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Africa: Economic Outlook
AfricaFocus Bulletin
Jan 15, 2011 (110115)
(Reposted from sources cited below)
Editor's Note
According to the World Bank's Global Economic Prospects 2011,
released on January 13, the GDP growth rate for Sub-Saharan Africa
is projected at 4.7% for 2010, from a 1.7% low in 2009, increasing
to 5.3% in 2011 and 5.5% in 2012. This compares to negative growth
for the United States in 2009 (-2.6%) and weak recovery in
2010-2012 (2.8%, 2.8%, and 2.9%).
Equally notably, the best growth rates were for countries other
than the region's largest economic power South Africa. Rates for
South Africa, with a negative rate of -1.8% in 2009, are projected
at 2.7% for 2010, 3.5% in 2011, and 4.1% in 2012. Other countries in the
Sub-Saharan region, by contrast, grew an average of 5.8% in 2010,
with 6.4% and 6.2% rates projected for 2011 and 2012 respectively.
The World Bank notes that the recovery is due in large part to
trends in commodity prices, particularly for metals and minerals as
well as for oil. But it also stresses the significance of domestic
demand and of expanding investment in the region, including in
manufacturing and telecommunications service.
As readers of AfricaFocus Bulletin are well aware, growth in GDP is
hardly an adequate measure of sustainable economic advance and even
less of equitable human development. Nor does the growth trend
extend to all countries. But, the World Bank report notes, the
growth trend extends to quite a few countries, including Nigeria,
Angola, Kenya, the Republic of Congo, Ethiopia, Mozambique,
Botswana, Zambia, Malawi, and Tanzania.
This AfricaFocus Bulletin contains excerpts from the report's
regional annex on Sub-Saharan Africa. For the full text and other
resources on Global Economic Prospects 2011, see
http://www.worldbank.org/globaloutlook
For previous AfricaFocus Bulletins on economic issues, visit
http://www.africafocus.org/econexp.php
Additional Note
Remember to visit the AfricaFocus Facebook page for more frequent
updates on a variety of subjects. Recent links posted include
articles on South Africa joining the BRIC group, and a background
analysis on Tunisia from Al Jazeera, which has played a critical
role in covering the events there.
Go to: http://www.facebook.com/pages/AfricaFocus/101867576407
Announcement
Books by AfricaFocus Editor now available as Google E-Books, at
modest prices
Apartheid's Contras: An Inquiry into the Roots of War in Angola and
Mozambique, 1994
http://books.google.com/books?id=iq970FthE0IC
Imperial Network and External Dependency: The Case of Angola, 1972
http://books.google.com/books?id=iDk1XRE7oNAC
King Solomon's Mines Revisited: Western Interests and the Burdened
History of Southern Africa, 1986
http://books.google.com/books?id=hInY3fym7IkC
Operation Timber: Pages from the Savimbi Dossier, 1988
http://books.google.com/books?id=LY2LnKwXdcoC
Portuguese Africa and the West, 1974
http://books.google.com/books?id=6JH9Ix3qfLcC
No Easy Victories: African Liberation and American Activists over
a Half Century, 1950-2000
Not yet available as e-book, but excerpts are available and print
edition available at discount through
http://www.noeasyvictories.org
++++++++++++++++++++++end editor's note++++++++++++++++++++
Global Economic Prospects January 2011: Regional Annex
Sub-Saharan Africa
World Bank
January 13, 2011
[Excerpts: for full report, including tables and figures, visit
http://www.worldbank.org/globaloutlook]
Recent developments
GDP in Sub-Saharan Africa is estimated to have expanded by 4.7
percent in 2010, up from 1.7 percent in 2009. Excluding the
region's largest economy, South Africa, growth in the region is
estimated at 5.8 percent in 2010, up from 3.8 percent in 2009.
While a resilient demand environment supported growth during 2009,
the recovery in 2010 was bolstered by the external sector, through
stronger export volumes, rising commodity prices, higher foreign
direct investment and a recovery in tourism.
After falling sharply, regional export volumes rebounded during the
second half of 2009 and into the first half of 2010, peaking in
March 2010 at 13.6 percent above pre-crisis volumes. In line with
the global slowing in trade, exports declined toward the middle of
the year and as of July 2010, export volumes were only 2.2 percent
above their pre-crisis levels. Excluding South Africa, whose
exports were affected by the rand appreciation and labor strikes,
export volumes in the rest of the region were 10 percent above
pre-crisis levels in July.
Export volumes rebounded most strongly for metal and mineral
exporters (up 34.7 percent, 18.2 percent for oil exporters and only
5.8 percent for agricultural commodity exporters. Partly as a
result, growth in 2010 was strongest among mineral and metals
exporters (6.5 percent), somewhat less strong among oil exporters
(5.9 percent), and a weaker but nevertheless robust 5.7 percent
among agricultural exporters.
Notwithstanding the rebounding in volumes the value of regional
exports remains 26 percent below its August 2008 levels, because as
they are yet to regain the extraordinary high levels of 2008.
However, this mainly reflects weaker oil prices, as metals and
mineral prices have recovered much of the declines endured during
the crisis. As a result, while oil exporters revenues are off 40
percent, agricultural exporters were at their August 2008 level,
and metal and mineral exporters were 4.8 percent above that
benchmark.
Foreign earnings were also boosted by South Africa's hosting of the
FIFA World Cup. Partly as a result, Sub-Saharan Africa, the only
region to have experienced an increase in tourist arrivals in 2009,
sustained that growth trajectory with a 16 percent increase in
international arrivals during the first half of 2010 (UN World
Tourism Organization, 2010). Tourism revenues were also up in major
tourist destinations in the region (Cape Verde, Kenya Mauritius,
Seychelles, and Tanzania).
Foreign direct investment is the most important source of private
capital flows to sub-Saharan Africa. After declining by 12.3
percent in 2009, FDI recovered by 6 percent to $32bn in 2010.
Indeed, foreign direct investment to the region has risen in six of
the past eight years, reflecting increased investment interest in
the region (UNCTAD estimates that the rate of return of FDI in
Africa is the highest globally).
The bulk of this investment (40 percent) went to the three largest
economies: South Africa, Angola and Nigeria. Nonetheless, over 50
percent of FDI goes to the smaller countries in the region, in
marked contrast with portfolio flows, 90 percent of which go to the
region's largest economies. Supported by the rise in metal and
energy prices in recent years most of these flows went to the
extractive industries sector. Beneficiaries of these flows cover a
diverse range of countries including middle income (Congo, Ghana),
low income (Mozambique, Zambia, Niger), post-conflict (Liberia,
Sierra Leone) as well conflict countries (Guinea).
However, although most of the dollar value of FDI goes to the
extractive sector, the manufacturing sector accounted for 41 per
cent of the total number of greenfield investment projects during
2003-2009, including, for example, metals (9 per cent of the
total), transport equipment (7 per cent) and food and beverage (6
per cent) (UNCTAD, 2009). Besides manufacturing the services sector
is also another large recipient, particularly telecommunications,
transportation and banking services. In June 2010, for instance,
Bharti Airtel, an Indian company, completed the acquisition of
Zain's mobile operations in Africa for $10.7bn, one of the largest
acquisitions in 2010. Even though developed countries are the main
source of foreign direct investment to the region, developing
countries (including from elsewhere within Africa) are increasing
their share of foreign direct investment within Africa.
...
Economic ties between Sub-Sahara Africa and Asia have been
strengthening in recent years, and as a result, a number of African
countries have benefitted from access to loans from Asian
countries. Though overall totals are not available, some notable
deals include: a September 2010 framework agreement between the
Government of Ghana and the Chinese Development Bank and Chinese
Exim Bank amounting to over $13bn; a loan between the Democratic
Republic of Congo of up to $6bn with China in 2010. The majority of
these loans were towards the financing of infrastructure-related
projects such as roads, railways, power plants and economic zones.
The Forum on Chinese and Africa Co-operation reports that since
2000 Chinese companies have built 60,000km of road and 3.5 million
kw in generating capacity of power plants in Sub-Saharan Africa.
By the end of October portfolio flows to South Africa, the most
liquid market in the region, had more than doubled to $6bn. They
have supported a recovery in share prices and with it underpinned
household consumption due to the increased wealth effect. The
inflows have also accounted for the appreciation of the rand (8
percent against the dollar between January and December 2010, and
30% real effective appreciation since January 2009). The
appreciation, while moderating domestic price increases has also
reduced the competitiveness of South Africa's exports, in
particular the manufacturing sector.
Thanks to the ongoing recovery in the U.S and in Europe, remittance
flows to Sub-Saharan Africa, which remained nearly flat during the
crisis, registered a modest 1 percent gain in 2010 to reach $21
billion. Remittance flows are important in supporting household
consumption in a number of Sub-Saharan African countries,
accounting for up to 22 percent of GDP in Lesotho and about 10
percent in Cape Verde, Senegal and Togo.
Improving domestic conditions also supported the rebound.
Despite improved external conditions, strong domestic demand -
partly reflecting improved incomes due to higher commodity prices
- meant that imports increased faster than exports and the
contribution of net exports to GDP growth was negative in most
Sub-Saharan countries, subtracting some 0.8 percent from aggregate
2010 GDP growth. However, the rebound is not a simple commodity
story. Between 2000 and 2008 less than one third of Sub-Saharan
African GDP growth was due to natural resources, with the bulk
reflecting the rapid expansion of wholesale and retail trade,
transportation, telecommunications, and manufacturing.
Part of the recent resilience reflects the implementation of
countercyclical domestic demand policies in a number of countries.
Many countries with adequate fiscal space (e.g. Kenya, Nigeria and
Tanzania) went ahead with infrastructure programs despite the
crisis in part because of multilateral and bilateral budgetary
support and in part because good macroeconomic management and
earlier debt relief meant that they had the fiscal space to pursue
these plans despite the global recession. Indeed, though shut out
from international capital markets, during the recession, many sub
Saharan African governments were able to borrow from their domestic
securities market to finance their fiscal plans.
As a result fiscal deficits in the region surged to 5.5 percent of
GDP in 2009 from a surplus of 1 percent in 2008. Since then, the
ongoing recovery is helping to bring down fiscal deficits. In 2010
fiscal deficits are estimated to have declined to 4.3 percent of
GDP, with the decline being most marked among oil exporting
countries (a fall from 6.8 percent in 2009 to 3.0 percent in 2010).
Favorable weather conditions in Eastern and Southern Africa
supported bumper harvest in a number of countries in the region,
thereby providing support to household incomes as the agricultural
sector remains the largest employer in most countries. For a number
of countries in the region (e.g. Malawi and Zambia) the extension
in farmer coverage of government input support programs contributed
to favorable maize harvests. In West Africa, floods destroyed
agricultural output in Benin, Togo and parts of Nigeria. On the
other hand, a severe drought across the Sahel left many households
in Niger insecure as crop yields failed.
...
With over 40 countries in the region it is a challenge to
categorize growth performances within income groupings, regional
blocks, and resource content of exports since performances remain
heterogeneous even across each of these sub groupings. The
following section will focus on recent growth performances among
the largest and the fastest growing economies in the region.
In South Africa, the largest economy in the region, output in
first, second and third quarters expanded at seasonally adjusted
annualized rates of 1.7 percent and 3.1 percent and 2.6 percent
respectively. Growth for 2010 is forecast at 2.7 percent, supported
by a firming in domestic demand, reflected in the pick-up in
wholesale and retail trade, and the recovery in house prices. ...
Nigeria's economy has continued on its robust growth path. This
strong performance continued into 2010, with the first and second
quarters registering 7.4 percent and 7.7 percent annualized growth.
Growth in 2010 is expected at 7.6%. Though the rebound in the
global economy helped, domestic developments were major factors.
The relative peace in the Niger Delta region has boosted crude oil
and natural gas production, while the non-oil sector has continued
to grow strongly (contributing 70 percent of growth in 2009 for
example). ...
Angola's GDP is estimated to have increased 3.0 percent in 2010, up
from the 0.7 percent growth recorded in 2009. With oil accounting
for over 50 percent of the Angolan economy, increased incomes from
the stronger oil prices has underpinned the acceleration. However,
large government payment arrears to the private sector had strong
negative spillover effects in the non-oil economy, limiting
economic growth in 2010. ...
The Kenyan economy returned to higher growth, thanks to a rebound
in the agricultural and industrial sectors. The Kenyan economy is
estimated to have grown 5.0 percent in 2010. The rebound in the
agriculture sector has been supported by favorable weather
conditions and an increase in the area under irrigation.
Agriculture exports, particularly tea (up 50 percent in volume
terms), has supported the upturn - although horticultural exports
were hampered by the weak recovery in Europe and the Iceland
volcanic ash crisis in April 2010 - which cut into time-sensitive
deliveries.
Counter cyclical fiscal policy helped firm domestic demand in 2010,
with government investing heavily in domestic infrastructure. The
passing of the new constitution and the strengthening of regional
integration efforts in East Africa has created new opportunities
for businesses in Kenya. Remittance flows rose to $1.8bn in 2010.
This amount was higher than each of the traditional foreign
exchange earners: tourism, tea and horticulture. Kenya continues to
benefit from the productivity gains that growth in its dynamic
information and communications technology sector brings to its
economy (e.g. banking, trade and health services etc). The ICT
sector alone is estimated to have accounted for 13 percent of
growth in Kenya's economy over the past decade.
Boosted by increased oil production and recovery in international
oil prices, GDP growth for 2010 in the Republic of Congo is
estimated at 10.3 percent, making it the fastest growing economy in
sub-Saharan Africa in 2010. ...
Unlike other fast growing Sub-Saharan African economies, where
growth has been supported by the minerals sector, Ethiopia's robust
growth performance over the past couple of years, including a 9
percent increase in GDP during 2010, has been driven by the
agricultural sector. The sector has benefitted from continuing
government investment in roads, power projects and marketing
networks, which has helped bring more small-holder farmers into the
market. Generous incentives have also supported large scale
commercial agriculture ventures, including in agro-processing. ...
Thanks to the recovery in exports, increased inflows of foreign
direct investment and continuing donor support Mozambique's economy
is estimated to have grown 7.8 percent in 2010. Export proceeds for
the first six months of 2010 were up by 11 percent compared with
the same period in 2009. This was mostly due to
an increase in world market prices for aluminum, which accounts for
56 percent of Mozambique's exports. ... high-inflation has cut
into private consumption spending, as has currency depreciation
viz-a-viz the rand (South Africa being a major source of imports
(particularly food imports). In September the government reversed
an earlier decision to increase the price of bread, other basic
goods and utilities due to riots.
Botswana was one of the middle income countries in sub Saharan
Africa that was severely hit by the crisis in 2009, due to the fall
in diamond prices, its principal exports. The recovery in diamond
prices has spurred a strong rebound in mining activity, which
accounts for some 36% of GDP. Growth in 2010 is estimated at 7.8%
in 2010. ...
A rebound in copper prices, bumper harvests, inflows of foreign
direct investment and a strengthening services sector contributed
to the robust 6.4 percent growth in Zambia for 2010. With the
dollar price of copper rising 54 percent during the period
January-November 2010 versus the same period in 2009, copper output
increased to 720,000 metric tons the highest level recorded since
the 1970's. Overall exports values increased by 28 percent for the
first half of 2010. Further, thanks to a government fertilizer and
seed subsidy program and favorable weather, maize harvest increased
42.1 percent in the 2009/10 season. ...
In spite of the slowdown in tobacco production, the main foreign
exchange earner, the Malawian economy is estimated to have grown by
6.8 percent in 2010 on account of bumper maize harvests, aid
inflows and rising uranium exports. Subsidies on fertilizers and
hybrid seeds to farmers supported the boost in maize harvests.
Prudent macroeconomic policies have also kept a lid on inflation,
despite depreciation pressures.
Tanzania is expected to record a solid 7.0 percent growth in 2010,
thanks to favorable developments in the services and minerals
sector. With the recovery in the global economy, merchandise trade
and tourism rebounded. Supported by developments in the gold
sector, by August 2010, merchandise exports had reached $3.4bn up
from the $2.5bn recorded in the same period in 2009. ...
Medium-term outlook
Sub-Saharan Africa is projected to grow at 5.3 percent and 5.5
percent in 2011 and 2012 respectively. Excluding South Africa,
growth is projected at 6.4 percent and 6.2 percent for 2011 and
2012 respectively, making sit one of the fastest growing developing
regions. Growth is expected to be driven by continued recovery in
the global economy. Developments in domestic demand will continue
to play a dominant role in supporting the growth process
particularly through productivity spillovers from ongoing
investments in telecommunications, banking, energy and
transportation services. These projects are being financed through
foreign and domestic sources. Over the forecast horizon an
increasing number of Sub-Saharan African countries are likely to
raise finance in international capital markets. Countries that
have indicated an interest in doing
so over the forecast horizon include Nigeria, Angola, Kenya,
Senegal, Tanzania, and Zambia.
...
The dollar value of remittances into Africa are expected to grow by
4.5 percent and 6.7 percent in 2011 and 2012 supporting the
strengthening of household consumption.
Individual growth performances will vary across countries. Among
the larger economies, South Africa should benefit from an improving
global economy, ongoing public investment and firming up in
consumer demand. South Africa's economy is projected to expand by
3.5 percent and 4.1 percent in 2011 and 2012 respectively. With
R811bn (rands) targeted to improve infrastructure over the next
three years, public investment is likely to provide support to the
economy, including employment. However, higher growth levels would
likely be needed to significantly reduce the high levels of
unemployment (25.3 percent).
Nigeria is expected to continue its strong growth performance in
2011, with GDP expanding 7.1 percent before moderating in 2012 to
6.2 percent closer to its medium term trend growth rate. The
non-oil sector should be a major driver of growth, benefitting from
new offshore developments and an improved security situation in the
Niger Delta area. The scaling-up of government spending on
infrastructure will also reinforce growth prospects. However, the
upcoming elections may however lead investors to hold-off
investments until a peaceful transition is in place.
Notwithstanding efforts to diversify the economy from the oil
sector, growth prospects over the forecast horizon in Angola will
continue to be tied to developments in the oil sector. With oil
prices projected to be broadly stable over the forecast horizon,
the fiscal policy should cease to be a drag on growth. As a result,
GDP is expected to expand by 6.7 and 7.5 percent in 2011 and 2012,
respectively - potentially resulting in increased inflationary
pressures.
Supported by increasing intra-regional trade and productivity
benefits of ongoing infrastructure investments, Kenya's outlook
remains favorable, with growth projected above trend at 5.2 and 5.5
percent in 2011 and 2012. However, droughts could hinder growth in
the agriculture sector and private investment spending may also
slow in the run-up to the 2012 election.
As oil production begins, Ghana is projected to be the fastest
growing economy in sub-Sahara Africa, with a growth rate of 13.4
percent in 2011 and 10 percent in 2012. A recent revision to
Ghanaian GDP data has raised estimates of its income 60 percent,
suggesting that it is now a lower-middle-income country. Outside
the oil sector Ghana's economy will still register strong growth,
particularly in construction services as large infrastructure
projects are carried out. The inflows from the oil sector, if not
managed prudently, could discourage the incentive structure for
agricultural exports.
Risks to the outlook
The main downside risk to the growth prospects of Sub-Saharan
African countries stems from a possible faltering in the global
economic recovery. Most countries have depleted the fiscal space
they had created during the pre-crisis period, and have not had
time to rebuild it. As a result, few would be able to conduct the
kind of counter-cyclical policies that helped limit disruption
during the past crisis should there be an early faltering of the
recovery process.
...
With the agriculture sector being the largest employer in the
region and contributing a large share of GDP in many countries in
the region, unfavorable weather conditions, such as wide spread
droughts, could threaten growth prospects by reducing output as
well as dampening domestic demand, as food prices rise. A related
risk is a spike in the prices of agricultural food products on
international markets. Though many staples in the region are
non-traded and their markets are mainly domestic in nature, some
key commodities such as rice, flour, sugar and vegetable oil are
imported in large quantities. As a result, a significant rise in
the local currency cost of these internationally traded commodities
could have a significant effect on the incidence of poverty and on
growth prospects. Similarly, for oil importing countries, a spike
in oil prices could lead to macroeconomic instability with its
deleterious consequences on economic growth.
Over the forecast horizon, elections are scheduled to be carried
out in at least a third of Sub-Saharan African countries. Though
the past decade has seen an increase in the smooth transition of
power in many countries in the region, there still remain a number
of instances where the political developments leading to the
elections and in its aftermath have been a deterrent to economic
activity. In 2010 for instance, growth prospects in Madagascar,
Comoros, Cote d'Ivoire and Guinea were severely dented by political
unrest. Hence the evolution of the political cycle over the
forecast horizon will be consequential to individual country growth
outcomes.
...
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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