• November 9, 2016

Africa Growth: The Past, Present and the Future

 

A lot has been happening in Africa and it’s worth a moment of reflection. Especially for international investors who would want to consider portfolio diversification- the future of Africa is on the boom and economic condition seems more interesting. With some economic challenges, we can not be less hopeful of how this will turn. Yet, many observers are wondering whether Africa’s economic advances are running out of steam.

Between 2010 and 2015, growth was improving and speeding up in the 30 most economically strengthened Nations. There were lots of hope as these advancement attracted global interests. Well, some recent developments also have created more doubts about the ability of the continent to sustain its growth since about half of the economies are being slowed down.

Let us study the African Nations by 3 broader categories: The Arab spring countries, the oil exporters, and the Rest of Africa. By Arab spring countries I mean; Egypt, Libya, and Tunisia.

 Arab Spring CountriesOil ExportersThe Rest of Africa
2010-20150.04.04.4
1990-20003.44.02.1
2000-20104,87.34.1

Africa GDP Growth- Real compound annual growth rate %

The decline in economic performance of the two major groups is due to—oil exporters hit by the decline in oil prices and countries affected by the political turmoil of the Arab Spring (Egypt, Libya, and Tunisia). Other African countries experienced growth to 4.4% from 2010 to 2015 from 4.1% between 200 0 and 2010 and from 1990 to 2000.

Despite this economic challenges, the International Monetary Fund projects that Africa will be the world’s second-fastest-growing region in the period to 2020. This optimism is popularly fuelled by four major factors;

  1. The assumed rapid urbanization
  2. Increase working age population
  3. Technological advancement
  4. Natural resources.

If countries take proactive measure to improve the business environment for manufacturers, then the output will be doubled from $500 billion today to about $950 billion by 2025. Interestingly, consumption in Africa totals about $ 4 trillion annually and its growing rapidly. With more proactive measures from the government, 3/4 of the manufacturing outputs will come from indigenous manufacturing companies. This will also create about 14 million new jobs in Africa for the next 10 years.

Africa will also need to develop its human capital and competitive advantages for local companies. The focus needs to be on developing young talents as corporate leaders to help push local companies through this tough phase into the continent’s potentials. There are about 700 companies in Africa, with annual revenue of more than $500 million, and another 400 with annual revenue above $1 billion. Amazingly, these companies are growing more and getting more profitable than their international peers.

By recommendation, the government, educational institutions, banks and leading organizations will have to focus on the following growth necessities:

A. Improve on the mobilization of more domestic and local resources
B. Do much more with diversifying economies
C. Invest widely in infrastructure development
D. Other African countries must buy into the vision of Africanism by deepening regional integration
E. Invest in talents for the future.

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