved steady economic growth and industrial development- Gabon. The 2022 African Industrialisation Index cites Gabon as a leading example of African development, having developed an advanced manufacturing industry by diversifying from the oil industry and creating special economic zones for firms 8 . This illustrates the critical role of diversification for sustainable economic progress. Gabon’s rise in rankings within the African Industrialisation Index has a positive correlation with its GDP growth, from 14.37 billion in 2010 to 20.52 billion in 2023 9 .

Moreover, this illustrates the importance of local conditions when implementing industrial policy. Developing countries which have faced significant challenges whilst attempting to industrialise have often fallen short. Zambia’s attempt to industrialise in the 1980’s led to an overreliance on the IMF for borrowing to finance projects, leading to large debt payments. This forced Zambia to roll back on the industrialisation process, leading to a debt crisis and impoverishment. However, referring to the bounds defined by the question, current conditions within Sub-Saharan Africa seem to be supporting industry growth. One example of this is the ratification of the AfCFTA (African Continental Free Trade Agreement) in 2019, allowing for the concessions and liberalisation of most tariffs, making regional trade more time and cost-efficient 10 . To ensure an increase in economic development it is necessary to ensure for streamlined and reliable free trade across borders, larger markets that lead to greater specialisation having positive knock-on effects such as cluster development or innovations-both of which enhance competitiveness at a global scale, leading to potential economic growth. Looking at the implementation of a similar policy is paramount when prioritising the economy.

Modern policy within Sub-Saharan Africa has seen a shift from industrial development to financial development 11, as a means for economic growth. One key example is Kenya, with innovations in fintech having provided access to financial services. Furthermore, financial services have seen growing importance in contribution to GDP, in addition to the expansion of banking sectors increasing FDI (Foreign Direct Investment) and more broadly, economic activity.

One key effect of fintech development within Kenya is that financial inclusion improves access to financial services domestically. The resulting impacts of innovation within mobile-phone-based micro-financing services such as M-Pesa being a factor attributed to a dramatic increase in bank accounts within Kenya – up from 42% in 2011 to 79% in 2023 12 . This has allowed for an increased amount of people to save, borrow and invest within the economy. Furthermore, services such as M-Pesa have extremely low transaction costs, making it increasingly beneficial for groups who rely on remittances as income. Studies have shown a positive correlation between increased access to financial services with overall economic growth 13 , Julie. O (2013) further states that financial inclusion can further be used to tackle poverty and inequality and thus promote economic growth. One example of a policy which could increase financial inclusion would be increased investment into DPI (Digital Public Infrastructure).

Like physical infrastructure, the development of streamlined and more accessible financial services could be implemented in the title’s scenario to both alleviate societal burdens associated with LIC’s – by reducing inequality - in addition to increasing economic growth. This demonstrates the importance of implementing policies which improve financial flexibility for aggregate economic growth.

To conclude, it is important to realise that although successful countries such as Gabon and Kenya could be seen as potential models for economic development policy, the examples given cannot be seen as a one-size-fits-all. This being the fact that policy must be reliant on existing local social and financial conditions to implement, different countries within case studies shown to have differing levels of development. However, this is not to say that socio-economic policies such as promoting industrial diversification, cultivating financial inclusion, or retaining human capital within borders, are highly relevant. Therefore, a holistic approach that balances the following is crucial for sustainable development in the long-term.

[1] African brain drain: is there an alternative? | The UNESCO Courier (no date). Available at: https://courier.unesco.org/en/articles/african-brain-drain-there-alternative.
[2] Kasper, J. and Bajunirwe, F. (2012) ‘Brain drain in sub-Saharan Africa: contributing factors, potential remedies and the role of academic medical centres’, Archives of Disease in Childhood, 97(11), pp. 973–979. Available at: https://doi.org/10.1136/archdischild-2012-301900.
[3] Toyin-Thomas, P. et al. (2023) ‘Drivers of health workers’ migration, intention to migrate and non-migration from low/middle-income countries, 1970–2022: a systematic review’, BMJ Global Health, 8(5), p. e012338. Available at: https://doi.org/10.1136/bmjgh-2023-012338.
[4] Hellmann, T. (no date) ‘High Growth Start-Up Ecosystems in Sub-Saharan Africa’.
[5] Bank, A.D. (2022) Africa Industrialization Index 2022, African Development Bank Group. African Development Bank Group. Available at: https://www.afdb.org/en/documents/africa-industrialization-index-2022.
[6] More a marathon than a sprint (no date). Available at: https://www.economist.com/middle-east-and-africa/2015/11/07/more-a-marathon-than-a-sprint.
[7] The Economist (no date) ‘African industry is doing better than previously thought’. Available at: https://www.economist.com/middle-east-and-africa/2021/03/18/african-industry-is-doing-better-than-previously-thought.
[8] Bank, A.D. (2022) Africa Industrialization Index 2022, African Development Bank Group. Available at: https://www.afdb.org/en/documents/africa-industrialization-index-2022.
[9] World Bank Open Data (no date). Available at: https://data.worldbank.org (Accessed: 3 September 2024).
[10] The African Continental Free Trade Area | African Union (no date). Available at: https://au.int/en/african-continental-free-trade-area (Accessed: 1 September 2024).
[11] Newman, S. (2020). Finance and Development in Sub-Saharan Africa. The Routledge Handbook of Financial Geography. Available at: https://doi.org/10.4324/9781351119061-32.
[12] Kenya at a Financial Inclusion Crossroads: DPI, Inclusive Green Finance and Financial Health Pave the Path Forward | United Nations | UNSGSA Queen Máxima (2023). Available at: https://www.unsgsa.org/country-visits/kenya-financial-inclusion-crossroads-dpi-inclusive-green-finance-and-financial-health-pave-path-forward.
[13] Julie, O. (no date) ‘The Relationship Between Financial Inclusion and GDP Growth in Kenya’.