By Daniel Hunter
Economic growth in Sub-Saharan Africa is likely to reach more than 5 percent on average in 2013-2015 as a result of high commodity prices worldwide and strong consumer spending on the continent, ensuring that the region remains amongst the fastest growing in the world, according to the World Bank’s latest Africa’s Pulse, a twice-yearly analysis of the issues shaping Africa’s economic prospects.
In 2012, about a quarter of African countries grew at 7 percent or higher and a number of African countries, notably Sierra Leone, Niger, Cote d’Ivoire, Liberia, Ethiopia, Burkina Faso and Rwanda, are among the fastest growing in the world.
The new World Bank report forecasts 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.
Welcoming the new assessment that Africa continues to grow faster than the global average, the World Bank’s Vice President called on the need for faster progress in areas such as electricity and food in the vulnerable areas of The Sahel and the Horn of Africa, and that significantly more energy and agricultural productivity were needed to raise the quality of life for Africans throughout the continent and reduce poverty significantly.
“African countries will need to bring more electricity, nutritious food, jobs and opportunity to families and communities across the continent in order to better their lives, end extreme poverty, and promote shared prosperity,” said the World Bank’s Africa Vice President Makhtar Diop.
“Without more electricity and higher agricultural productivity, Africa’s development future cannot prosper. The good news is that governments in Africa are intent on changing this.”
Diop also urged African governments and their development partners to upgrade the continent’s statistical capacity so that citizens could better measure and monitor their development progress and analyze the reasons for its success and failure, especially in resource-rich countries and fragile states, where data gathering and analysis remained weak.
Africa’s Pulse says that 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, were sustaining solid economic growth across the continent.
Looking forward, it is expected that by 2020, only four or five countries in the region will not be involved in mineral exploitation of some kind, such is Africa’s abundance of natural resources.
The World Bank says that given the considerable amounts of new mineral revenues coming on stream across the region, resource-rich African countries will consciously need to invest these new earnings in better health, education, and jobs, and less poverty for their people in order to maximize their national development prospects.
Consumer spending, which accounts for more than 60 percent of Africa’s GDP, remained strong in 2012.
This trend was driven by declining inflation, which fell from 9.5 percent in January 2012 to 7.6 percent in December 2012; improved access to credit, for example in Angola, Ghana, Mozambique, South Africa, and Zambia; lower interest rates--for every interest rate hike there were three cuts; and a rebound in agricultural incomes, thanks to more favorable weather conditions in countries such as Guinea, Mauritania and Niger, which all experienced better rains compared with the 2010/2011 crop year; and the steady remittance inflows, which are estimated at $31 billion in 2012 and 2011.
Increased investment flows are supporting the region’s growth performance. In 2012, for example, 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.
Africa’s Pulse notes that 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 Sub-Saharan exports to emerging markets, including those of China, Brazil and India, and to countries in the region has surpassed that to developed markets. Total exports to Brazil, India and China were larger than to the EU market in 2011.
After more than a decade of strong economic growth, the World Bank says that Africa has been able to cut poverty on the continent, but not by enough.
“While 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,” says Shanta Devarajan, the World Bank’s Chief Economist for Africa, and lead author of the new report.
Devarajan adds that during the second half of the 2000s, Ethiopia and Rwanda saw their economies expand at 8-10 percent (or between 5 and 8 percent per capita), which resulted in a 1.3 to 1.7 percentage point yearly fall in their national poverty rates. In contrast, poverty reduction in some other countries has lagged far behind growth.
Africa’s Pulse suggests that 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.
“If properly harnessed to unleash their full potential, these trends hold the promise of more growth, much less poverty, and accelerating shared prosperity for African countries in the foreseeable future,” says Punam Chuhan-Pole, a co-author of the Africa’s Pulse and a Lead Economist in the World Bank’s Africa region.