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Africa on the Rise
By admin September 20, 2016

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In 2010, The McKinsey Global Institute’s report on the African Economy, Lions on the Move: the Progress and Potential of African Economies, highlighted the important role of African governments in keeping increasing ties to the global economy. Rapid economic growth was creating substantial business opportunities that lifted millions out of poverty and created prosperity in all corners of the continent. Real GDP had grown at 4.9 per cent a year between 2000 and 2008, turning Africa into one of the fastest growing regions in the world and putting Africa’s future prospects clearly on the rise. However, six-years later, Africa’s GDP growth averaged 3.3 per cent, barely keeping up with increasing population growth. When the new McKinsey’s Lions on the Move report published in September 2016, a significant slowdown of some African economies has been recorded, in which Egypt, Lybia and Tunisia were specifically named as case studies for prolonged slowdowns.

Economic indicators in the latest IMF World Economic Outlook have underlined the economic slowdown that affected several northern African economies, which at the same time had repercussions in many other emerging markets, such as Latin America and parts of Asia. Two common denominators accounting for nearly three-fifths of Africa’s combined GDP were mainly the cause of the economic downturn: North African countries badly absorbed the democratic aftermath of the Arab Spring and the vulnerability of Africa’s oil exporters negatively influenced oil prices. These two factors influenced the stagnation within northern African economies during the past six-years while the rate of growth among the biggest oil exporters in Africa – Nigeria, Angola, Algeria and Sudan – fell from 7.3 per cent to 4.0 per cent.

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Source: World economic outlook: too slow for too long, IMF, April 2016, McKinsey Global Institute analysis

However, a deeper analysis of the overall African economy suggests that the situation may not be as bad as it seems, partly for two main reasons. First of all, although aggregate GDP has slowed down due to political turmoil and faltering growth among oil exporters, in the rest of Africa, GDP has recorded strong growth increasing from 4.1 to 4.4 per cent. Secondly, Africa is experiencing an incredible transformation due to digitization, urbanization and growth in the working-age population, which according to the OECD Development Co-operation Report 2016 will turn Africa into the largest workforce region in the world by 2034, outnumbering China and India.

Indeed, demographic growth could drive the future economic prospects, encouraging domestic consumption and supporting industrialization. However, African companies have not proved to be able to absorb the existing and increasing potential of the domestic demand, as the region still relies a lot on imports from ASEAN (20 per cent) and South America’s Mercosur (10 per cent). In addition, overlapping regional trade zones, trade barriers and inadequate infrastructures are still key limiting factors for the African economy.

Therefore, a much more integrated market providing a greater business environment, together with less regulatory issues, will be a focal point in the Africa agenda because it will stimulate African companies’ comparative advantages and attract more Foreign Direct Investment.

Despite facing these challenges, Africa demonstrates significant growth and development prospects for the future.

 

For more information:

Africa Still Rising

Tech Jobs for Africa

Global Growth – Still Made in China

What’s driving Africa’s growth

Then and Now: Reimagining Africa’s Future

 

 

 


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