Even casual observers of sub-Saharan Africa are aware of the often explosive growth seen across the continent over the past decade. Fueled in large part—although not completely—by booming commodities demand, the continent has seen steady growth of between 5 and 7 percent for several years, with some states occasionally seeing double digit growth.
Since 2014, however, the continent’s economic growth has fallen somewhat back to Earth. Chinese demand has stagnated, causing significant drops in commodity prices, particularly in the extractive sector. Countries heavily reliant on oil exports, particularly Nigeria and Angola, have been battered by low prices, forcing them to scramble to patch up budget deficits. All of these shocks saw sub-Saharan Africa’s overall economic growth to fall to an estimated 3.9 percent this year, from 5 percent in 2014. This is still respectable—no developed economy would quibble with such growth—but it represents the continent’s lowest GDP increase in more than a decade.
That said, the picture for 2016 is far from bleak. The IMF Regional Statistical Outlook, published in October, estimates the sub-region’s growth to rebound to 4.3 percent in 2016. Although countries reliant on energy and mineral exports are likely to see stagnant growth, the IMF sees five countries enjoying growth of more than 7 percent. Revisions are likely; the IMF already has downgraded Mozambique’s projected growth from a continent-leading 8.2 percent to 6.5 percent due to low natural gas prices. Nonetheless, several African markets show great promise despite challenging global conditions:
Ethiopia, 8.1 percent growth: Ethiopia’s place at the top of this list should be no surprise; it has seen growth averaging nearly 10 percent per year for a decade, and has seen double digit growth in five of the past eight years. This growth reflects the government’s commitment to expanding infrastructure (particularly in rural areas), modernizing agriculture, and boosting manufacturing capacity. The government has been particularly active in creating industrial zones designed to draw in foreign investment, with investors given significant tax breaks. With no real energy or mineral exports to speak of, Ethiopia looks to be well insulated from global price shocks, although an ongoing drought could negatively impact growth.
Cote d’Ivoire, 7.6 percent: The only west African country on the list—and the richest—Cote d’Ivoire’s inclusion is largely the product of a peace dividend following the 2011 end of the country’s civil war and successful October 2015 national elections. President Alassane Ouattara since taking office in 2011 has prioritized rebuilding (and expanding) the country’s war-ravaged transport infrastructure in an effort to jumpstart the long-dominant cocoa sector. These efforts—alongside high cocoa prices—have triggered growth rates of more than 9 percent since 2012, with a visible economic boom in the capital of Abidjan. It also led to Ouattara’s reelection last month with more than 83 percent of the vote nationally.
Democratic Republic of Congo, 7.3 percent: Congo’s projected growth is probably the most fragile of any country on this list, given its heavy reliance on the mining sector in the eastern part of the country. Congo also is susceptible to political and security shocks in 2016, with the deteriorating situation in neighboring Burundi and uncertainty around scheduled national elections later in the year likely to affect growth. Still, Congo is a sleeping giant, with one of the continent’s largest populations and fastest growing cities, the capital Kinshasa.
Rwanda, 7 percent: Although much smaller geographically and population-wise, Rwanda resembles Ethiopia in many ways. Politically, both are highly centralized, autocratic governments heavily focused on domestic security and stability. Economically, both push state-centric policies aimed at modernizing agriculture and boosting manufacturing output. Rwanda’s President Paul Kagame also has been adamant about his desire to make Rwanda an information and communications hub for the entire east and central African region. His government has welcomed outside investors with open arms, and has particularly focused on tackling corruption.
Tanzania, 7 percent: Newly-elected President John Magufili’s reputation as a “doer” bodes well for continuing Tanzania’s robust economic growth of recent years. The government has pledged itself to kickstarting a new port outside the capital, Dar es Salaam, as well as a new liquefied natural gas plant to take advantage of the country’s offshore gas deposits. Infrastructure development aimed at improving agricultural output is another priority.
What commonalities do we see among these countries? Not many, to be honest. Some have highly democratic political systems; others are among the continent’s most autocratic. Ethiopia and Congo are some of the poorest countries in Africa; Cote d’Ivoire does rather well. Even with the downturn in commodities, some of these countries have significant extractive industries. Ultimately, this diverse group shows the diversity of promise the continent has to offer investors.
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