The Great #African Renaissance—an EIU Webinar


This post is a summary of a conversation that Jane Morley, a Senior Editor at the Economist Intelligence Unit had with Paul Lewis of Economist Education on February 28th, 2013.

1. Introduction

The continent of Africa is growing faster than any other place in the world other than India and China. The fastest growing economies in the continent are Angola, Nigeria, and South Africa. Most of the other countries are expected to grow quickly as well; there are some exceptions such as Zimbabwe and Swaziland, but these are in the minority.

2. What is driving growth in Africa

a. External demand from China and India, particularly for natural resources such as oil (Nigeria and Angola) and minerals (Tanzania). This demand is keeping commodity prices high, which has fueled much of Africa’s growth recently. Oil has been discovered in Uganda recently and in Kenya as well.

b. Domestic demand driven by increasing urbanization and rising disposable incomes. This is true of emerging service sectors such as telecommunications and banking, but in traditional sectors such as agriculture (Ethiopia, Rwanda).

c. Political changes have brought stability and growth. Improved economic management after the debt relief in 2006 and 2007 has led to increased capital inflow.

d. Demographics: Africa has the youngest and most populated market in the world. More than half of population is under 24. By 2050, Africa’s population will be 2 billion, greater than the 1.6 billion in India or 1.4 billion in China. Urbanization is rapid: 40% of Africans live in cities; lower than China but higher than India, but by 2030, urbanization will increase to 63% of Africa. Meanwhile, the middle class is growing and families are starting to have fewer children. 10 years ago the average African woman had 6 children; today she has 5 (compared to the average of 1.7 in Asia). The growing middle class will create demand for schools and utilities.

3. Country profiles—a sampling of differing outcomes in Africa

Here are sample profiles of some of the countries in Africa, with the opportunities and challenges faced by them.

Country Opportunities Challenges
Nigeria Demand for alternative energy is growing

 

Violence may deter investors
South Africa Growth should rise from 2.5 to 4% in the next 3 years;inflation will reduce from 6 to 5%

 

Growth far below potential
Kenya Last year’s moderation of inflation should benefit this year’s growth Election-related violence may curtail tourism and investment

 

Ghana Growth is robust, broad-based; emerging middle class driving consumption growth

 

Nascent oil and gas sector presents huge challenge
Zimbabwe Conduct and outcome of elections will be crucial Power-sharing administration would be worst outcome because most of the energy of government would be spent on infighting

4. General Challenges

Some of the general challenges faced in Africa are that some government backing and regulatory support, in addition to the financial investment, are necessary in order to have investments thrive.

However, rapid policy improvement in order to reduce bureaucracy is taking place in Africa, and this should accelerate growth in the future. Free trade zones are a popular policy idea but they do not yet function well. It is even more difficult to unify fiscal policy between countries, so this is a development that will take a long time in order to bear fruit. But the potential rewards are enormous, and this promise should help propel things forward.

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