Africa, the Fundamentals of a Growth Leader

Recent projections from the Economist Intelligence Unit reiterate the growing consensus on Africa’s role as the next global growth leader for the coming decade. Indeed, the EIU is predicting an increase in the average African GDP per capita from 1,800 USD in 2011 to 2,500 USD in 2016, increasing spending power by 25%. This is in itself a continuation of previously witnessed trends in private consumption increase, both absolute and relative to other regions of the World (see Graph 1).

Graph 1: Growth in Private Consumption, 2000-2010 (%)

Source: Economist Intelligence Unit

The fundamentals are also there to support a steady increase in purchasing power for Africans: economic growth predictions for next year are very healthy, well above the OECD average in many of the markets in which Global South Group operates (see Graph 2), and well above population growth predictions until 2015 (see Graph 3).

Graph 2: Real GDP Growth Rate Prediction, 2013 (%) 

Source: African Economic Outlook, AfDB Database.

Graph 3: Projected Annual Average Population Growth Rate 2010-2015 (%)

Source: UNDESA

Indeed, in the past, the early stages of demographic transition and the concurrent sharp increases in population growth had eroded African nations’ economic growth efforts. As fertility slowly reduces, wealth is spreading and economic growth is beginning to make an impact.

A Virtuous Circle?

As African economies grow, the need for qualitative improvements in the structure of GDP and for increased value addition will become ever-more pressing. One typical lever is foreign investment, which the region has been able to leverage more effectively in absolute terms in recent years. Nevertheless, destination countries with large FDI inflows rely heavily on fossil fuels for the majority of GDP (see Graph 4). African nations’ difficult climb up the Doing Business rankings underlines the issue of economic governance, which will remain a thorn in the continent’s impressive progress in the years to come.

Graph 4: Foreign Direct Investment, Net Inflows 2010 (BoP, current US$ million)

Source: African Economic Outlook, AfDB Database.

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