May 23, 2017
The GDP growth rate in Africa slows 2.2 percent due to weak global economic growth and continued fall in commodity prices despite forecast of economic expansion by 4.3 percent in 2018.
THE 52nd annual general meetings of the Africam Development Bank began on Monday, May 22, with the launch of the African Economic Outlook 2017. The special theme of the publication is “Entrepreneurship and Industrialisation”. Produced by the African Development Bank, Organisation for Economic Co-operation and Development and the United Nations Development Programme, the publication aims to promote up-to-date evidence evidence and analytics to support Africa’s decision makers.
It stated that Africa’s real GDP growth slowed down to 2.2 percent, mainly due to the continued fall in commodity prices and weak global economic growth. East Africa was the fastest growing region at 5.3 percent real GDP growth, followed by North Africa at 3 percent. Growth in other regions was anemic, ranging from a low of 0.4 percent in West Africa, dragged down by the recession in Nigeria, to 1.1 percent in Southern Africa, with South Africa, the region’s largest, posting only 0.3 percent growth.
With dynamic private sectors, entrepreneurial spirit and vast resources, Africa has the potential to grow faster and more inclusively. The continent’s average growth is expected to rebound to 3.4 percent in 2017, assuming that the recovery prices is sustained, the world economy is strengthened and domestic macroeconomic reforms are entrenched. In 2018, growth is expected to consolidate, expanding by 4.3 percent.
At the launching, Akinwumi Adesina, president of the African Development Bank, AfDB, noted that slowdown in the economy was not the feature of all African economies. “The outlook for African economy improves due to positive economic headwinds. Strong demand is driving African economic growth. For most of African countries, it is most important that the growth is driven by investment,” Adesina said, adding that “the myth that African economy is driven by resources is not true”. According to him, Africa’s growth resilience is also driven by improving business environment with all regions recording growth deceleration with East Africa continuing to lead the pack with an estimated growth of 5.3 percent.
Also, the African Economic Outlook 2017 said the composition of total financial flows to Africa reflects the dynamism of its domestic markets. In 2017, inflows are projected at almost $180 billion. Remittances will reach $66.2 billion, up from $64.6 billion in 2016. Foreign direct investment inflows are expected to reach over $57 billion in 2017, supported mainly by greenfield investments from emerging economies. Tax revenue remains the most important source of domestic financing in African countries but has slowed with the decline in commodity prices. African countries will need to explore other options of mobilising domestic resources to minimise vulnerability of revenues to volatility in commodity prices.
Unlocking Africa’s less volatile sources of growth to spur human development, the publication said would require greater investment in human capital – such as in health, education and skills – stronger capacities to diversify financing and more effective efforts to promote structural transformation. Despite a decade of progress. 54 percent of the population in 46 African countries are still living in poverty. It is essential to double efforts to empower Africans with the necessary skills to promote development from the bottom up, driven by domestic innovation and investment. This is why the African Economic Outlook focuses this year on the role of entrepreneurs in Africa’s industrialisation.
“We need to help African countries address the challenges of low human development and social exclusion, and this is what we are doing. Industrialisation is one of the High 5 priority areas of the African Development Bank. It is also in line with the Africa Union’s proclamation of industrialisation as the main strategy to promote inclusive economic transformation, and it is the ninth Sustainable Development Goal,” Adesina, Angel Gurria, secretary general, OECD, Paris, and Helen Clark, Administrator, United nations Development Programme, said in a jointly signed editorial in the publication.
it noted that in July 2016, the United Nations General Assembly proclaimed 2016-25 as the Third Industrial Decade for Africa; under China’s leadership. The G20 also agreed in September 2016 to support Africa’s industrialisation as part of its Action Plan on the 2030 Agenda for sustainable Development.
To bolster this momentum, this year’s African Economic Outlook proposes several concrete steps for action, stating that Africa’s industrialisation will differ from the experience of other world regions. First, the 54 African countries are diverse and will thus follow various pathways to industrialisation. Second, industrialisation will not rely solely on the manufacturing sector, which remains modest at 11 percent of the continent’s GDP. Twenty-first century industrial policies can target additional sectors with high-growth potential, such as agro-processing ad services with higher value added. “Third, policies must promote “green industrialisation”, as technological and market changes have made it possible to achieveindustrialisation with lower environmental costs. Greater efforts should also be made to ensure that green infrastructure is developed and is accessible to firms and citizens. Fourth and most importantly, Africa’s industrialisation strategies should therefore leverage Africa’s booming entrepreneurs.,” it said.
Also, it states that that the entrepreneurial culture is vibrant with about 80 percent of Africans viewing entrepreneurial culture as vibrant with about 80 percent of Africans viewing entrepreneurship as a good career opportunity. The continent has the highest share in the world of adults starting or running new businesses, but often in sectors where productivity remains low. New industrialisation strategies should focus on leveraging this dynamism and targeting the continent’s fast-growing private enterprises which have potential to create quality jobs.