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International Relations, PUBLICATIONS

Africa’s economic growth: Taking off or slowing down?

Written by Ionel Zamfir

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Over the past 15 years, most countries in Africa experienced sustained economic growth, with growth rates often exceeding 5% per year. This has inspired much optimism about the region’s prospects to finally leave poverty and under-development behind. However, the general economic context is now turning less favourable, with growth slowing down, especially in oil and mineral exporting countries. On the whole, overall growth is expected to continue, but at a slower pace. In this changing climate, it is important to look at the drivers of growth, in order to distinguish those that can sustain further growth.

Looking back to the years of sustained growth, it is clear that many drivers have contributed to this; their configuration ultimately depended on the local economic situation in each country. Favourable external conditions, especially high commodity prices (based on high international demand) and availability of investment money in search of new opportunities at global level have played a major role. At the domestic level, the improvement of the macroeconomic climate – especially the reduction of external debt and of current account and fiscal deficits – as well as the decline in the number of conflicts and improved political and economic governance have also been, without doubt, central contributors to growth. Spurred by growing internal demand, a buoyant services sector has in many cases been the fastest growing sector of African economies. The telecommunications boom, first based on a huge increase in mobile phone use and now on rapidly expanding internet penetration, has also played a central role. Financial services are developing quickly often in tandem with ICT uptake. The laggard in the growth story, however, has been the manufacturing sector. Sub-Saharan Africa remains unable to join the ranks of those developing countries that base their growth on the export of competitive manufactured products.

Growth has been fast, but from a low base, and consequently Africa still has much to do to catch up with other regions of the world. Despite the excitement raised by the fast economic growth which inspires the belief that Africa could become the next Asia, African countries still trail behind other developing countries in terms of development pace. Per capita GDP growth is still significantly lower than in Asia; economic diversification and sophistication remain low level in most African countries.

Proposals to spur a real and deep economic transformation have varied, but in many cases focus on the need to develop Africa’s industrial base. Adapting Africa’s industrialisation to its specific characteristics requires coordination with the extractive industries, and modernisation of agricultural production and expansion of agro-processing. In this way the continent could leave dependence on a few export commodities behind, and improve resilience to external shocks. Industrialisation is also considered necessary by many authors to create sufficient jobs for the rapidly growing population. While the service sector has grown quickly, driven by internal demand, and is usually considered the sector that most contributed to growth, its overall productivity and its export potential are still low; much of the workforce lacks the necessary higher skills. For economic success to continue and to achieve its transformative impact, a climate of political stability is needed, since conflict is a major threat to Africa’s economic growth.

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Discussion

2 thoughts on “Africa’s economic growth: Taking off or slowing down?

  1. Thank you for this interesting post. I agree that in general it is vital to development prospects for economies to industrialise and that this has been relatively lacking in Sub-Saharan Africa. An appropriate industrial policy which encourages coordinated growth between sectors, technological learning and the expansion of exports is surely vital. This would enable such countries to take advantage of already existing technologies to support more rapid growth in productivity as well as job creation, which will help to increase average incomes and reduce poverty.

    Like

    Posted by Nick Johnson | January 9, 2016, 19:06

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  1. Pingback: Africa’s economic growth: Taking off or slowing down? | Vatcompany.net - January 6, 2016

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The content of all documents (and articles) contained in this blog is the sole responsibility of the author and any opinions expressed therein do not necessarily represent the official position of the European Parliament. It is addressed to the Members and staff of the EP for their parliamentary work. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy. Copyright © European Union, 2014. All rights reserved

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