Sub-Saharan Africa’s macroeconomic prospects remain promising. Despite headwinds, medium-term growth for Africa remains favorable. Regional GDP growth is projected to strengthen to an average annual pace of 5.2 percent in 2015-16 from 4.6 percent in 2014, and rise to 5.3 percent in 2017. GDP per capita is set to rise steadily from an estimated 2.1 percent in 2014 to 2.6 percent in 2015, reaching 2.8 percent in 2017.
Public investment in infrastructure, increased agricultural production, and buoyant services sector are expected to continue to support growth in the region. The growth pick-up is expected to occur in a context of reduced support from commodity prices and net FDI flows as global demand remains subdued. Overall, Sub-Saharan Africa is forecast to remain one of the fastest growing regions.
Private consumption in the region is expected to remain strong in 2015-17. Reduced imported inflation, aided by a benign global inflationary environment and stable exchange rates, and adequate local harvests are expected to help contain inflation in most countries, which should allow for some gains in real disposable incomes. However, currency-induced price pressures, which could weigh on consumer sentiment and slow private consumption growth, remain a concern for countries with a heavy reliance on portfolio flows, including Ghana and South Africa.
Government consumption is projected to grow at a moderate pace as governments across the region strive to restrain current expenditures, allowing for some fiscal consolidation to take place. The expansionary fiscal policy stance that has led to budgetary imbalances has been found to be linked more systematically to current expenditures than capital spending, with insignificant correlation to capital expenditures. Ongoing efforts to contain wages and salaries and streamline less productive expenditures on goods and services are therefore important consolidation steps. In this context, steps by Ghana and Zambia to control spending will be key to correcting the large fiscal and external imbalances.
Net exports are again projected to make a marginal contribution to GDP growth in the region over the forecast horizon. The contributions of net exports will be constrained by lower commodity prices, which could be exacerbated by low output in countries such as Angola where production is stagnating. In metal-exporting countries, increased output would mitigate the weakness of metal prices. On the import side, the demand for capital goods is projected to remain strong, as governments continue to frontload infrastructure investments and private consumptions remains strong. Reflecting these trends and the weakening of commodity prices, the current account deficit in the region is projected to widen from an estimated 2.4 percent of GDP in 2013 to an average of 3.1 percent of GDP in 2014 and 2015.
At the country level, growth is expected to remain robust in Nigeria, supported by the continued expansion of non-oil sectors, particularly the services sector which now accounts for more than 50 percent of GDP. South Africa is expected to experience steady but slow economic growth as improving labor relations allow for a resumption of investment in the gold and platinum mining sectors; gradually improving net exports help mitigate the drag from policy tightening; and infrastructure bottlenecks, especially in the energy sector, are progressively alleviated. Among other middle-income countries, high interest rate and rising inflation due to currency depreciation are expected to slow economic activity, including notably in Ghana.
In low-income countries, political stability and continued investment in infrastructure should keep growth rates high. The Ebola outbreak is expected to severely disrupt activity in key economic sectors in Guinea, Liberia, and Sierra Leone and slow growth in these countries in 2014. Economic spillovers are, however, expected to be modest and contained to Ghana and Nigeria, the main transportation hubs in the West Africa sub-region.
Sub-Saharan Africa features significant diversity among its 48 countries: the region includes 19 fragile and conflict-affected states, 11 other low-income countries, 13 lower middle income countries, seven upper middle-income countries, and 1 high income country. Development challenges in these countries vary greatly. The World Bank Group continues to engage with all countries across this range to support the broad-based eradication of extreme poverty and to help generate shared prosperity across the Region.
With strong emphasis on increasing regional and national competitiveness, creating more jobs and opportunities for families, while reducing vulnerability and improving resilience, the World Bank Group works to deepen the impact of its development mission and complement the efforts of other key partners, including African governments and economic communities, the private sector, civil society, think tanks, and others. The World Bank Africa Region works selectively and focuses on results, flexibility, efficient delivery, and innovation while increasing the use of programmatic approaches and maximizing the performance of its portfolio.
The Region’s priorities include the following:
Energy: This includes engagement along the full value chain with the aim of helping countries reduce the cost of production and improve pricing (through improved generation mix and sector reform). Clean energy generation (hydro, gas, geothermal) and power pooling (across sub-regions) are being actively pursued.
Agriculture: We work to enhance the resilience of agriculture production systems through landscape approaches, including irrigation. Areas of emphasis include improving the quality of sector policy environment and public spending, and facilitating private sector investments in agriculture that are inclusive, with greater attention to land administration programs. Pastoralism and agri-business are other major priorities.
Social protection: Extending coverage of social protection systems to help households mitigate shocks and build human capital is a priority, reflected in a quickly expanding social protection portfolio including in Fragile and Conflict-affected States (FCS).
Higher education/Science and technology: Investing in skills and education is crucial to reap Africa’s demographic dividend. Improving the quality of education, science and technology training, spending funds wisely, and exploring appropriate private sector linkages are particularly important. IDA‘s involvement in secondary and tertiary education is expected to grow further. Basic education will continue to be driven by the Global Partnership for Education.
Urban planning: Africa is the continent with the fastest urbanization rate. The disorganized and unplanned urban expansion is becoming an obstacle to economic growth, and will affect productivity growth in the urban space. Integrated urban development, bringing together urban water and sanitation, transport, roads, housing, power, and governance sectors will be a priority in the coming years.
Transport: Logistics, railway, ports, and urban transport are areas of growth in the Region.
Health: Expansion of basic health services to all (Universal Health Coverage), improvement of quality of services, improvement of health systems, and adoption of results-based approaches are priorities.
Natural Resource Management: Our focus here is to help countries manage the development potential of earnings from their extractive industries, including transparency of contracts and ensuring that countries have the capacity to negotiate fair deals in exchange for selling their mineral resources.
Data/Statistics: We are actively working with countries to build their statistical capacity and to produce timely, accurate statistics is a priority to understand the poverty dynamics in countries.
Trade and Competitiveness: There is need to increase analytics on firm-level productivity to help increase competitiveness. There is also need for analytic work and policy dialogue to increase sub-regional trade.
Micro, Small and Medium Enterprise (MSME) Development: Improving competitiveness and access to finance are priority areas, with a specific emphasis in helping the local private sector transitioning to more light manufacturing and modern agriculture activities (job creation).
In fiscal year 2014 (FY14), the World Bank Group’s financial commitment to SSA, a major priority for the institution, was US$15.3 billion and included:
$10.2 billion in the International Development Association (IDA) credits, grants, and guarantees, up from $8 billion from the previous year.
$4.2 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.
The Bank Group works collaboratively to tackle development challenges and focuses on regional projects in sustainable energy, irrigation, water management, and food security, and also on job training programs for youth, preventing malaria and other tropical diseases, and on social protection for poor families across the region.
With the recent outbreak of Ebola in Guinea, Liberia and Sierra Leone, the World Bank Group has mobilized a $400 million financing package for those countries hardest hit by the crisis, including $230 million toward the emergency response and $170 million for medium- and long-term projects. Of the $230 million in emergency funding, $117 million is already in the countries, including $58 million for Liberia, $34 million for Sierra Leone, and $25 million for Guinea. Most of the $117 million ($105 million) was approved by the World Bank Group’s Board of Executive Directors on Sept. 16, and was new money provided in grants from the World Bank Group’s IDA Crisis Response Window. The other $12 million in the emergency financing was reallocated in August 2014 from existing health projects in Liberia and Sierra Leone ($6 million per country) to make some funds immediately available and take advantage of the existing implementation capacity set up for these projects.
The World Bank Group also transferred $6 million in a project preparation advance for Guinea, and announced on September 25 that it had shifted $113 million in funding to the emergency response, bringing total emergency funding to $230 million. These funds are paying for essential supplies and drugs, personal protective equipment and infection prevention control materials, health workers training, hazard pay and death benefits to Ebola health workers and volunteers, contact tracing, vehicles, data management equipment, and door-to-door public health education outreach.
On September 25, 2014 the World Bank Group announced $170 million in new funding to help the three countries build their public health systems and strengthen the region’s disease control capacity; the Board of Executive Directors will consider this funding in the coming weeks.
In FY14, the Bank Group focused its efforts to act quickly and effectively in emergency situations across Africa. In response to the crisis in Central African Republic, the Bank delivered emergency development funds of over $70 million to help restore key government services and to support food distribution and health services. Major regional initiatives focused on the challenges of fragility and conflict. In May 2013, the World Bank Group announced a $1 billion development pledge to help countries in the Great Lakes region provide better health and education services, generate more cross border trade, and fund hydroelectricity projects in support of the Great Lakes peace agreement.
Signaling a renewed focus on boosting economic growth and lifting people out of devastating poverty in Africa’s hard-hit Sahel region, the World Bank Group pledged $1.5 billion to the Sahel in November 2013, which is additional to its ongoing development multi-country and national programs in the region already worth several billion dollars. The funding will create more hydropower and other sources of clean energy to greatly expand irrigation and transform agriculture; protect and expand pastoralism for more than 80 million people living in the Sahel who rely on it as a major source of food and livelihoods; expand health services for women and girls; and improve regional communications and connectivity between countries.
Sub-Saharan Africa is blessed with large hydropower resources that can create electricity, yet only 10% of its potential has been harnessed. 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. Many projects benefit from IBRD, IFC, and MIGA working together across the World Bank Group to better leverage their development impact in the region.
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 is mobilizing its knowledge and leadership behind countries to champion education. The World Bank’s new $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’s strategy for Africa is being implemented by leveraging partnerships, knowledge and Bank’s Group financing instruments. The Africa region has strategic bilateral partnerships with African countries. The Bank is working with key regional and sub-regional organizations and financial institutions, including the African Union, the African Development Bank, and NEPAD, and has developed strong partnerships with the private sector, think thanks, parliamentarians and African civil society.
The Bank also collaborates with a wider range of partners at the national, regional, and global levels, stepping back where others have comparative advantage and leading where the Bank is well placed to do so. Mobilizing partners to deepen and accelerate support for Africa is a top priority and requires closer partnerships with non-conventional development actors, including Brazil, China and India, as well as global funds, Arab funds, and private foundations.