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Africa's Bright, Dark Economic Spots Get Attention

  • Nico Colombant

Economists say more outside investment is needed to boost Africa's recent economic growth

Economists say more outside investment is needed to boost Africa's recent economic growth

As the International Monetary Fund (IMF) and World Bank spring meetings kick off in Washington this week, Africa's economies are the talk of both guarded optimism and cause for concern.

Since the mid-1990s, economic growth in Africa has accelerated. The upward trend is continuing now despite sluggish recoveries elsewhere. World Bank officials expect the region's economy to grow 5 percent this year.

Economists and experts warn however against considering Africa as a homogeneous entity. Brookings Africa Growth Initiative Director Mwangi Kimenyi is among these. He spoke at a conference in Washington last month organized by the Carnegie Endowment for International Peace.

"It is very important to disaggregate these countries, remove the oil countries, because the drivers are different," said Kimenyi. "Coastal [countries] are sometimes different from the landlocked, North Africa, and so on. But if you look at the countries that are doing well and they are not natural resource rich countries, they have tried to diversify their economies and they have become competitive in particular sectors."

Bright spots in African economies include Ghana's agricultural sector, Kenya's mobile banking, Lesotho's light manufacturing, Cape Verde's tourism and Botswana's mining.

Major obstacles in most African countries include insufficient schooling beyond primary levels, huge gaps between a small rich elite and the majority of poor, a lack of outside investment and limited regional integration.

Harry Broadman, the chief economist of U.S.-based Albright Capital Management, says the main impediment to better growth is poor governance.

"We can have all the other reforms that we want in the world, whether it is trade reform, whether it is education or the like, but unless we have a confluence between civil society and the political and economic leadership, we are not going to get very far in a sustainable way on the continent moving forward," said Broadman.

Shanta Devarajan, the chief economist of the World Bank's Africa region, also points to low labor productivity, which measures the ratio of output per hour's work.

"You see 70 to 80 percent of the labor force in the informal sector, mostly in single family household enterprises working on very low productivity activities and also unable to take advantage of any economies of scale, even of the type where you have a firm of 50 people you might be able to buy a machine that can increase your productivity," said Devarajan.

Devarajan says Africa's labor force is getting bigger and bigger, which is both a source of potential but also problems.

"We have seven to 10 million young Africans entering the labor force every year adding to a total stock of about 200 million," added Devarajan.

Beyond the overall numbers which point to strong growth, economists say there are more than a dozen African countries which are extremely fragile economically.

They also say most Africans continue to be extremely vulnerable to external shocks which can severely affect their livelihood, from soaring food and fuel prices, to climate change induced natural disasters, and the outbreak of health epidemics and recurring political violence.