Sub-Saharan Africa’s growth is projected to slow down in 2015 to below the 4.4 percent annual average growth rate of the past two decades. Slower expansion of economic activity largely reflects the fall in oil prices, and other commodities, on the region’s economies, even though net oil importers would see gains. Commodity prices and foreign investment are expected to provide less economic support; subdued demand and economic activity in emerging markets will weigh on the region’s growth as well.
The diversity in growth patterns matches the diversity of the continent’s countries. Prospects of oil exporters, such as Nigeria and Angola, are being negatively affected by weaker global prices of their main commodity. Although continued expansion of non-oil sectors, particularly services, in Nigeria is expected to lift growth in 2016 and beyond. Among frontier market countries, growth is expected to increase in Kenya, propelled by higher public investment and the recovery of tourism. In Ghana high interest rates and inflation are expected to weigh on consumer and investor sentiment slowing economic activity. South Africa is expected to register slow but steady growth, helped in part by gradually increasing net exports, and reforms to alleviate bottlenecks in the energy sector.
Growth will remain strong in most low-income countries, owing to infrastructure investment and agriculture expansion, although lower commodity prices will dampen activity in countries that export metals and other key commodities. Excluding South Africa, the average growth for the rest of the region was around 5.5 percent. However, extreme poverty remains high across the region. Foreign Direct Investments fell in 2014, reflecting slower growth in emerging markets and declining commodity prices. Several countries including Cote d’Ivoire, Kenya and Senegal, were able to tap international bond markets to finance infrastructure projects.
Fiscal deficits for the region narrowed as several countries took measures in 2014 to control their spending. At the same time, however, the fiscal position deteriorated in many countries. The cause in certain countries (e.g. Kenya and Mozambique) was the result of rising wages. In others (e.g. Mali, Niger, and Uganda), it was due to higher spending on public investment. Elsewhere, higher deficits reflected declining revenues, notably among oil-exporting countries which suffered lower production and oil prices (e.g. Angola). The region’s debt ratio remained moderate thanks to robust growth and concessional interest rates. However, in a few countries, debt increased significantly in 2014, especially in Ghana, Niger, Mozambique and Senegal.
Falling prices for oil, metals, and agricultural commodities weighed on the region’s exports. In contrast, spurred by infrastructure projects, import demand remained strong. As a result, several countries continued to have substantial twin fiscal and current account deficits. Inflation edged up in the first half of 2014, due in part to higher food prices, but remained low in most countries.
The risks to the region’s outlook stem from both domestic and external factors. The Ebola outbreak in West Africa is slowing but effectively being contained, but fears remain that it could spread more widely than assumed in the baseline, denting confidence and causing severe disruptions to cross-border trade and supply chains in the region. In various countries, government budgets are under increased pressure from urgent demands for increased spending. Conflicts in South Sudan and Central Africa Republic, and security concerns in northern Nigeria, northern Cameroon and southern Niger could deteriorate further with harmful regional spillovers. A sudden increase in volatility in international financial markets, and lower commodity prices are among the major risks to the region’s outlook.
Africa has great diversity among its 48 countries, with a mix of low-income, lower-middle-income, and upper-middle income countries, and several fragile states. Each country faces distinct challenges to transition to the next level of development.
The World Bank Group (WBG) continues to prioritize Africa’s 18 Fragile and Conflict-affected States (FCS), with a focus on state rebuilding and supporting the transition out of fragility. The WBG’s approach to these countries is differentiated to respond to the different circumstances and needs of each country. Our program addresses intra-country economic disparities among regions and groups, which also contribute to fragility and conflict.
The Bank’s strategy in Africa to help end extreme poverty and boost shared prosperity focuses on a wide range of priority areas ranging from designing and implementing economic recovery plans in Ebola-affected countries, to providing fiscal support in the effective delivery of basic services, extending safety nets, ensuring food security, and providing support for small farmers.
Regional integration in Africa remains a critical piece of the Bank’s strategy to improve connectivity, leverage economies of scale, and enhance productivity.
Knowledge is essential to our effort to improve development outcomes and make aid more effective. Country Economic Updates, produced in consultation with clients and other stakeholders, help promote substantive discussions around key policy issues. Analytical work on structural transformation, on macroeconomic vulnerabilities, on fragility and poverty, but also on more specific areas such as the management of drylands, addressing the challenges of the Sahel, improving development outcomes in the Horn of Africa, and tapping the opportunities in land reform, urbanization, and demography are also underway.
Better infrastructure is key to promote broader growth, including in manufacturing and services. More abundant, reliable power, lower transport costs, and better logistics are fundamental for competitiveness. Too little electricity remains the most serious infrastructure obstacle. Tapping Africa’s tremendous potential to generate its own power from hydro, geothermal, natural gas, and solar resources is a priority for our client countries and the WBG.
Africa now has the world’s fastest urbanization rate. Half of Africa’s population will live in towns and cities by 2040, being 450 million more people than today. Integrated urban planning, addressing water, sanitation, transport, housing, power and governance, will be vital to making urbanization a true driver of productivity and income growth.
While cities are growing, agriculture still employs 60 percent of the workforce, the vast majority of whom live in rural areas where major improvements are needed to ensure that rural exodus in search of the limited jobs in the cities does not merely shift the bulk of Africa’s poorest from rural Africa into impoverished urban Africa. There is a need to accelerate progress in boosting agriculture productivity and output. Supporting smallholders among others through investment in improved technologies, rural financial services, and better access to markets is vital. Equally important is the push to boost agribusiness investments and improve land and water management by adopting modern irrigation practices, preventing conflicts over water resources and implementing climate-smart agriculture solutions.
Africa is the world’s youngest continent, and each year for the next decade, 11 million youth will enter the job market. Young Africans must be equipped with the right skills and training. There is still a large mismatch between what African students are learning and the skills employers are actually seeking. To help bridge this gap, the World Bank Group has launched initiatives to boost STEM (science, technology, engineering and Mathematics) across the region. The initiatives include the innovative “Africa Centers of Excellence Project,” which has launched in West Africa and will be expanded across the continent.
The Ebola crisis sheds light on the need for better, well-financed and more resilient health systems across the continent, to contain risks of communicable diseases such as malaria, tuberculosis and HIV/AIDS. Expanding quality basic health services remains a key priority.
Comprehensive and cost-effective social protection systems are essential to help the poor and vulnerable weather crises and rise out of extreme poverty. It will remain crucial for countries in need of making macroeconomic adjustments in response to shocks to pre-identify the vulnerable and cushion the adverse impact of such adjustments.
Africa’s poor are likely to be hit hardest by climate change, particularly changes in temperature and rainfall patterns. The Sahel and other drylands have seen increased rainfall volatility, and water resources are continuously depleted. Natural disasters, such as droughts in East Africa, and floods and cyclones in Southern Africa, are increasing in frequency and intensity. Investing in climate-change adaptation techniques and disaster risk management will remain top priority.
In fiscal year 2015 (FY15), the World Bank Group’s financial commitment to Sub-Saharan Africa was US$15.7 billion and included:
$10.2 billion in the International Development Association (IDA) credits, grants, and guarantees.
$4.6 billion from the International Finance Corporation (IFC) for private sector development projects.
$420 million in the International Bank for Reconstruction and Development (IBRD) lending.
$516 in the Multilateral Investment Guarantee Agency (MIGA) guarantees for projects.
Following the Ebola outbreak in Guinea, Liberia and Sierra Leone, the World Bank Group has mobilized about $1 billion in financing to date for the three countries. $518 million for the emergency response from IDA, which is mostly in the form of grants, is helping the three countries provide treatment and care, contain and prevent the spread of infections, help communities cope with the economic impact of the crisis, and improve public health systems. As of March 1, $346 million, or 67 percent of the total $518 million in committed IDA funding has been disbursed to the countries and implementing UN agency partners.
IFC has mobilized $450 million to enable trade, investment and employment in the three countries, and will also provide advisory services to 800 small and medium enterprises on health, security and environment issues related to Ebola.
The Bank continues to move forward with sub-regional initiatives to address drivers of fragility and conflict in the Great Lakes, Sahel, and Horn of Africa. About 50 percent of the $1 billion in regional IDA allocated to the Great Lakes and the Sahel has been approved to finance projects in energy, transport, ICT, sexual and gender-based violence, and women’s health.
Our cross-border Regional Integration (RI) portfolio of 67 projects has a total commitment of $8 billion. Power pools such as the West Africa Power Pool create regional markets for electricity that boost generation and lower costs, and improve competitiveness. Regional transport corridors and efficient logistics help facilitate trade, and help to diversify economies and generate jobs. The RI program supports trade and economic integration through harmonization of policy and regulatory frameworks as in the East African Community (EAC). It also supports initiatives in health, such as the East Africa Public Health Laboratories Project to enhance preparedness of health systems to deal with disease outbreaks.
Boosting access to affordable, reliable, and sustainable energy is a primary objective of the Bank’s work in Africa. During the fiscal year (FY14) projects focused on developing hydropower potential and providing new forms of sustainable power to increase energy production and benefit millions of Africans.
In a major push, IBRD, IFC, and MIGA combined forces under a joint Energy Business Plan for Nigeria. The plan will support Nigeria’s energy reform program and help increase installed generation capacity by about 1,000 MW while mobilizing nearly $1.7 billion of private sector financing for Africa’s largest economy.
In FY14, the Bank also supported the 80-megawatt Regional Rusumo Falls Hydroelectric Project in Burundi, Rwanda, and Tanzania, and provided a $100-million grant to Burundi for the Jiji-Mulembwe hydropower project. Both initiatives will increase electricity generation capacity benefitting millions of Africans.
The Bank supports country-led efforts to improve agricultural productivity by linking farmers to markets and reducing risk and vulnerability; increase rural employment; and make agriculture more environmentally sustainable. Projects during FY14 included support for improving pastoralism through community development and livelihoods in Ethiopia, boosting agribusiness in Senegal, and pushing the envelope on landscape management, notably in the Sahel.
Higher education plays a key role in promoting economic growth and development especially for Africa’s fastest growing youth population. As one of the largest financiers of higher education in the region, the World Bank Group is mobilizing its knowledge and leadership behind countries to champion education. The World Bank Group’s $150-million Africa Higher-Education Centers of Excellence project is funding 19 university-based centers for advanced education in West and Central Africa. It will support regional specialization among participating universities in mathematics, science, engineering and ICT to address regional challenges.
The World Bank Group’s strategy for Africa is being implemented by leveraging partnerships, knowledge and the financing instruments. The WBG works closely with the United Nations, and with various multilateral and bilateral partners. The Bank collaborates with African regional and sub-regional organizations, such as the African Union, EAC, ECOWAS, CEMAC and SADC, which play a critical role in a host of sub-regional and regional programs and in promoting economic integration. We have also developed strong partnerships with the private sector, think thanks, parliamentarians and African civil society.
Mobilizing partners to deepen and accelerate support for Africa is a top priority and requires closer collaboration with non-conventional development actors, including Brazil, China and India, as well as global funds, Arab funds, and private foundations.
The Africa Region also leverages the combined strength of the entire WBG by working closely with IFC and MIGA in energy, agribusiness, water, transport and other priority areas.
Last Updated: Apr 01, 2015
the number of remittances in inflows to Nigeria, which accounts for 49% of the continents remittances