Economic Growth in Africa: The Past, Present and Future
Africa’s economic growth and performance has improved greatly since the turn of the century, leading to notable gains in GDP per capita and lower levels of poverty. During 2000-2012, the Sub-Saharan Africa’s economy grew at an average rate of 5.5% p.a. in real terms, compared to 2.54% p.a. during the previous 13-year period. This meant that nominal GDP per capita rose from US$484 in 2001 to US$1,450 by 2012 after having declined during the previous two decades. The expansion coincided with an improvement in business environments and a reduction in political risk, although a commodity boom also played a significant role in the increase in real GDP.
Several African countries are expected to be among the fastest growing in the world over the next decade. The following countries are expected to have the most potential for luxury goods demand expansion: Angola, Egypt, Ethiopia, Ghana, Kenya, Morocco and Nigeria. The countries were chosen due to recent performance in wealth accumulation and a high growth rate in dollar millionaires, which explains the inclusion of a low-income country with long-term potential such as Ethiopia.
However, the accompanying graph depicts only countries whose GDP per capita figure for 2012 exceeds US$500. The baseline expectation is that economic activity will expand by more than 5% p.a. in all selected countries except Egypt by 2020, as indicated in the accompanying graph. On aggregate, real GDP growth is expected to average 5.4% in 2015 before accelerating to an average of 5.7% in 2017 and 6% by 2020. North Africa, which counts Egypt, Morocco and Algeria as countries with a high incidence of high net worth individuals (HNWI), is projected to expand by 3.7% in 2015, up from an average of 1.2% in 2013, before accelerating to 4.2% by 2017.
The underdeveloped private sector puts the onus of infrastructure and economic diversification on the government, but capacity constraints have hampered the flow of oil revenue into the wider economy. Increases in oil production will continue to have a significant effect on GDP growth going forward, directly through production figures, but also indirectly through increased government revenue to be spent on domestic investments. The government’s ability to diversify the economy away from the hydrocarbons sector, and to develop a strong and thriving private sector, will have significant implications on the pace and stability of economic growth going forward. Ethiopia stands out as an outlier due to very low per capita GDP figures; nonetheless, Ethiopia is a textbook example of an undeveloped country with enormous potential. The country boasts an immense area of arable land, some of the most favourable demographics worldwide, an abundance of natural resources including mineral wealth and renewable energy potential, as well as a favourable geographic location in close proximity to both Asia and Europe.
Furthermore, Ethiopia has been Africa’s fastest growing economy on a medium-term basis. Economic growth in the economy has been characterised by a proactive public sector leading development, while the private sector has played more of a supportive role. The country has achieved an average GDP growth rate of around 9.5% between 2007 and 2012, and strong growth is expected to continue over the medium term.
About David Okwara
Africa, Africa brief, Africa challenges, Africa opportunities, African countries, agriculture, challenges, development, East Africa, economic growth, economy, Ethiopia, FDI, financial services, Foreign Direct Investment, foreign investment, GDP, Ghana, government, infrastructure, Kenya, sub-Saharan Africa, World Economic Forum, Zimbabwe