The region’s economy is booming, but investment in infrastructure is needed for this to continue, writes Steve Cameron
Africa’s economy is experiencing a resurgence. Over the past couple of years the continent’s economic growth has exceeded the global average.
Driven by oil and mineral exports from West Africa, economic growth averaged 5% over the past couple of years, and is forecasted to grow by 4.4% over the next 20 years. Considering the pace of change in West Africa right now, this may seem somewhat conservative. The region comprises a diverse group of countries with widely differing engines of economic growth, and in some countries double digit growth rates in GDP have been witnessed. As per advanced estimates from the IMF, this region witnessed a CAGR of 19% since the beginning of this decade. The economic performance of individual countries, however, fluctuates from year to year for a number of reasons. Over the last few years, crisis control measures, improved domestic governance and a favourable international environment seem to have smoothed out previously wild fluctuations of annual growth output in most countries.
The overall economic performance of countries in West Africa has therefore been encouraging, with nearly all recording a positive annual percentage output change, despite the effect of the appreciation of the euro that adversely affected Franco-zone countries. In particular, Angola has averaged the highest growth rates, predominantly due to rapid development of oil and diamond output. Accounting for 56% of GDP and 95% of export earnings, Angola is exceptionally dependent on oil, and it became a member of Opec in January 2007. High oil prices and growing output from new fields is driving GDP growth, which reached 14.8% in 2006 and is expected to remain high at 27% in 2007 and 17.3% in 2008. Other economic activities account for a negligible share of overall growth and export revenues. However, some impact from the oil boom is percolating through to the broader economy. Nigeria, Ghana and Burkina Faso have also recorded impressive growth rates of over 5% in the past few years. In particular, the results for Ghana seem to indicate an accelerating trend. The implementation of the Growth and Poverty Reduction Strategy II (GPRS) is seeing desired results in Ghana. Real GDP growth reached 6.2%. Until recently, growth was driven largely by the agricultural sector, but in the recent past, industrial and services sectors have also played a significant part. Industrial activity accelerated in 2006 with a growth rate of 7.3%, and was primarily led by a 9% expansion in gold production. As a share of GDP, the industrial sector improved from 24.7% in 2005 to 25.4% in 2006.
Nigeria has benefited both from the high world price of oil and the efficiency gains resulting from economic reforms. Real GDP growth rate averaged 6% during the period 2002-06. Disruptions in oil production in the Niger Delta slowed growth from 10% in 2003 to 6.5% in 2005 and 5.3% in 2006. On the other hand, non-oil sector GDP grew by 8.9% in 2006, up from 8.6% in 2005. The outlook for the Nigerian economy is positive, largely due to increased oil production, hope that stability is restored in the Niger Delta, and to an anticipated increase in public investment on infrastructure. Trade has a strong linkage with GDP, and this is especially the case in West Africa where 40% of the GDP comprises exports, and where exports essentially comprise the raw materials trades. In Africa, containerisation, in particular, has grown more than three times compared with economic growth. It is growing in Africa at the pace of more than 10% annually, but remains relatively low in West African ports so that a commodity, which would be shipped in a container from a Far Eastern or from a European port, may still be carried in breakbulk from an African port. Large investment in securing supplies of raw materials by the Far East is seeing Africa witness strong economic growth. As this translates into growing trade and as Africa links in with global trade, low levels of container penetration could pose a significant challenge. cs
