Unlocking the Potential of Local Economies in the Continent

Africa’s gross domestic product (GDP) growth is expected to strengthen to 5% in 2016 improving from 4.5% this year. As the global economy remained slow and some African countries saw domestic problems of various natures, the 2014 growth was about 3.9% lower than predicted in last year’s African Economic Outlook (AEO).

West Africa achieved relatively high growth of 6% in 2014 despite its battle with the Ebola virus Nigeria’s growth of 6.3% came mainly from non-oil sectors displaying diversification of the economy. But Southern Africa’s growth fell below 3% as the major South African economy only grew by 1.5%.

Domestic demand has continued to boost growth in many countries while external demand has remained mostly inactive because of flagging export. Export values of goods were also decelerated by lower export prices. However the continent exports are expected to reinforce in the coming year as the world economy improves.

On the supply side, many African countries have improved their investment climate and conditions for doing business, which enhance long-term growth prospects. Benin, Côte d’Ivoire, the Democratic Republic of the Congo (DRC), Senegal and Togo made it to top ten countries worldwide with the most reforms introducing easier way of doing business.

The growth in 2014 was mainly driven by agriculture, industries, construction and services and manufacturing. Furthermore, modernisation and structural transformation, the process by which new and more productive activities were evidenced in some sectors. Improved economic policies, lower inflation and stronger budgets due to more practical economic policies supported by debt relief have improved macroeconomic stability and enhanced growth in many countries.

Governments are improving the business environment and promoting structural transformation towards more productive activities. This has helped some countries without oil resources, such as Ethiopia and Rwanda, to attain high annual growth of 8%. In the coming decades, changes in the global context, rapid population growth and growing social demands will create new opportunities and new challenges to which African policy makers will have to respond with innovative development strategies.

In addition, African economies will continue to face stiff competition on global markets, in terms of costs, quality of goods and services, and production potential. On the other hand, the rapid growth of Africa’s workforce will increase the pressure on labour markets. The workforce is expected to increase by 910 million people between 2010 and 2050, of which 830 million in sub-Saharan Africa and 80 million in North Africa. Hence creating more productive jobs and structural transformation, becomes even more pressing.

The estimated numbers of youth joining labour markets in 2015 are about 19 million in sub-Saharan Africa and 4 million in North Africa according to AEO. Over the next 15 years, the figures will be 370 million and 65 million respectively. The upcoming growth in Africa’s workforce represents two-thirds of the growth in the workforce worldwide.

To register ongoing economic growth political and social stabilities are prerequisites. But stability also depends on how the outputs of growth are shared. In this respect many African countries rank poorly. Among countries with average growth above 6% from 2001 to 2014, Ethiopia had the highest ranking with respect to inclusive growth. With Africa’s population set to double by 2050, unlocking the economic potential of the continent’s diverse regions will be vital to create economic growth and more job opportunities.

By Eden Sahle

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