Africa’s Growing Prospects
The African growth story continues as investors pour into Africa. Investment is booming and interest in the continent is surging as capital seeks regions still able to flourish despite the broader global economy’s fight to return to robust—or at least decent—health.
Despite the economic doldrums in much of the world over the past decade, Africa has managed to grow at an average of more than 5 percent, notes the 2013 Africa Competitiveness Report, produced by the World Bank, World Economic Forum, and African Development Bank.
“Africa is at an auspicious moment in history, when the successes of past decades and an increasingly favorable economic outlook combine to give the continent an unprecedented opportunity to boost investments and spur regional integration to end poverty within a generation,” note the report’s sponsors.
Indeed, Mohamed El-Erian, CEO of the global investment firm PIMCO, recently authored a piece on the very real rise of Africa’s economic prospects.
“Now, from bonds to private equity, new vehicles are emerging to channel foreign investments into more of the most promising African economies. How real is the boom?” El-Erian asked. “Foreign direct investment in sub-Saharan Africa has leapt from $6 billion in 2000 to $34 billion in 2012. In just the past couple of years, several African countries—among them Angola, Namibia, Senegal, and Zambia—have issued external debt for the first time, allowing them to invest for the future.”
The IMF, too, recently issued its Regional Economic Outlook for sub-Saharan Africa and projects “regional economic growth of 5½ percent in 2013–2014, compared with 5 percent in 2012. Investment is expected to remain a key driver of growth, while measured activity in 2013 will also be boosted by one-off factors in some countries, including rebound effects from floods in Nigeria and recovery of agriculture in regions previously affected by drought.”
Yet even with the good news the continent continues to face poverty and development challenges. Ninety percent of Sub-Saharan African countries in Transparency International’s 2012 Corruptions Perception Index reported a score below 50 out of 100. The World Bank notes that Sub-Saharan Africa has a poverty headcount ratio, defined as the percentage of population living at below $1.25 per day, of 48.5 percent. That number rises to 70 percent when the dollar figure rises to $2.00. Child marriage continues to plague the continent, with Niger and Chad both seeing more than 70 percent of their girls wed before the age of 18. Growth is uneven across the continent and, the World Bank argues, “highly reliant on natural resources, with a number of resource-rich countries enjoying very strong growth—in some cases over 10 percent—and other countries not doing very well.”
Still, the positive developments are real and growing. As the World Bank notes of Africa, “improvements in macroeconomic performance, coupled with its limited integration into the global economy, have helped to mitigate the effects of the global economic crisis. More generally, it should be noted that sub-Saharan Africa has made considerable progress in ensuring sounder macroeconomic policies over the past 15 years and has reached levels of macroeconomic performance similar to that of other developing countries.”
To boost this growth and further it, the World Bank, World Economic Forum, and African Development Bank recommend that countries lower barriers to increased trade, invest in infrastructure, and strengthen the legal and regulatory environment. The trio also recommends “innovative public-private partnerships” that “can serve as incubators for self-sustaining industrialization, more jobs, greater opportunities, and more dynamic regional integration.”
As the report notes, “the present time is fortuitous for Africa. The continent is enjoying solid growth, and much international attention is focused on Africa as an investment destination, with a specific emphasis on the continent’s infrastructure.”