9 June 2008
editorial
Johannesburg — AFRICA's economy has been growing by about 6% a year since 2004. Last year, according to the International Monetary Fund (IMF), the economies of sub-Saharan Africa showed real growth of 6,5%.
In its April outlook, the IMF predicted the region could show the same growth again this year. The African Development Bank's recent forecast is 5,9%. And speakers at last week's World Economic Forum (WEF) on Africa were generally upbeat about growth.
Yet with the storm clouds over the global economy growing darker, is that optimism misplaced? There's reason to think not. But how well Africa weathers the storm will depend as much on whether it can improve the quality of its leadership and governance as on pure economics.
In previous global downturns, Africa has often been hit even harder than more developed regions. And one might expect that since the global commodities boom has been so important a driver of Africa's growth in recent years, a slowdown in the world economy cannot be good news.
In fact, Africa's growth turns out to be less closely tied to global trends than might be expected. The IMF points out a global slowdown affects sub-Saharan Africa through trade and financial links, in the form of investment inflows.
The concern is that the region could be hit both ways. But economic models suggest its prospects depend only in part on those of the world economy. The IMF's economic models show historically that on average a 1% decline in world growth is associated with only a 0,3%-0,4% drop in growth across sub-Saharan Africa.
Similarly, a McKinsey study cited at the WEF last week has estimated the resources boom in fact accounted for just 15% of Africa's growth in the past few years, with 10% of this from oil and the rest from other commodities.
The oil boom, of course, is far from over, and oil exporters such as Angola and Nigeria are set to grow even faster than before. However, even for Africa's oil importers, as Finance Minister Trevor Manuel put it last week, "the forces for growth are strong".
That's partly because much of the economic revival of recent years has been driven by forces of reform internal to Africa, and are expected to continue to drive growth for a while yet: greater political stability, and better economic policies that have been conducive to growth.
There's also the fact that, in WEF-speak, the challenges Africa faces are also big opportunities. High global food prices are hitting the continent's people very hard, because so many of them are poor.
Equally though, this is the continent with the most potential to expand agricultural output to take advantage of those high prices. It has huge swathes of unused agricultural land; it has water resources; and about 70% of its population is still rural. So there has to be potential for a huge "green revolution", though this will depend on skilled and effective leadership able to implement good policies.
Also, Africa is desperately short of electricity and transport infrastructure. Investment in infrastructure has picked up, and that has helped to drive growth. But there's scope for far more, and here again what's needed are the effective programmes and partnerships that only good leadership will be able to effect.
Be the first to Write a Comment!
Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
