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Urbanisation, high domestic demand to drive economic growth in Africa

By Nicholas Waitathu | May 11th 2015 | 2 min read
By Nicholas Waitathu | May 11th 2015

High domestic demand, increasing commodity exports, dynamic agriculture and the services sector are some of the factors that will stimulate economic growth in Africa in the current decade, according to Africa Capacity Building Foundation (ACBF).

It said Africa's economic growth will be further instigated by rapid urbanisation, an expanded labour force and the rise of the middle-class.

According to Programmes Officer, East and Southern Africa Beruk Negash, the African economy is bound to grow more in the coming years as countries continue to embrace reforms and exploit new wealth creation avenues, for example, remittances from their citizens in the diaspora.

"The demographic factor is a key reason to drive higher domestic consumption, therefore contributing to sustainable economic growth coupled with high production," he said.

Expansion of the middle-class, he added during the ACBF's 12th Annual Forum of the Partnership for Development in Nairobi last week, would increase demands for goods and services of better quality.

Commodity prices

Mr Negash observed that despite current global uncertainties, prices of commodities are expected to remain high and based on the fact Africa is a commodity-based region, there will be high demand of the same in the international market.

The agriculture sector will remain the main source of employment as it presently employs 60 per cent of Africa's workforce, and it is likely to be a major source of African growth in medium-term.

"The services sector will become a major contributor to African economic growth, with industries such as transport, trade and real estate, telecommunications, financial and insurance services and information technology projected to have a significant impact on Africa's gross domestic product (GDP) in the coming years," he said.

He observed that to improve and enhance Africa's capacity there is need to formulate and implement sound economic policies and reforms to create a better business climate in addition to employment creation.

Growth rate

According to the United Nations Economic Commission for Africa (UNECA) Africa's GDP growth rate is expected to increase to 4.5 per cent in 2015 and 4.8 per cent in 2016.

Negash said to improve this growth to a transformational level of 7 per cent – leading to employment creation and poverty reduction – capacity development efforts are critical.

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