Sub-Saharan Africa set to see high growth
Doha, January 20, 2014
Sub-Saharan Africa (SSA), which grew by five per cent last year, is the second fastest growing economy in the world, said a report.
It is expected to reach six to 6.5 per cent on the back of high investment spending and a growing middle class, according to the latest QNB Group estimates.
Strong infrastructure investment and continued prudent macroeconomic policies will be essential if the African subcontinent is to achieve double-digit growth and reach emerging market status, it said.
The economic renaissance of the African subcontinent started in the mid-1990s.
Following years of corruption and economic mismanagement, a new generation of African leaders started on the difficult path of structural reforms with support from the International Monetary Fund (IMF) and the World Bank.
This included bringing inflation under control, increasing tax collections, reducing wasteful subsidies, and redirecting government spending toward long-term investments in human capital, like education and health.
Meanwhile, the international community granted most SSA countries debt relief that enabled them to exit from an unsustainable debt burden accumulated during the 1970s and 1980s.
Several African countries have now managed to grow rapidly for the last two decades under moderate inflation.
Countries like Ethiopia, Mozambique, Rwanda, Tanzania and Uganda on average quadrupled their real GDP growth rates, while bringing inflation generally down into single digits. This has enabled millions of Africans to escape poverty and reach middle class status.
While SSA’s economic growth was primarily linked to international commodity prices in the past including cocoa, copper and crude oil, the new growth drivers are increasingly linked to a rising African middle class.
Mobile licences grew at an average rate of 44 per cent during the years 2000-2012, making it the fastest-growing mobile phone market in the world, according to the GSM Association.
Another important driver is the rise of the African consumer. The SSA consumer industries will grow by $400 billion during 2012-20, representing the single-largest business opportunity in the subcontinent, according to a 2012 study by McKinsey & Company.
This growth is driven by Africa’s growing and young being increasingly urbanised, educated and digitally-savvy.
The QNB Group report points out that the next phase of the African renaissance will need to be driven by large infrastructure investment and continued prudent macroeconomic policies to support the rapid growth in other sectors of the economy.
Currently, airports are overcrowded, electricity supply is unreliable, ports are inadequate and roads are mostly unpaved. This infrastructure gap needs to be filled to enable the subcontinent to reach double-digit growth. - TradeArabia News Service