Nompumelelo Magwaza
While most of the world faces major economic and political uncertainty, Africa is expected to continue its growth trajectory in the coming years.
According to Ernst & Young’s Africa on the Move report, released yesterday and produced in collaboration with the Skolkovo Institute for Emerging Markets Studies in Moscow, significant reforms in macroeconomic management and improved incentives for the private sector, among other factors, has spurred growth in many African nations.
Growth in sub-Saharan Africa is expected to have averaged 4.8 percent last year and to average 5.8 percent this year, according to estimates from the International Monetary Fund.
The study suggested that government reforms and initiatives had reduced inflation, budget deficits and debt levels in African countries.
A sample of 15 sub-Saharan African countries showed that the debt burden – measured as the stock of external debt to gross national income – decreased from an average of 120 percent in 1994 to 21 percent in 2011.
Ernst & Young also said that, in its Africa attractiveness survey, the perception of Africa as a place to do business had improved over the past three years. The rising middle class and urbanisation remained an important driving factor.
It is estimated that Africa’s population will double in the next 40 years to reach 2 billion. As a result, by 2040, Africa’s potential labour force is expected to be more than 1.1 billion people, which exceeds projections for the Chinese and Indian workforces.
Africa’s consumer spending is expected to rise from $680 billion (about R6.3 trillion) in 2008 to $2.2 trillion by 2030.
The study showed that urbanisation was on an upward trend across Africa, increasing at 3.5 percent a year for the past two decades.
Sugan Palanee, the head of markets at Ernst & Young, said: “In Africa, a broad range of factors have created favourable conditions for economic transformation, which could see rapid growth become sustainable and inclusive in the future.”
Although Africa’s economy has grown rapidly over the past decade, questions are sometimes raised about the sustainability of this growth. There are concerns that the continent is still heavily dependent on revenues from natural resources. As a result, Africa’s future growth prospects remain vulnerable to external risks.
Nigeria and Angola are among the world’s top 20 oil producers while South Africa, Ghana and Tanzania are among the top 20 gold producers. More than anything, the concern is that economic growth will fail to create sufficient jobs and improve living standards of Africans.
The report suggests that a robust structural transformation is key to shaping Africa’s ability to generate inclusive growth and tackle serious challenges, such as poverty and unemployment.
“Africa’s past growth has not been sufficiently employment intensive. A greater focus on employment, especially youth employment, is necessary,” the report said.
According to the World Bank, the poverty rate in sub-Saharan Africa fell from 56.5 percent in 1990 to 47.5 percent in 2008 and is projected to drop to 35.8 percent in 2015.
To enable economic transformation on the continent, infrastructure development will also need to be prioritised.
The African Development Bank claims that the shortage of roads, housing, water, sanitation and electricity causes a 40 percent reduction in sub-Saharan Africa’s output.
Other enablers include the financing of small and medium-sized enterprises, public-private partnerships, foreign direct investment and deeper regional integration.