Africa south of the Sahara is hampered by the low diversification of investments. This is the main conclusion of the latest World Bank report, Africa Pulse, published on October 3, 2018.
The good news from this biannual review is that sub-Saharan African economies continue to recover, after stalling in 2015-16, but at a slower pace than expected. In 2018, the region is expected to show an average growth rate of 2.7%, a slight increase compared to the 2.3% recorded in 2017. It is far from the average of 5% recorded on the period 2004-2014.
“To accelerate and sustain an inclusive growth dynamic, policymakers must continue to prioritize investments that focus on human capital, limit the risk of misallocation of state resources, and boost productivity,” says Albert Zeufack. Chief Economist of the World Bank for Africa. “They must also be able to manage new risks arising from changes in the composition of capital flows and debt. ”
Debts, oil and metals …
This slowdown is partly due to a less favorable international environment for the region. Global trade and industrial activity are losing momentum as metal and agricultural commodity prices fall due to concerns over tariffs and more uncertain demand. While oil prices are expected to increase in 2019, metal prices could remain moderate due to lower demand, especially in China. Capital market pressures have increased in emerging economies, and concerns about dollar-denominated debt are increasing as the value of the US dollar rises.
Nigeria, South Africa and Angola run out of energy
The slowdown of the recovery in sub-Saharan Africa (0.4 point below the April forecast) is explained by the modest performance of the three largest economies in the region. In fact, lower oil production in Angola and Nigeria offset the rise in oil prices, and in South Africa, weak growth in household consumption was exacerbated by the contraction in agricultural activity. Growth in the rest of the region has been stable. Several oil-exporting Central African countries have benefited from rising oil prices and rising oil production. Economic activity remained strong in high-growth, resource-poor countries such as Côte d’Ivoire, Kenya and Rwanda, supported by agricultural production and services, on the production side, and household consumption and public investment, on the demand side.
Public debt has remained high and continues to rise in some countries. The sustainability of this public debt is likely to be compromised by the weakening of currencies and the rise in interest rates associated with the change in the composition of the debt. The report also warns of the risks of budget slippage, conflict and climate shocks. There is therefore room for policies and reforms that can strengthen the resilience of countries and boost potential growth in the medium term.
In addition, the Africa’s Pulse report devotes a special report on the decline in labor productivity in sub-Saharan Africa and ways to address it. “Reforms should include policies that encourage investment in non-resource sectors, create jobs and improve the performance of businesses and workers,” said Cesar Calderon, senior economist and lead author of the report.