Africans and the youth in particular are engaging much more actively in topics that impact us every day such as race and politics. One area that needs more focus and attention among the African youth is economics. The economy of Africa, the cornerstone of its renaissance, has more impact on the African individual, however we find external parties scrutinise and analyse the economy more than those directly affected by it. The onus is on us to do our research and share informed opinions.
This month Professor Mthuli Ncube, Professor of Public Policy at Oxford University and former Chief Economist at the African Development Bank, shared his views in a lecture in Johannesburg. He gave a diagnosis and possible solutions on African regions, their bottlenecks and their opportunities and pointed out 3 things that will impact Africa’s economic outlook in the short to medium term: the Chinese economy, US interest rates movements and Commodities market.
These points are discussed below along with others you, as a (young) African, should know about Africa’s economic outlook:
East Africa is a prime example of how inter-regional activity can insulate global economic volatility. The rising stars in the region include Rwanda – Dubbed the ‘Singapore of Africa’, their success has been largely attributed to leadership and good governance. Kenya, Tanzania and Ethiopia, which grew at 10% in 2014, are also countries to watch.
In the West, Professor Ncube is particularly enthusiastic about Cote d’Ivoire, en route to becoming an emerging nation by 2020, their services industry has contributed significantly to GDP. Ghana and Nigeria will continue to be strong despite debt challenges and other economic issues.
Countries like Nigeria, Ghana and Angola have been negatively affected by the drop in the oil price. Nigeria’s economy in particular is highly dependent on the oil price movement and has suffered currency depreciation. Further, China, the world’s second largest crude oil consumer, is experiencing a slowdown in growth.
As a net exporter of commodities, Sub-Saharan Africa has been hurt by lower prices, however according to Makhtar Diop, World Bank Vice President for Africa, “The end of the commodity super-cycle has provided a window of opportunity to push ahead with the next wave of structural reforms and make Africa’s growth more effective at reducing poverty”.
Since 2008, SA’s GDP has slowed to 1.8% per year, with unemployment hovering around the 25% mark. Labour issues, energy constraints and a weak currency have contributed to the contraction of the economy by 1.4% in the first quarter of 2015.
McKinsey Global Institute released a report in September identifying 5 opportunities that should reverse the negative trend, growing GDP by 1.1% per year and creating 3.4 million jobs. These opportunities include advanced manufacturing, infrastructure productivity, natural gas, service exports and raw and processed agricultural exports. The effective implementation of these various initiatives and SA’s National Development Plan are central to achieving the growth figures Cyril Ramaphosa, the deputy president has claimed.
The United Nations (UN) estimates that Africa will have a population of 2.5 billion by 2050 – The Next Billion. “Currently 41% of the population is below the age of 15 and another 19% are between the ages of 19 and 24”, the UN director of the Population Division, John Wilmoth has stated. These statistics present a great opportunity, provided the proper planning for and management of this population growth takes place.
The African Diaspora are a very important factor in the rise of the continent. Africans in various parts of the world can come back home and exercise their school of thought, build businesses, provide services and invest in their countries. Together, leaders and the diaspora should develop innovative solutions for growth.
An example of this is the Grand Ethiopian Renaissance Dam (GERD) that used what is termed as ‘Diaspora Bond’ to raise finance for the construction of a hydro power dam in Ethiopia. While it has its challenges, it’s a great step involving those scattered across the globe.
China recently suffered a knock in its financial markets due to the slowdown of growth in its economy. Contagion resulted and the stock markets across the globe and emerging markets currencies plummeted (In SA, R14 to the dollar!), on what analysts have called ‘Black Monday’.
The traditional trade relationship between Africa and China has been that Africa exports raw materials and imports manufactured goods from China. They are also the leading partner in our infrastructure development, these deals are linked to extractive industries proving China’s slowing growth is unfavourable to African countries.
That said, Africa needs to make sure it gets “the best deal possible” for its natural resource exports, particularly with its largest trading partner China, to protect itself from global market turbulence, according to the new president of the African Development Bank, Akinwumi Adesina.
In the US, there’s been speculation about the rise of interest rates, which after the recent plunge in financial markets and a strong US dollar, would be especially detrimental to African countries as, among other factors, debt commitments will be more painful to service.
An overall trend observed recently is that the world’s developed economies and their markets are converging upwards, whereas emerging markets are slowing down and vulnerable.
The infrastructure deficit is commonly referred to as the single most important factor stifling Africa’s growth. If we don’t have adequate roads, buildings, commercial hubs, public transport systems, industrial plants such as power plants etc. we won’t be able to unlock all our opportunities. Lack of access to suitable funding (structures), inadequate strategies and collaborative and integrated planning are probably the most important challenges in infrastructure development.
Critical however is, the structural transformation of the economy with growth strategies sensitive to equity and sustainability. This will help diversify the economy and pull the continent out of the commodity-dependent state it’s in right now. This involves a value addition/beneficiation focus, investing in the services and manufacturing sectors (sometimes at the cost of the economy in the short-run). Of significance is education and skills development with investment in social infrastructure for health and well-being of the populace.
Article by Lilitha Mahlati, an investment banking associate and co-founder of Mbewu Movement. She describes herself as a transformation, youth and gender activist. Follow her on twitter: @misslilitham