Africa’s economic growth prospects remain "relatively robust" and are expected to be supported by improvements in the global economic and regional business environment, rallying commodity prices, easing infrastructural constraints and swelling trade and investment ties with emerging economies, the United Nations (UN) World Economic Situation and Prospects 2014 (WESP) report has revealed.
Released in Johannesburg on Tuesday, it stated that after estimated gross domestic product (GDP) growth of 4% in 2013, the continent growth was projected to accelerate to 4.7% in 2014 and 5% in 2015.
Further drivers of Africa’s medium-term growth prospects included an increase in domestic demand, most notably associated with a growing consumer class, as well as improvements in economic governance and management.
While continental growth prospects remained solid, the WESP report revealed that other economic indicators varied.
Among these, inflation across Africa was expected to decelerate slightly from an average of 8% in 2013 to 7.8% in 2014, while the continent’s average fiscal deficit increased from 1.35% of GDP in 2012 to 1.8% in 2013.
Moreover, Africa’s overall current-account deficit was expected to slightly decline from 1.8% of GDP in 2013 to 1.7% in 2014.
Meanwhile, in Southern Africa, growth was projected to increase from 3.6% in 2013 to 4.2% in 2014, with this improvement largely attributed to projected increases in South Africa’s growth rate from 2.7% in 2013 to 3.3% in 2014, as well as declining labour market unrest, increased investment and rising mineral output.
“Southern Africa is likely to attract increased foreign investment, owing to huge
coal deposits and offshore gas discoveries in Mozambique, increased oil output in Angola and investment in the copper sector in Zambia and uranium mining in Namibia,” the report added.
While acknowledging Africa’s predicted growth trend, which was heavily driven by commodity production and exports, the UN noted that this growth remained “far below” the continent’s potential.
“Growth is still failing to translate into meaningful job creation and the broad-based economic and social development needed to reduce the high poverty and rising inequality rates in many countries.
“The informal sector is still large and opportunities remain limited for many seeking to enter the labour market, as seen by high youth unemployment rates and wide gender disparities in earnings.
“Continual pressure on labour markets from a steady stream of new entrants, owing to population growth, has meant that even solid GDP growth rates have not been sufficient to make measurable impacts,” the organisation stated.
The lack of economic diversification away from the “heavy” dependence on resource extraction or agriculture was further cited as a key reason for an underwhelming demand for labour.
However, continued growth in other sectors such as telecommunications,
financial services, transport and construction in countries such as Ghana, Kenya and Nigeria was expected to somewhat offset the growth encumbrances.
In addition, the recent “strong” performance of Africa’s mineral sector was considered by the report to again demonstrate the importance of mining to the continent’s economic growth, as well as the potential for greater linkages between mining and the economy as a whole.
“It is time to transform Africa’s economies by capitalising on high demand and investment, and enhancing linkages between mining and manufacturing,” the WESP report stated.
Despite the expected robust growth prospects, some significant internal and external downside risks and uncertainties could derail progress in Africa, the UN cautioned.
Changes in global commodity prices and terms of trade were key risk factors, while political, civil and labour unrest still posed a significant threat to economic activity in several African countries, including the Central African Republic, the Congo, the Democratic Republic of Congo, Egypt, Libya, Mali, Somalia, South Africa, South Sudan and Tunisia.
“In addition, with many African economies relying on agriculture, weather-related shocks represent a key downside risk for economic growth and upside risk for agricultural prices,” the report concluded.