The World Bank said on Wednesday the economic growth in Sub-Saharan Africa remains strong and is poised for lift-off after growing at 4.9 percent in 2011, just shy of the pre-crisis average of 5 percent.
Excluding South Africa, which accounts for over a third of the region’s GDP, growth in the rest of region was 5.9 percent, making it one of the fastest growing developing regions, a new Bank report on Africa’s economy says.
“Over a third of countries in the region attained growth rates of at least 6 percent, with another 40 percent growing between 4 – 6 percent. Among fast- growing economies in 2011 were resource-rich countries such as Ghana, Mozambique, and Nigeria, as well as other economies such as Rwanda and Ethiopia, all posting growth rates of at least 7 percent in 2011,” the report says
“In view of the turbulence that has beset the global economy in the last five years, many would be right to think that the prospects for Africa are terrible. But as this issue of Africa’s Pulse shows, African economies continue to show resilience and some of the fastest-growing economies in the world are now in Africa…”says Obiageli ‘Oby’ Ezekwesili, The World Bank’s Vice President for Africa, and a former Nigerian Minister of Mineral Resources.
He says the urgent agenda remains sustaining the macroeconomic reforms while accelerating the structural reforms that will deliver the right quality of growth that creates jobs and raises incomes on the continent.
However, the new report―Africa’s Pulse, a twice-yearly analysis of the issues shaping Africa’s economic prospects―also says that theEuro zone debt crisis and tighter domestic policies in some large developing countries pushed African exports lower in late 2011.
Metal and mineral exporters (e.g. Zambia, Niger, and Mozambique) and cotton exporters (e.g. Benin and Burkina Faso) were among the hardest hit in the three months ending in November 2011. Given the recent strengthening of other commodity prices in 2012, export values for both agriculture and metal and mineral exporters may already have started expanding.
In a significant development, the World Bank says that overall capital flows to Sub-Saharan Africa rose by $8 billion in 2011 to $48.2 billion. Foreign direct investment, which accounts for about 77 percent of all capital flows to the region, contributed to about 83 percent of the increase.
Recent foreign direct investment to the region has been spurred by increased global competition for natural resources, higher commodity prices, robust economic growth and a fast rising middle class. The region is increasingly being recognized as an investment destination, including from private equity investors
As world oil prices remain high, a number of African countries have raised domestic prices of fuel. For example, Ghana raised fuel prices by 30 percent in January 2011. Similarly, Mozambique raised fuel prices in 2011 (10 percent in April and 8 percent in July) and Guinea also introduced measures to reduce the fuel subsidy. On January 1, 2012, the Nigerian government removed the fuel subsidy on gasoline. Following week-long protests, a portion of the subsidy was reinstated.
“That poor people protest the removal of fuel subsidies that benefit the rich shows how deep the continent’s governance problems are. They simply don’t trust the government to spend the savings on them,” says Shanta Devarajan, the World Bank’s Chief Economist for Africa and author of Africa’s Pulse.
As Africa’s Pulse notes, rolling back fuel subsidies is a politically sensitive issue. Removing subsidies and raising prices needs to be well managed. For one thing, social assistance programs need to be strengthened so as to help poor and vulnerable households weather the price shock.
Another is to increase public understanding and support for subsidy reform by having a transparent and evidence-based discussion and scrutiny of subsidies: the full cost of the subsidy, the distribution of the subsidy and who is benefiting from the subsidy, and the implications for public spending on priority areas.