African Economies Resilient But Vulnerable
By J C Suresh, IDN
A new report by the World Bank highlights the resilience of African economies despite global slowdown caused by the Euro-zone crisis and decline in growth in emerging economies, particularly China – an important market for the continent’s mineral exports.
In fact, new oil, gas and mineral wealth offer an opportunity for inclusive development. But strong growth rates could yet be vulnerable to deteriorating market conditions in the Euro-zone, the report warns.
So far, consistently high commodity prices and strong export growth in those countries which have made mineral discoveries in recent years, have powered economic activity and are expected to buttress Africa’s economic growth for the rest of 2012, according to the World Bank’s new Africa’s Pulse. African countries’ share in global reserves and annual production of some minerals is sizeable.
“A third of African countries will grow at or above 6 percent with some of the fastest growing ones buoyed by new mineral exports and by factors such as the return to peace in Côte d’Ivoire, as well as strong growth in countries such as Ethiopia,” said World Bank Vice-President for Africa, Makhtar Diop.
“An important indicator of how Africa is on the move is that investor interest in the region remains strong, with $31 billion in foreign direct investment flows expected this year, despite difficult global conditions,” Diop added.
According to the report, Sub-Saharan Africa is poised to grow at 4.8 percent in 2012, largely unchanged from the 4.9 percent growth rate in 2011 and mainly on track despite setbacks in the global economy. Excluding South Africa, the continent’s largest economy, growth in Sub-Saharan Africa is forecast to rise to 6 percent. African exports picked up particularly in the first quarter of 2012, growing at an annual pace of 32 percent, up from the -11 percent recorded in the last quarter of 2011.
New mineral wealth
The report expects new discoveries of oil, gas, and other minerals in African countries to generate a wave of significant mineral wealth in the region.
Because of minerals beginning to earn hundreds of millions of dollars in windfall revenues for countries across Africa, Diop envisages an opportunity for “strengthening economic transparency and financial controls around the new discoveries, to leverage their full potential through development policies that increase economic growth, create jobs, reduce poverty, and improve health and education especially for young people and future generations, while balancing the immediate needs.”
According to Africa’s Pulse, a twice-yearly analysis of the issues shaping Africa’s economic prospects, the economic importance of natural resources is likely to continue in the medium term in several established oil and mineral producers, thanks to the sizeable stock of resource wealth and the prospects of continued, high commodity prices.
African countries’ share in global reserves and annual production of some minerals is considerable. In 2010, Guinea alone represented over 8 percent of total world bauxite production; Zambia and the Democratic Republic Congo have a combined share of 6.7 percent of the total world copper production; and Ghana and Mali together account for 5.8 percent of the total world gold production.
“Resource-rich African countries have to make the conscious choice to invest in better health, education, and jobs, and less poverty for their people,” says Shantayanan Devarajan, the World Bank’s Chief Economist for Africa, and lead author of Africa’s Pulse.
In its wide-ranging analysis of new developments in Africa, the report notes that after ten years of high growth, an increasing number of countries are moving into ‘middle-income’ status, defined by the World Bank as those countries achieving more than $1,000 per capita income.
Of Africa’s 48 countries, 22 states with a combined population of 400 million people have officially achieved middle-income status; while another 10 countries representing another 200 million people today would reach middle-income status by 2025 if current growth trends continue or with some modest growth and stabilization, says the report.
Africa’s Pulse adds: Another seven countries which are home to 70 million people could reach this milestone if they created economic growth of seven percent growth over the coming years. For example, Sierra Leone could grow at this rate because of its recent expansion in mining. Ten African countries, which are ‘fragile’ and conflict- affected states, and with a combined population of 230 million people, have almost no chance to reach middle-income status by 2025.
The report also notes that with rapid population growth Africa is urbanizing rapidly, with profound implications for social and economic opportunities. Today, 41 percent of Africans live in cities, with an additional one percent every two years. By 2033, Africa – like the rest of the world – will be a majority urban continent. Urbanization and development go together, avers the report.
It points out that poverty rates on the continent have been falling faster than one percentage point a year and for the first time, between 2005 and 2008, the absolute number of people living on $1.25 a day has declined. Child mortality has also been decreasing.
Because the global economy continues to be in fragile condition, Africa’s Pulse warns that the continent’s strong growth rates could yet be vulnerable to deteriorating market conditions in the Euro-zone.
In addition, recent spikes in food and grain prices are a cause for serious concern. An unprecedented hot and dry summer in the United States, Russia and Eastern Europe led to reduced yields on both maize and wheat production worldwide. Africa’s Sahel region is already suffering from higher food prices, high rates of malnutrition and recurring crisis and insecurity.
Besides, swarms of desert locusts and the ongoing conflict in The Sahel also undermine the region’s food security. Countries like Mali and Niger are already suffering from locust invasions with a possibility that the swarm could move to neighbouring countries such as Mauritania and Chad. This would aggravate the ability of families to find enough to eat in a region already grappling with drought and conflict, warns the report. But at the same time, it adds: “Because Africa’s growth recovery since 2000 – the longest expansion since independence – was based on improved macroeconomic policies and political stability, the prospects of sustained growth are strong. Discoveries of minerals are bringing the prospect of large revenues for newly resource-rich countries.”