Africa Rising: A Tale of Growth, Inequality and Great Promise

April 14, 2014


  • World Bank hails 19 years of robust growth in Africa, but cautions against complacency
  • Panel discusses how to make growth more pro-poor and more focused on shared prosperity
  • Preventing violent conflict and seizing leapfrogging opportunities, key to ensure Africa thrives

WASHINGTON, April 14, 2014—The World Bank cautioned on April 12th against any complacency in tackling Africa’s enduring development challenges.

The warning came even as the World Bank praised Africa for being on course to mark 20 years of substantial growth with the region forecast to post a GDP growth rate of 5.1% in 2014.

“The last two decades have been very good for Africa which continues to reverse decades of decline vis-à-vis other regions of the world,” the Chief Economist for the Africa Region at the World Bank Francisco (Chico) Ferreira told a jammed-to-capacity auditorium of delegates attending this weekend’s Spring Meetings of the World Bank and International Monetary Fund (IMF) in Washington, DC.

Speaking at the same event, the Central Bank Governor of Tanzania, Benno Ndulu said Africa’s last two decades of growth “represent a quantum jump” especially when compared against the average annual growth rate of 0.8 percent posted by the continent over a 34-year period, from 1960 to 1994.

Mr. Ndulu revisited an old economic yardstick for Africa: “Sub-Saharan Africa’s economy,” he recalled, “used to be compared to Belgium’s only to point out that Africa’s economy was smaller than Belgium’s.”

Well – not anymore!  According to Mr. Ndulu, “the GDP of Sub-Saharan Africa (SSA) is now $1.7 trillion, while Belgium’s is $500 billion, meaning that the SSA economy is now three times bigger than Belgium’s.” The African economy, he added, is now bigger than Australia’s (estimated at $1.5 trillion) and is about the same size as the economies of Canada and India.

“Africa’s problem going forward is not only to invest more, but to invest better,” according to Jean-Claude Brou, the Industry and Mining Minister from Cote d’Ivoire, who spoke on behalf of Prime Minister Daniel Kablan Duncan.

Africa’s growth is not yet a tide that is lifting all boats. While the middle-income countries in Africa has risen from six in 1995 to 23 in 2013, inequalities have expanded and Africans today enjoy less than one-twentieth of the living standards of Europeans.

All is not bad news, though. Africa’s GDP per capita has expanded 40 percent since 1995. Some of the fastest per capita growers include Equatorial Guinea (15.7 percent increase in the last 17 years); Liberia with a 23 percent increase over the last seven years; Mauritius with above 3.9 percent increase for the past 29 years; and resource-poor Burkina Faso, whose per capita income has risen over the last 18 years.

" We need to promote labor intensive industrialization and technology-driven innovations. "

Benno Ndulu

Sources of Africa’s Growth

Africa’s growth is widespread and has, almost everywhere, been investment-driven (rather than consumption-led), according to Chico Ferreira, increasing the possibility of impacting more Africans than otherwise.

Thanks to the improved performance by the continent’s so-called “population giants” (Nigeria, Ethiopia, Kenya, etc.), 60 percent of Africans now live in the 22 fastest growing countries. A majority of the 22 countries -13 countries in all – are resource-rich (five of them oil producers). However, and happily, fast growth is not a preserve of resource-rich African countries. Nine of Africa’s 22 fastest-growing economies are non-resource-rich countries.

Even countries emerging from violent conflict (such as Angola, Mozambique, Uganda, Rwanda, Liberia, Sierra Leone, etc.) have benefited from what the World Bank Vice President for the Africa Region, Makhtar Diop described as “the catching up effect”.

Four major changes are unfolding at sector level across Africa, according to Ferreira. First, African agriculture is growing faster than agriculture anywhere else. Second, growth seems to be bypassing Africa’s manufacturing sector – now accounting for only 7 to 8 percent of GDP – and performing at about the same level as in other developing countries. Third, Africa’s natural resources sector has tripled its contribution to growth. And, fourth, the growth in Africa’s services sector has been enormous and is bound to be a lot higher than estimated now, given the recent rebasing of the Nigerian economy.

Growth has also been fuelled by a higher contribution from taxation, according to Mr. Ndulu and by a better integration of Africa with international trade, according to Mr. Ferreira.

Wanted: More Pro-Poor Growth

So far, Africa’s growth has, sadly, not been inclusive and has had a lower impact on poverty reduction in comparison to other developing regions. “The richest Africans have seen their fortunes increase by 8 percent over the last decade, while the poor have seen theirs increase by only 1 percent,” Mr. Ferreira regretted, adding: “While growth is essential for poverty reduction, it is not sufficient”.

Mr. Ndulu called for Africa’s growth to be made more pro-poor; more job creating; more supportive of the integration and gainful employment of the African youth and woman. He urged African leaders to foster “wealth preservation” by investing revenue earned from extracting natural resources (depleting them in the process) in the much-needed structural transformation of African economies.

Boosting shared prosperity and curbing inequality can use the help of a “redistributive tax policy” that puts money back in the wallets of the poor, said Mr. Diop citing the success of similar policy in Brazil.

Mr. Brou called for action to boost regional integration and intra-African trade which, according to him, currently accounts for less than 20 percent of Africa’s total trade, being far below the 60 percent and 50 percent figures reported respectively for intra-European and intra-Asian trade.

In addition to calls for African countries to maintain macroeconomic stability, panelists stressed the positive impact investments in value-added agribusinesses can do for a continent still heavily dependent on agriculture. In order to have the most impact on poverty, growth must create jobs, especially jobs for youth and women. Investments must also aim to reduce the exorbitant costs of energy and transportation which render “Made in Africa” goods less competitive globally.

Projecting Africa’s Future Growth

Looking into the future, panelists at the event were unanimous in agreeing that Africa can be expected to grow into the foreseeable future, judging among others from the ever growing number of natural resource deposits being discovered on the continent.

Besides extractives, the modern services sector holds great potential for boosting Africa’s growth, according to Mr. Ferreira.

“We need to promote labor intensive industrialization and technology-driven innovations,” said Mr. Ndulu, stressing the “leap frogging potential” technology and cheap, young labor offer an African continent that needs to do everything “to preserve the gains made in peace and stability over the past decades” and avoid the “turning back of the arms of the clock” effect that violent conflict has on Africa’s development.