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Sub-Saharan economy to grow at 4.8pc

BUSINESS
By - | Oct 6th 2012 | 3 min read
By - | October 6th 2012
BUSINESS

By James Anyanzwa

Sub-Saharan Africa economy is expected to grow at 4.8 per cent, broadly unchanged from the 4.9 per cent growth rate last year, and largely on track despite setbacks in the global economy, according to the World Bank’s new Africa’s Pulse report.

 The report dated October 2012,  says growth in sub-Saharan Africa is forecast to rise to six per cent, excluding South Africa, the continent’s largest economy,

“Sub-Saharan African countries continue to grow at a steady pace. The region’s decade-long economic expansion appears sustainable,” says report, a twice yearly analysis of the issues shaping Africa’s economic prospects.

African exports rebounded notably in the first quarter of this year, growing at an annualised pace of 32 per cent, up from the -11 per cent pace recorded in the last quarter of last year.

Euro crisis

 The report warns that African countries have not been immune to the recent bout of market volatility stemming from the Euro Area crisis, as well as the growth slowdown that is occurring in some of the largest developing economies, in particular China,  an important market for Africa’s mineral exporters.

However, high commodity prices and strong export growth in those countries, which have made mineral discoveries in recent years, have fuelled economic activity and are expected to underpin Africa’s economic growth for the rest of this year. 

The report says new discoveries of oil, gas, and other minerals in African countries will generate a wave of significant mineral wealth, and that the economic importance of natural resources is likely to continue in the medium term in several established oil and mineral producers, thanks to the sizeable stock of resource wealth and the prospects of continued, high commodity prices.

“Resource-rich African countries have to make the conscious choice to invest in better health, education, and jobs, and less poverty for their people because it will not happen automatically when countries strike it rich,” says Shantayanan Devarajan, the World Bank’s Chief Economist for Africa, and lead author of Africa’s Pulse. 

“Gabon, for example, with a per-capita income of $10,000 has one of the lowest child immunisation rates in Africa.”

Global reserves

The region’s established oil producers represent less than 10 per cent of the share of global reserves as well as annual production, according to the report. 

Nigeria, the largest regional producer, can keep supplying at 2011 levels for another 41 years, while Angola, the second largest producer in the region, has about 21 years remaining at current production levels before its known reserves are depleted.

 Given the size of these reserves, it is likely that the dependence on oil resources in these countries is likely to continue in the near to medium term. Production in new mineral countries such as Ghana, Mozambique, Sierra Leone and Uganda could last for a substantial number of years as well.

 “A third of African countries will grow at or above six per cent with some of the fastest growing ones buoyed by new mineral exports such as iron ore in Sierra Leone and uranium and oil in Niger and buoyed by factors such as the return to peace in Cote d’Ivoire, as well as strong growth in countries such as Ethiopia,” said World Bank Vice-President for Africa, Makhtar Diop.

“An important indicator of how Africa is on the move is that investor interest in the region remains strong, with $31 billion in foreign direct investment flows expected this year, despite difficult global conditions.”   

With the global economy still in fragile condition, Africa’s Pulse warns that Africa’s strong growth rates could yet be vulnerable to deteriorating market conditions in the Euro-zone.

“In addition, recent spikes in food and grain prices are a cause for concern,” says report.  Africa’s Sahel region is already suffering from higher food prices, high rates of malnutrition and recurring crisis and insecurity.

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