Can Africa keep its economic boom from going bust?(Read article summary)
Several African economies are among the fastest growing in the world, but to transform cash into social prosperity will require more attentive involvement from the state, writes Lee-Roy Chetty.
A version of this post originally appeared on the author's personal blog. The views expressed are his own.
Economic growth in sub-Saharan Africa is likely to reach more than 5 percent on average between 2013 and 2015 as a result of high commodity prices worldwide and strong consumer spending on the continent, ensuring that the region remains among the fastest growing in the world.
In 2012, about a quarter of countries on the African continent grew at 7 percent or faster and a number of countries – including Sierra Leone, Niger, Ivory Coast, Liberia, Ethiopia, Burkina Faso, and Rwanda – are among the fastest-growing economies in the world.
Forecasts indicate that medium-term growth prospects remain strong and will be supported by a gradually-improving world economy, consistently high commodity prices, and more investment in regional infrastructure, trade, and business growth.
However, the need for faster progress in areas such as electricity and food in vulnerable areas of the Sahel and the Horn of Africa, as well as significantly more energy and agricultural productivity, are desperately needed to raise the quality of life for Africans throughout the continent and reduce poverty significantly.
Specifically, without additional focus on electricity and higher agricultural productivity, Africa’s development future cannot prosper at the rate needed to address the still-high levels of poverty and inequality on the continent.
African governments should continue to be pressured to upgrade their specific country’s capacities so that their citizens can better measure and monitor their development progress and analyze the reasons for its success and failure, especially in resource-rich countries and fragile states.
The recent discoveries of oil, natural gas, copper, and other strategic minerals, and the expansion of several mines or the building of new ones in Mozambique, Niger, Sierra Leone and Zambia – together with better political and economic governance – are sustaining solid economic growth across the continent and bode well for the future, if managed correctly.
It is also forecast that by 2020, only four or five countries in the region will not be involved in mineral exploitation of some kind, such is the continent's abundance of natural resources.
According to the World Bank, resource-rich African countries will consciously need to invest their new mineral earnings in better health, education, and jobs in order to maximise their national development prospects.
Increased investment flows into Africa are also supporting the continent’s growth performance.
In 2012, net private capital flows to the region increased by 3.3 percent to a record $54.5 billion and foreign direct investment inflows to the region increased by 5.5 percent in 2012 to $37.7 billion.
Exports are also driving the continent’s growth and that the traditional destination of these goods over the last decade is changing as well.
Since 2000, the overall growth of African exports to emerging markets, including those of China, Brazil and India, and to other countries in the African region, has surpassed that to developed markets. Total exports to Brazil, India and China were larger than to the entire European Union market in 2011.
Even though the broad picture emerging from the data is that Africa’s economies have been expanding robustly and that poverty is coming down, the aggregate hides a great deal of diversity in performance, even among Africa’s faster growers.
As an example of this trend, Ethiopia and Rwanda saw their economies expand between 8 percent and 10 percent each, which directly resulted in a 1.3 percent to 1.7 percent annual drop in their national poverty rates. In contrast, poverty reduction in some other countries has lagged far behind growth.
A number of emerging trends on the continent could help to transform its current state of development over the coming years. These include the promise of large revenues from mineral exploitation, rising incomes created by a dramatic expansion of agricultural productivity, the large-scale migration of people from the countryside into Africa’s towns and cities, and a demographic dividend potentially created by Africa’s fast-growing population of young people.