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African Economy to Outpace Global Average Growth

Daniel Cooke

According to a report by the World Bank, Sub-Saharan Africa is on pace to achieve larger economic growth than the global average over the next three years. The report stated that higher commodities, increased investment opportunities, and a steady recovery in the global economy should sustain the region’s GDP growth above 5%, while the global average remains merely 2.4% as of this year. Excluding South Africa, the region’s strongest economy, African economies are currently growing at 5.8 percent, higher than the developing country average of 4.9 percent.Coupled with an anticipated increase in global foreign direct investment, which is expected to reach $54 billion USD by 2015, the economic growth in Sub-Saharan Africa provides an immense opportunity not only to elevate the standing of African nations in the global economy, but also the chance to fight back against the region’s staggering poverty levels.

Despite these expected figures, the World Bank’s report also stated the risks associated with doing business in Sub-Saharan Africa that have been a continual challenge towards the region’s economic growth. Labor protests in South Africa, alongside political turmoil in the Central African Republic, Mali, and Togo, have been deemed as potential threats to attracting foreign direct investment. The Eurozone crisis and a decrease in demand for commodities from China also have the potential to prevent substantial African economic growth.  Furthermore, although the percentage of Africans living on less than $1.25 a day fell from 58% to 48.5% between 1996 and 2010, Africa’s fight against poverty remains restricted by income inequality and a lack of market diversity due to reliance on mineral and mining exports. These factors have hurt the economic prospects of even resource-rich countries, such as Equatorial Guinea, Nigeria, and Gabon.

The World Bank stated that the key factor that African nations need to capitalize on in order to maximize their economic potential is infrastructure investments. With global foreign direct investment levels expected to rise, African nations will need to establish the infrastructure needed to access their wealth of natural resource deposits to attract foreign firms away from other developing regions. As seen through the success of oil and gas industries in East Africa and Mozambique, African firms can use their economic prosperity to boost poverty reduction and increase government and citizen accountability, which are also important for attracting foreign businesses to African shores. Clearly, with global foreign direct investment and GDP expected to rise, Sub-Saharan African countries have an unparalleled opportunity to experience immense economic growth due to the region’s wealth of natural resources, as long as the infrastructure is in place to attract foreign direct investment into the continent’s industries.

For more information on African business prospects, click here to read more about emerging African markets and business news from the globalEDGE Blog. The “Doing Business in Africa” module also provides a deeper insight into this topic, along with a case study to further one’s insight into the business environment of Sub-Saharan Africa.

( Vivian )20 Jun,2013

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