Southern Africa West Africa
Central Africa East Africa
North Africa excluding Libya
2016f 2015e
2014 8
6 5 4 3 7
2
3.0
3.3
- 1
2.4 2.5
5.2 5.3 4.4
5.7
4.3 4.2 3.5 3.4
6.6 6.8
7.0 6.2
4.0 3.9 3.6
2.8
2017f
REAL GDP GROWTH (%)
Fig 1.15
YEARS
Figure 1.15 AFriCA’S grOWTH PrOSPeCTS BY SuBregiON, 2014–2017
SOurCe: eCA CALCuLATiONS BASeD ON uN-DeSA (2015).
NOTe: e = eSTiMATeS; f = FOreCASTS.
22
sectors, such as electricity, construction and tech-nology, in large infrastructure projects and in mining.
East Africa’s growth is set to lead the rest of the subregions, rising by 6.8 per cent in 2016 and 6.6 per cent in 2017, bucked by robust growth in coun-tries such as Ethiopia, Rwanda and Tanzania—this despite low commodity prices, rising imports of capital goods for infrastructure (instead of pro-ductive capacities) and the aftermath of the recent drought. Central Africa is expected to see growth rise to 4.3 per cent in 2016, driven by investment in energy and infrastructure and strong service sector performance.
In North Africa, growth is forecast to increase to 4.3 per cent in 2016 before marginally declining to 4.2 per cent. Improved political and economic stabil-ity in the subregion—and a subsequent increase in business confidence (especially in Egypt and Tunisia), in inflows of external aid and in large infrastructure projects—will buttress growth. But continuing political challenges in Libya will con-tinue to affect the subregion’s political and eco-nomic governance.
RISKS
The global economy’s weak recovery affects Africa’s performance through trade, investment and remittances. Besides China’s economic decel-eration, the Eurozone’s subdued (though improv-ing) performance is a concern. Likely solid perfor-mance by India and Africa may, however, buffer the trade impact. Low oil prices will hurt hydrocar-bon-exporting countries, but on balance may be positive for Africa as a whole. The depreciation of major African currencies, while possibly beneficial for exports (see the earlier discussion, “Exchange rates depreciated, though generally failed to lift exports”) is likely to put pressure on monetary sta-bility through imported inflation.
FDI flows are expected to remain steady at about 3 per cent of GDP, but the Federal Reserve’s mon-etary policy presents a risk over the medium term.
Low interest rates have increased speculative investors’ appetite for emerging markets, and US policy rate rises may divert some flows back to mature markets.
Regional risks include weather-related shocks.
Drought in East Africa and some parts of Southern Africa could hurt agriculture, which is still the main employer in most African countries (box 1.3).
Poor harvests would also increase risk of inflation through higher food prices. And the drought may affect the hydropower generation capacity, threatening the greening of Africa’s industrializa-tion as economic agents switch to thermal power.
Security in some African countries remains an issue, especially in Egypt, Kenya, Libya and Tunisia, where security concerns have hurt tourism receipts. Boko Haram in Western Africa and political unrest in, for example, Burkina Faso and Burundi, may disrupt domestic economic activity and reduce foreign investment.
Low oil prices will hurt hydrocarbon-exporting countries, but on balance may be positive for
Africa as a whole.
STRUCTURAL TRANSFORMATION AND GREEN GROWTH—IT MUST BE
“WHEN?” NOT “IF”
African economies face risks that require special attention from policymakers, including turbu-lence in the global economy. Africa’s
vulnerabil-ity calls for a rethink of its broader development strategy. Despite healthy economic growth (often higher than elsewhere in the world over the last decade), it has rarely been inclusive: the number of Africans in absolute poverty has risen and ine-quality remains a major issue. And because Africa’s growth has been largely tied to exploiting non-re-BOX 1.3 DrOugHT iN SOuTHerN AFriCA AND THe HOrN OF AFriCA—iMPACT ON grOWTH
SOurCe: WOrLD BANK (2015b).
Both the direct and indirect impacts of climate change are felt in many parts of the world, including Africa. With El Niño’s recent increase in intensity, high temperatures are likely to continue in 2016, affecting most of Africa’s large and fast-growing economies.
The Horn of Africa and Southern Africa, where some countries have grown fast over the past 15 years (box figure 1.2), are experiencing severe drought and may well continue to do so with rising carbon emissions (Oxfam, 2015). South Africa, Africa’s second-largest economy, declared five of its nine provinces drought-disaster areas in late 2015. In Ethiopia—the fastest-grow-ing economy in the world (with Turkmenistan) in 2014, at 10.3 per cent—severe drought is decimatfastest-grow-ing crops, livestock and water, leaving 4.5 million people in need of food relief in August 2015.
The impact of the drought is likely to hurt African economies because 94 per cent of their agricultural output is rain fed, and the major source of energy generation is hydroelectricity (WWF, 2011). Forecasters predict little rain in the months ahead.
-4 -2 0 2 4 6 8 10 12 14
Equatorial Guinea Ethiopia Chad Sierra Leone
Nigeria Rwanda Mozambique Angola Zambia Uganda Tanzania Ghana Burkina Faso Cabo Verde Sudan Sao Tome and P
rincipe Liberia Namibia
Congo, Rep. Mauritania Congo, Dem. Rep. Niger Botswana Morocco Kenya
Benin Mali Malawi Lesotho Egypt, Arab Rep.
Mauritius Djibouti Senegal Camer
oon Libya
Algeria Tunisia
Gambia, The Burundi South Africa Seychelles Togo Madagascar Comoros Guinea-Bissau Guinea Gabon Swaziland Cote d'Ivoire Eritrea Central African Republic Zimbabwe South Sudan Somalia
GDP GROWTH RATES (%)
BOX Figure 1.2 AVerAge ANNuAL gDP grOWTH, 2000–2014
24
newable natural resources—with minimal value added and employment generation—sustainable growth has been undermined. Services dominate African economies’ valued added as a share of GDP (figure 1.16).
These three strands—macroeconomic vulnerabil-ity, social inequality and natural resource domi-nance—weave into the argument that industrial-ization is critical for Africa’s structural transforma-tion and efforts to create jobs, raise value added and increase incomes. Current developing-coun-try models of economic growth, as exemplified
by China and India, rarely account for the social and environmental externalities that exacerbate poverty in developing countries, Africa included.
Given the commodity domination of its exports, its drive for industrialization and structural trans-formation, and its greater energy needs, Africa’s imperative is to adopt green growth.
A green economy is considered to improve human well-being and social equity, while sharply curtail-ing environmental risks and ecological scarcities.
It integrates economic, social and environmental policies and focuses on new opportunities for
eco-GDP VALUE ADDED (%)
60
50
40
30
20
10
0
14.84 15.05 14.93 14.97 14.78 14.93 14.76 13.72
29.72 31.25 30.43 29.77 29.61 29.32 29.32 29.77
50.83 51.86 51.39 52.49 53.52 53.98 54.30 55.34
2010 2011 2012 2013 2014 2015e 2016f 2017f
Agriculture VA Africa Industry VA Africa Service VA Africa
YEARS
SOurCe: eCA CALCuLATiONS BASeD ON eiu (2015).
NOTe: e = eSTiMATeS; f = FOreCASTS.
nomic growth that reduce pressure on the quality and quantity of natural capital systems (UNEP, 2011).
A green growth pathway will put Africa’s devel-opment on a more robust and sustainable foun-dation, since it not only accommodates growth of the economy but also prioritizes the need for restoring or increasing environmental and social assets. Environmental protection’s contribution to economic growth is relatively straightforward to analyse, enhancing as it does the quality of natural capital—a critical input into production
processes—and increasing income. As Africa’s GDP grows, the continent will have to better manage its scarce natural resources, such as water and fertile land. The economic system cannot be separated from the environment, so the benefits of rapid industrialization have to be seen as part of wider ecological and social systems. (Social trends are reviewed in the next section.) Modern economic growth must thus cease stoking envi-ronmental pressures. Box 3.1 in Chapter 3 outlines the main concepts and definitions surrounding Industrialization, Structural Transformation, Greening and their inter-linkages.