Continent’s growth rate hit 5.4 percent over decade.
Even resource-poor countries posted healthy gains.
Volatility remains a risk to investment.
November 14, 2007 – After years of stop-and-start results, many African economies appear to be growing at the fast and steady rates needed to put a dent in the region’s high poverty rate and attract global investment.
The encouraging trend is shown in the World Bank Africa Development Indicators 2007 (ADI) released today. The report is based on more than a thousand indicators covering economic, human and private-sector development, governance, environment, and aid.
“Over the past decade, Africa has recorded an average growth rate of 5.4 percent which is at par with the rest of the world,” said Obiageli Ezekwesili, World Bank Vice President for the Africa Region . “The ability to support, sustain, and in fact diversify the sources of these growth indicators would be critical not only to Africa’s capacity to meet the MDGs [Millennium Development Goals on poverty, health and other issues], but also to becoming an exciting investment destination for global capital."
‘ Africa Has Learnt to Trade More Effectively’
Summing up some of the most encouraging findings of the report, John Page, Chief Economist for the Africa Region, said:
“Africa has learnt to trade more effectively with the rest of the world, to rely more on the private sector, and to avoid the very serious collapses in economic growth that characterized the 1970s, 1980s and even the early 1990s.”
Page said that what appears to be taking place in Africa since 1995 is “a mastery of the very difficult lessons of the 1980s, an improvement in macro-economic management, in structural policies, an integration with the rest of the world that has allowed African economies to move from having twice as many growth accelerations as growth collapses over the last 30 years.”
While ADI 2007 reported significant long-term gains for Sub-Saharan economies, it warned that the region remains volatile – a condition that has dampened investment. “Avoiding growth collapses is key to accelerating progress toward the MDGs in Africa,” Page said.
A revenue bonanza linked to skyrocketing oil prices has helped Africa’s seven biggest oil economies, which are home to 27.7 percent of the continent’s population. Rising prices of precious metals and other commodities have also benefited many other resource-rich African countries.
Resource-Poor Countries Also Showed Growth Gains
But a group of 18 resource-poor countries – home to 35.6 percent of Africa’s population – have done as well as some oil-rich countries, if not better, sustaining growth of more than 4 percent over the last decade.
Only politically turbulent Zimbabwe among Africa’s 17 slowest-growing economies posted negative growth.
The slowest-growing economies – home to 36.7 percent of the region’s population – are getting more fundamentals right, ADI 2007 found. These include better macro-economic management, greater investments in human resource development, and improvements in institutions and in the performance of the public sector.
Past pessimism about Africa’s ability to grow and compete with the rest of the world “does not arise from the failures of Africa enterprise and workers,” Page said. Rather, it “arises from the fact that the continent faces an infrastructure gap and a level of indirect costs that are anywhere from two to three times as high as those in competing economies in Asia.”
Exporting From Africa Is High Cost Compared to Other Trading Countries
The indirect costs of exporting from Africa (18 to 35 percnt of total costs) are exorbitant compared to exporting from China (8 percent of total costs). Despite these obstacles, African exports expanded by over 11 percentage points on average between 2003 and 2006, according to ADI 2007.
Finding an appropriate balance between investments in human capital and investments in physical capital will help sustain steady progress towards the MDGs and closing Africa’s infrastructure needs, the report said. The infrastructure gap is estimated at $22 billion a year or 5 percent of the region’s GDP.
Besides infrastructure, accelerating and sustaining growth requires improving Africa’s investment climate, spurring innovation, and building institutional capacity to govern well, ADI 2007 said.