The views expressed in this article are those of the author alone and not the World Economic Forum. However, investors in the development of renewable energy face problems with decision making due to the existence of multiple criteria, such as oil prices and the associated macroeconomic performance. With a GDP of $95 billion, Kenya recently reached lower-middle income status, and has successfully established a diverse and dynamic economy. The remaining two-thirds came from other sectors, including wholesale and retail, transportation, telecommunications, and manufacturing (Exhibit 1). The project leverages significant financing from various development partners and sets the stage for future support for coal plant retirement in South Africa with anticipated Climate Investment Fund support of $500 million. Factors driving down China's growth. For countries in conflict, efforts should focus on limiting the loss of human and physical capital. With all the necessary ingredients for further expansion, they stand to benefit greatly from increasing ties to the global economy. countries. After the end of apartheid in 1994 it recovered quickly, with GDP growth peaks of 4.3% in 1996 and 5.6% in 2006, according to the World Bank. However, the region remains prone to conflicts with the scourge of armed conflict in 2021 and early 2022. All focus areas are approached through a lens of harnessing the digital economy, empowering women and girls, strengthening public sector institutions and governance frameworks, and promoting integration and cooperation in the region and continent. Overall, the WBGs support is driven by increased private sector investments through the International Financing Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). Indeed, the territory of the DRC is also rich in vast natural resources, including timber, oil, and gas, and one of the worlds most biodiverse regions. 0000008442 00000 n At the time of Gaddafis ouster,Libya had Africas highest life expectancy and GDP per capita. 0000005145 00000 n Key among these are the rate of investment, increase in the size of the workforce, and changes in economic policies. Coltan, or columbite-tantalite, is the raw ore from which tantalum is processed. For China, the key factors driving its economic growth are domestic investment, trade openness, initial income, and rural share of the population. If these countries improved their infrastructure and regulatory systems, they could also compete globally with other low-cost emerging economies. Yet Africas collective GDP, at $1.6 trillion in 2008, is now roughly equal to Brazils or Russias, and the continent is among the worlds most rapidly growing economic regions. The authors wish to acknowledge the contributions of the following colleagues to this article: Martijn Allessie, Charles Atkins, Mutsa Chironga, Norbert Drr, Reinaldo Fiorini, Michael Kloss, Corrado Ruffini, Sven Smit, Amine Tazi-Riffi, Till Zeino-Mahmalat, and Nadia Terfous. Deadly drought in Horn of Africa would not have happened without climate change, Cholera cases are on the rise. Since 2000, Africas annual private infrastructure investments have tripled, averaging $19 billion from 2006 to 2008. The socio-economic and fiscal fallout of the coronavirus pandemic and the geopolitical and geo-economic ramifications of the war in Ukraine, which threaten food security and Africas economic growth, further complicate the regional outlook for peace and political stability. 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Type above and press Enter to search. Alan Gelb, Vijaya Ramachandran, and Manju Kedia Shah, Africas Private Sector: Whats Wrong with the Business Environment and What to Do About It, Center for Global Development, Washington, DC, 2009. Rising oil prices have lifted their export revenues significantly; the three largest producers (Algeria, Angola, Nigeria) earned $1 trillion from petroleum exports from 2000 through 2008, compared with just $300 billion in the 1990s. Further, growth provides a major explanation for improvements in human development in African countries. Use this information to your advantage. 0000002360 00000 n Acha Leke is a principal in McKinseys Lagos office, Susan Lund is director of research at the McKinsey Global Institute, Charles Roxburgh is a London-based director of MGI, and Arend van Wamelen is a principal in the Johannesburg office. The economy in the entire continent has definitely taken a hit from COVID-19. At the same time, mass-migration as a result of flooding or droughts could put resources such as food, water and housing under pressure in areas less affected. 4 0 obj Receive the latest media about the economy and construction news in Africa through our platform. They trimmed their foreign debt by one-quarter and shrunk their budget deficits by two-thirds. Now, more than half a decade later, the plan to have a steady growing economy is working. Real GDP rose by 4.9 percent a year from 2000 through 2008, more than twice its pace in the 1980s and 90s. MGI research finds that over the next decade, the worlds liquid-fuel consumption will increase by 25 percenttwice the pace of the 1990s. With IDAs help, hundreds of millions of people have escaped povertythrough the creation of jobs, access to clean water, schools, roads, nutrition, electricity, and more. Several economic and structural factors, including low-income levels, poor growth outcomes, weak governance, state capacity, and inequality of opportunityespecially across ethnic, religious, and regional groupsincrease the likelihood of conflict. These resources are used in electronics such as cell phones, portable music players, game consoles, and computers. Supporting South Africas Just Energy Transition. But like petroleum-rich countries in general, those in Africa face acute challenges in maintaining political momentum for reforms, resisting the temptation to overinvest (particularly in the resource sector), and maintaining political stabilityin short, avoiding the oil curse that has afflicted other oil exporters around the world. Boosting exports to finance investment. To learn more about cookies, click here. Libyas conflict has persisted with fluctuating intensity since the fall of the former regime after the popular uprisings in 2011. 238 0 obj << /Linearized 1 /O 241 /H [ 1160 869 ] /L 178520 /E 30551 /N 65 /T 173641 >> endobj xref 238 33 0000000016 00000 n More educated workers are also keener on getting training to hone and improve their skills resulting in better quality and better pay. Economic growth in Sub-Saharan Africa is set to slow from 3.6% in 2022 to 3.1% in 2023. The achievement of progress in household welfare is severely constrained by rising unemployment, which reached an unprecedented 35.3% in the fourth quarter of 2021. Like other middle-income countries, such as Brazil, Malaysia, and Mexico, these African states must move toward producing higher-value goods. Together, such structural changes helped fuel an African productivity revolution by helping companies to achieve greater economies of scale, increase investment, and become more competitive. But after over a century of economic instability and unpredictability, economists are now seeing positive trends in Africas economic growth. Measured in terms of purchasing-power parity (PPP), which takes into account the relative prices of nontradable goods in different countries. If these countries could attract businesses to help develop their resources, they could push their economies upward on the path of steadier growth. To start, several African countries halted their deadly hostilities, creating the political stability necessary to restart economic growth. <>/Metadata 2831 0 R/ViewerPreferences 2832 0 R>> After declining at the turn of the century, there has been an uptick in conflicts political instability in Africa in recent years. 0000002029 00000 n The study finds that higher oil prices positively affect the development of renewable energy in oil-importing countries by making renewable energy more economically competitive. Africa already has more middle-class households (defined as those with incomes of $20,000 or above) than India. AFRICAN economies have shown impressive growth rates over the past 10 years, averaging over 5 percent. The South Africa Financial Sector Development and Reform Program Phase 2 (FSDRP 2) is a five-year Bank technical assistance program, launched in September 2018, with a contribution from the Swiss State Secretariat for Economic Affairs. This could prove a challenge considering the prevailing fiscal pressures. In the past, Africa has relied a lot on foreign direct investments to fuel its economies. 0000003463 00000 n READ MORE: Ending Libyas political impasse could unleash limitless economic potential. creating the political stability necessary to restart economic growth. Segmenting African countries by exports per capita and by economic diversification reveals how growth opportunities and challenges vary across the continent. India, Brazil, and Middle East economies are also forging new broad-based investment partnerships in Africa. 0000009214 00000 n Subscribe to our email newsletter and stay updated. The conflict has affected all levels of economic life in the country. Inequality in wealth is even higher, and intergenerational mobility is low, meaning inequalities are passed down from generation to generation with little change over time. Emerging markets require large investments to build a modern economys infrastructure. Wars, natural disasters, or poor government policies could halt or even reverse these gains in any individual country. five of the ten least-peaceful countries globally were in Africa. Telecommunications, banking, and retailing are flourishing. Image:REUTERS/Mike Hutchings. Most African countries today fall into one of four broad clusters: diversified economies, oil exporters, transition economies, or pretransition economies (Exhibit 3). However, the war in the northern Tigray region, which began in late 2020, resulted in immense disruption. These countries can also hasten their progress with support from international agencies and new private philanthropic organizations that are developing novel ways to tackle poverty and other social issues. Undeniably, the study has revealed that the general financial inclusion, penetration and availability dimension, . But with the recent circulation of vaccines, and with the populace settling in again to the new normal protocols, things are starting to peak right up again. If you continue to navigate this website beyond this page, cookies will be placed on your browser. While they are expanding rapidly, their penetration rates remain far lower than those in the diversified countries, creating an opportunity for businesses to satisfy the unmet demand. Libyas situation quickly descended into a destructive conflict during its political transition. However, the region remains prone to conflicts with the scourge of armed conflict in 2021 and early 2022. We face big challenges to help the worlds poorest people and ensure that everyone sees benefits from economic growth. Agree to the our terms and policy agreement. The level of education is widely accepted as a factor in economicgrowth. All the factors for economic growth that will be mentioned here did not happen overnight. Each African country will follow its own growth path. The annual flow of foreign direct investment into Africa increased from $9 billion in 2000 to $62 billion in 2008relative to GDP, almost as large as the flow into China. Economic Growth and Trade. The agriculture and resource sectors together account for as much as 35 percent of GDP in the transition countries and for two-thirds of their exports.