Africa is currently experiencing its most dynamic growth period in recent times. Our continent has achieved an overall growth rate above 6 percent for most of the last ten years. This makes Africa one of the fastest growing regions in the world today, with notable progress in nearly all dimensions of development.
Between 2000 and 2010, six of the world’s ten fastest growing economies were situated in sub-Saharan Africa, including our country, South Africa. In addition, a number of states consistently managed growth rates above 7 percent, which is widely seen as the threshold for sustainable poverty reduction. This outstanding growth performance reflects significant improvements in macroeconomic management across the continent.
However, the global financial crisis characterised by stagnant economic growth and recession in the West, has put a dent in Africa’s growth figures recently. While less exposed to international financial markets than other regions around the world, Africa still suffered a reduction in capital flows and a sharp decline in trade. This is due to the fact that many of Africa’s traditional trading partners are found in the EU and North America. However, with the help of anti-crisis measures taken by African governments and a rapid mobilisation of international support, particularly emanating from the East, sub-Saharan Africa, in particular, were able to return relatively quickly to its pre-crisis growth path.
With that being said, Africa still continues to be vulnerable to economic shocks, both externally and internally. With macroeconomic buffers yet to be rebuilt, Africa may still find itself particularly exposed to the Eurozone crisis in the coming years. Estimates are that every 1 percent drop in growth in OECD (Organisation for Economic Co-operation and Development) countries results in a 10 percent fall in demand for Africa’s exports. The recent political crises and unrest in Côte d’Ivoire, Mali and North Africa, the spike in global food and fuel prices and the humanitarian crisis in the Horn of Africa have also negatively affected growth rates on the continent recently.
Overall, however, growing investor confidence that Africa can continue its outstanding growth performance is gaining traction. This confidence exists for a number of reasons.
A decade of reform all over the continent has given rise to improved macroeconomic management and a more attractive business climate. The rise of China and other emerging economies from the East is helping to sustain high commodity prices, to the benefit of the resource-rich African continent. Another key factor is the rise of Africa’s middle class, now thought to number between 300 and 500 million people. With more Africans in a position to make consumer choices, Africa is becoming an increasingly attractive market for both domestic and foreign investors.
However, Africa’s growth still tends to be concentrated on a limited range of commodities and extractive industries. These sectors are not generating the employment opportunities that would allow the majority of the population to share in the benefits. This is in marked contrast to the Asian model, where the growth of labour-intensive manufacturing has helped lift millions of people out of poverty. This unequal pattern of growth is exacerbated by poor infrastructure and chronic under-investment in agriculture, which prevent the rural population from sharing in the new urban prosperity.
As a result, Africa remains one of the most unequal regions in the world. Income inequality, as measured by the Gini index, has widened over the past six years, as it has in other developing regions, and has only showed incremental levels of improvement since 1980. Of the ten most unequal countries in the world in 2010, six were in sub-Saharan Africa.
One of the consequences of high inequality is that economic growth has less of an impact on poverty reduction. With a result, growth is not reaching many of those in dire poverty. Since 2005, the proportion of Africa’s population living on less than $1.25 per day decreased from 51 percent to 39 percent. These figures are a very creditable performance by international standards, but still short of the rate of poverty reduction needed to achieve the first Millennium Development Goal (MDG) outlined by the United Nations (UN).
Africa continues to make progress on a broad range of development frontiers. Poverty rates are slowly falling, the private-sector environment is improving rapidly, trade is expanding, and more and more people are becoming connected – to roads, electricity, information technology, water and sanitation. Education and health are making steady progress and the number of fragile states has declined.
However, due to the fact that Africa’s growth is concentrated only in a few sectors, this only tends to benefit only part of the population on the continent. Despite continued GDP growth rates, comparable to that there is a need to change the quality of growth. With a focus on creating more and better jobs and economic opportunities which would result in lifting more of our fellow Africans out of poverty.
Why do you keep repeating this myth? Africa collapsed from vibrant economies to disasters post colonialism – any figures can look good when the base line is close to 0 (zero).
And even 10 percent economic growth rate would be nothing for as long as population growth rate is more than double economic growth rate.
Economic growth (expressed in % of GDP) is a marker under debate without a defined GDP base. 6% growth of a low base is nothing compared to a 2% growth of a tenfold higher base (compare 6% of 100 with 2% of 500).
In other economic disciplines (NEF), “economic growth” is down graded in importance for economic “well being” of a nation. The world economy cannot continue to grow when the collective consumption of the world population cannot grow due to reduced availability of new resources and the move towards recycling.
The Gini coefficient gap could be resoved by addressing the distribution of income in a society by creating a link between high (est) and low(est) incomes.
In many instances, the corporate mentality (profit oriented) and globalisation (poorly controlled capital flows and tax avoidance through internal pricing) is hindering proper measuring of the real economic performance per country.
Interesting article on a hot subject which seems not always well understood by politicians and/or some of our economic commentators. The unobtainable Millennium Development Goals are one of these emotional goals, set for public consumption and “wanting to look good” politicians.
How does a country grow its economy? Is there an appropriate model that we can follow? Is there a country that was poor and now is rich that we can emulate or that Africa can emulate? How did they move from rags to riches?
Does any blogger out there know of an example? Do you think that it could work in Africa?
Thanks Lee-Roy, good read.
Good growth figures but as you point out – - “As a result, Africa remains one of the most unequal regions in the world. Income inequality, as measured by the Gini index, has widened over the past six years, as it has in other developing regions, and has only showed incremental levels of improvement since 1980. Of the ten most unequal countries in the world in 2010, six were in sub-Saharan Africa.”
That is a recipe for revolution.
6% growth, that’s fantastic. Now subtract from that the destruction of farmers’ and farmland plus a huge increase in the population growth rate, rampant corruption, crime and we end up with a negative growth rate. Sad to say we have had poverty from the beginning of time and the thought of eradicating it is a pipe dream. Giving wealth and resources away does not create more wealth it creates more poverty. Don’t have the actual figures with me right now but in the case of Ethiopia the population is doubling every 25 years and this is all because of food handouts which are given with the best of intentions, but they create a nation that depends on the efforts and production of others and with nothing else to do they have babies and more babies and more mouths to feed . In the case of Zimbabwe, Mugabe destroyed the farms and then used food aid to starve or bribe his subjects into submission. A vote for a plate of food? Its duisgusting so we have to stop food aid somehow if there are any politicians involved. This has to stop but how?
@Manquat: “Is there an appropriate model that we can follow?”
“Is there a country that was poor and now is rich that we can emulate or that Africa can emulate?”…..
The simple answer is: keep balance of payments in the positive by keeping trade balance in the positive. Same as in your own household.
How to do this?? …is a little more complicated
)
@enough said: “That is a recipe for revolution”………yep, but a revolution (or a war, just a different name for the same thing) is never a solution towards progress. Just a further setback and distructive.
@Peter Joffe: As Mugabe uses food aid to keep the population under control, I suggest that so-called developed nations do the same to keep the developing countries under control.
Birth control?? consider the revolution if Mr Zuma’s ANC would implement a max number of children (China) per family
)
@Lyndall Beddy – why do you perpetuate the overpopulation myth. There is enough for everyone, and as populations become educated, birth rates shrink to below replacement, and populations decline. This is already happening in many countries around the world, view Wikipedia “sub replacement fertility”.
The colonial economies in Africa were to benefit the colonialists while they raped and plundered the continent, it was not for the benefit of the indigenous population really.
One African leader pointed out that when the whites arrived, they had Bibles and the Africans had the land. The colonialists said, let us close our eyes and pray. When they opened their eyes, the Africans had the Bibles, and the colonialists the land.
>>>>
Farming has never worked except where ONE child in a generation takes over the farm, and the others get EDUCATED for jobs elsewhere.
Which means towns, villages, cities and an education system. None of these things existed in the Homelands/Bantustans.
Everywhere where farms got split up between sons the result has been acute poverty and abandonment of the land – Haiti and Rwanda being obvious examples.
The USA still has the same number of farms as in the 19th century – probably about a million people at the most out of a population of close to 400 million.
A few hundred families still own 80 percent of Britains land.
The Brits originally gave the Zulus in Zululand 6000 acres per family, the same as the whites got in Natal.
But the blacks had nowhere to send their spare children, did they? And in black culture children, not land, is the insurance for old age.
And, to stop the black chiefs selling the land, the Brits had put it into communal ownership – which meant no private property rights and no abilty to raise bond finance.
Whites had private ownership, and like in every other business 80 percent went bankrupt and had to sell their farms but those who made it made money.
My uncle bought 5 farms from pals going bankrupt who wanted to avoid the embarrassment of an official insolvency. he once said to me that he thought his interest on overdraft was paying the salaries at his branch of the bank. But he was both a good farmer and a good businessman.
@bernpm
It is a myth perpetuated by right wing politicians that the one child per family policy in China works. In reality China adds more people to the global population growth each year than any other country in the world.
The cause of the increasing economic growth without jobs creation in Africa is lack of political willingness and self enrichment which engulf S. A . as we speak. How can municipality start financial year with a budget for local economic development but during end financial report there no proof of what happen to that budget and no one is going to account for that.Most growing business in S.A. are those business which are already well established.What need to done ,it must be easy to have business ,skils development both in rural and urban areas ,graduates must be prepared to be employable.
Enough Said
Mao stopped birth control in China, and the population during his rule DOUBLED to 1.5 billion people – which is WHY the Chinese have a one child policy.
Although I believe that a 2 child policy would still reduce population growth, even if more slowly, and be much better for family life and the mental health of the nation.
@enough said: “It is a myth perpetuated by right wing politicians…..”
I did not say that! Just mentioned the idea following up on Lyndall’s comment on child birth and Zuma’s practice of the same.
One of the Chinese problems is well known: baby girls are “dismissed” and boys grow up, leading to a surplus of the male variety.
The dynamics of global socio economics are too complex to suggest a “one solution fits all” approach. Some underlying truths can be suggested but an “economic model” can only be defined on a small scale and often by accepting or excluding some factors/variables. The Chinese model is such an attempt with many “undesired by products or side effects” (as the term is). Read up on Prof Tinbergen, Nobel price winner in the 1960′s.
“This unequal pattern of growth is exacerbated by poor infrastructure and chronic under-investment in agriculture, which prevent the rural population from sharing in the new urban prosperity.” You say nothing at all about the most obvious reason for Africa’s failures in the past – poor leadership, and a vampire class of politicians sucking money out of the economy. Fortunately most of Africa has turned away from this philosophy of entitlement and the Big Man syndrome – which is why much of Africa is now doing do well, despite the global slowdown. SA unfortunately is the exception. Until SA also throws off the shackles of the Big Man and the vampire state, SA will fall further and further behind the rest of Africa.
My mother once had a big fight with my uncle, her brother, one of many such fights, because he bought one of these farms going insolvent from a schoolfriend of theirs father together with all the furniture and antiques of the farmhouse, which she said he had underpaid for.
However my uncle could not have given a damn if they sent the moveables to auction, had no desire to dabble in antiques, and was already buying a bankrupt farm which he would have to inject capital into to turn around, so would not increase the price!
My mother and uncle argued about this for weeks – and the money involved was not that much! Nothing like sibling feuds to enliven family debate!
Are you referring to the Economist/IMF data? If so SA doesn’t appear in the top six which is headed by Angola at 11,1% GDP and sixth is Rwanda at 7,6%.
JOBS – JOBS -JOBES for the ANC. The ANC is looking for suitable applicants for the following positions that have huge benefits for the successful ANC member/applicant.
No education or previous experience needed. A blind eye to corruption and the ability to sing and dance is a prerequisite.
Up to 365 days of paid leave per year on full payis available under certain circumstances.
We need:-
1. A President who has no ability at all. You must have a leopard skin, a knobkerrie, a machine gun or a spear. The ability to sweet talk an added advantage.
2. Members of parliament and Provinces. Bunking sittings is an advantage.
3. Treasurer, We are looking for someone who leaves the keys for the safe lying about as ‘deserving members’ can then help themselves in private.
4. Chief of the police. A probability that you are a criminal is a prerequisite.
5. Speaker of the House where you will be required to evict anyone who disagrees with the ANC.
6. Foot Soldiers that can trans, destroy and burn but pass the blame onto other political parties or ‘criminal elements’.
7. Investigators who can find the odd mistake the other parties have made and blow them out of all proportion in the press.
8. A spin doctor who can cover all the ills of the ANC, blame everyone else and get judgments against the ANC disregarded.
9. Judges that will do the bidding of the ANC and convict only those who are not ANC members.
Please apply in writing well before the end of October 2012.