By TheAfricaBazaar Staff Writer
May 19, 2014
Africa’s economy prospects remain favorable, according to a report released Monday at the African Development Bank annual meeting in Kigali, but more effective participation and integration into regional and global markets could help strengthen African nations’ economies, argues the report.
The continent’s growth is projected to accelerate to 4.8 percent in 2014 and 5 percent to 6 percent in 2015, according to the latest African Economic Outlook report produced annually by the African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme (UNDP). The continent’s growth is more broad-based, driven by domestic demand, infrastructure and increased continental trade in manufactured goods.
While this year’s report shows that Africa’s macroeconomic looks great, weathered internal and external shocks and is poised to achieve healthy economic growth rates, increased efforts in export, putting in place sound public policies, knowledge and market information, investment in new and more productive sectors, human capital development, job creation and acquiring new technology as well as supporting entrepreneurs that will help achieve these gains, would give a healthy boost to the continent’s economic growth and help it avoid the trap of being stuck in low-valued activities.
“African economies have a great potential to build on their demographic dynamism, rapid urbanization and natural-resources assets. The challenge now for many of them is to ensure that greater insertion into global value chains is achieved and has a positive impact on people’s lives,” said Mario Pezzini, director of the OECD Development Centre. “Public policies need to be articulated in a targeted strategy that promotes more equitable economic and social transformation and an environmentally sound development,” he added.
For many African countries GDP rebounded strongly during the past year due to prudent fiscal management and policies and favorable performance improvements in sectors like agriculture. Some GDPs remain unchanged but stable while others declined, affected by political instability, and domestic factors.
Nigeria became the largest economy in Africa with an estimated gross domestic products of $510 billion as a result of its recent rebased GDP from 1990 to 2010, surpassing South Africa’s $352 billion. The country’s GDP boosted an estimated record of 7.4 percent in 2013 compared with 6.5 percent a year earlier. The growth rate is higher than the west African Sub regional level and far higher than the sub-Saharan Africa level due to performance improvements in the non-oil sector with agriculture trade and service being the main growth driver, the report states.
However, the country faces ongoing challenges such as its ongoing GDP rebasing, which analysts said could be a double-edged sword because it may influence the growth figures, possibly making them lower going forward since the expected larger economy, the lackluster performance in the oil sector, the upcoming 2015 general elections and poverty and high unemployment could drag down overall growth.
The country’s oil sector contributed 96 percent to total export of the country. Foreign capital inflow into the country increased by 28.3 percent in 2013 to $21.3 billion, up from $16.6 billion in 2012, while foreign direct investment declined by 21.4 percent in 2013.
High unemployment and labor-relations issues continue to pose challenges for South Africa, Africa’s second largest economy, with its agriculture and manufacturing outputs in 2013 continuing to be affected. GDP growth decreased to 1.9 percent in 2013 from 2.5 percent the previous year. However, the country’s financial stability indicators remain strong.
The growth is expected to jump to 2.7 percent in 2014 if affected factors are contained. South Africa’s integration into global markets via value chains–automobile, mining, finance and agriculture sectors–makes it a major hub on the continent. Capitalizing on this uniqueness and improving the capacity of its global competitive scale is critical to its continue growth, the report says.
Southern African countries like Namibia also experienced sluggish economy with its GDP slowed to 4.2 percent in 2013 from 5 percent in 2012. Zambia’s GDP, though robust, decreased to 6.5 percent in 2013 from 7.2 percent in 2012 due to poor performance in the agriculture sector.
Zambian government’s commitment to strengthening governance and democratic process that reinforce transparency and accountability efforts that fights against corruption, narrow fiscal deficit will help it address issues relating to demand for high ages, unemployment. The country’s GDP is expected to jump to 7.1 percent in 2014.
Botswana, on the other hand, received a boost in its economic performance, estimated GDP is 5.4 percent from 4.2 percent.
Mozambique became one of the most dynamic economies on the continent in 2013 with a GDP growth of 7 percent, proving resilient despite internal and domestic challenges and setbacks. Foreign direct investment in extractive sector and financial sector, plus infrastructure development and very large-scale projects fueled growth. Growth is estimated to be 8.2 percent in 2015, with GDP per capital growth at 5.8 percent in 2015.
In East Africa, Tanzania leads the way with its GDP growth at 7 percent in 2013, driven in large part by sectors such as transport, communication, manufacturing and agriculture. The country’s regional integration effort through tariff reduction and partnership with East African Community partners has produced $1.2 billion in 2012, a jump from $520 million in 2008. Other recent measures of fiscal consolidation, which the country embarked on in the past year have enabled it to keep its external debt sustainable at $13 billion in 2013.
The country is also in the advanced stages of preparing a new constitution, which is expected to be in place before the 2015 general election. The new constitution is expected to reform dominant issues affecting the country such as the presidential power, political powers, natural resources.
A trajectory growth recovery continues for Uganda’s GDP at 5.2 percent, up from 2.8 percent in 2012. The economic-focused recovery, which had led to debt and exchange rate stability in the country, allowing for a macroeconomic environment for growth, is expected to continue through 2015, with 6.6 percent projected in 2014. However, unfavorable investment climate for the private sector as well as the public sector have continued to dent growth.
Lower than expected performance in agriculture and aid-related delays in the implementation of strategic public investments also put a dent in Rwanda’s GDP in 2013, slowing it down to 4.6 percent from 7.3 percent in 2012. Growth is expected to rebound to 7 percent and 7.4 percent in 2014 and 2015, respectively.
Agriculture provides a major boost to Ethiopia’s economy, with GDP growth at 7.1 percent. Despite being one of Africa’s top performing economies for 10 years in a row, the government hasn’t rested on the country’s laurels. Prudent fiscal and monetary policies implemented by the government has enabled inflation to drop to single digits. The report authors argue that regional and global trade integration should help the country address any trade export obstacle.
Among ECOWAS countries, Senegal’s due diligence to good governance and better management of its public resources serve as the basis of the country’s recovery with GDP at 4 percent in 2013, up from 3.4 percent in 2012. Growth in 2014 is estimated at 4.8 percent.
Ghana, with its unprecedented budget deficit of about 12 percent, is trying to stop the budget spillage, which began in 2012, by putting in place measures that are expected to rein in the fiscal deficit to 9 percent. The country’s GDP declined to 4.4 percent in 2013 from 7.9 percent in 2012. About 7.7 percent is expected in 2014.
In North Africa, the Moroccan economy rebounded strongly during the past two years as domestic consumption and public investment and vibrant agriculture sector led to a GDP growth almost doubled at 4.7 percent, a significant jump from its 2.7 percent in 2013. The government is taking steps to reduce its fiscal deficit down to 3 percent of GDP in 2016 from its current 5.3 percent.
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