Africa: The Road to Sustained and Inclusive Economic Growth

Published on 15th April 2014

A  process  of  democratization  that  has  taken  root  across  much  of  the continent; ongoing improvements to the business environment; exponential growth in trade and investment and substantial improvements in the quality of human life have provided a platform for the economic growth that a large number of African economies have experienced over the past decade.  Despite the impact of the ongoing global economic situation, the size of the African economy has more than tripled since 2000.  The outlook  also appears  positive,  with  the  region  as  a  whole  expected  to  grow  by  4%  for 2013 and 4.6% for 2014. A number of African economies are predicted to remain among the fastest growing in the world for the foreseeable future. 

For Africa, the inclusion of the private sector in the continental transformative  agenda  is  an imperative  priority  to  sustain  the  current episode  of  high  economic  growth.  This  vision  is  reflected  in  national development  plans  whose  syntheses  are  aligned  in  the  2013- 2017 Strategic Plan of the African Union Commission and its Agenda 2063. 

The private sector is considered as a key partner  to  support  continental  efforts  to  build  a  more  prosperous  Africa, home  of  peace  and  stability  where  the  wealth  generated  benefit  all, transcending  barriers  related  to  age,  gender,  religion  and  geographical boundaries. In this context, the Commission of the African Union through its Department for  Economic  Affairs  is  in  the  process  of  finalizing  its  2015 - 2019  Medium-Term  Strategy  for  the  harmonious  development  of  a  vibrant  and competitive  private  sector,  engine  of  growth  which  generates  decent  jobs and  creates  increased  opportunities  to  harness  the  current  demographic dividend. To achieve this, however, the challenges ahead of us are significant.

Africa  still  has  a  long  way  to  go  to  achieve  its  transformation,  create  the jobs that our young people need and increase its participation in the   global trade  value  chain.  That  is  why  we  are  not  confusing  this  decisive  turning point  with  a  tipping  point.  That  is  why  we  must  make  a  clear  distinction between  the  necessary  sustainable  and  inclusive  economic  growth  and economic transformation which is the strategic objective.  

In  2014,  Africa’s  growth  rate  will  accelerate  and  reach  6.1%  per  year.  A dozen countries  will  exceed  this  rate.  However,  what  Africa  needs  is  a minimum  growth  rate  of  7%  per  year  over  several  years,  a  better  shared, more inclusive, and not too volatile growth.  Today,  what  prevents  us  from  reaching  that  goal  is  a  combination  of several factors. However, I would like to focus on four: The  need  to  step  up  the  supply  of  food,  energy,  and  water  to  meet  the needs  of    our  ever  growing population  now  standing  at  1.1  billion,  at  a time  when  environmental  degradation  and  the  pressing  need  to  tackle climate change makes this especially challenging.

In  seeking  solutions  to  these  challenges,  the  innovation,  technical expertise, and investment of the private sector is greatly needed  and  in our renewed partnership,   we must build for sustainable development. Allow  me  to  mention  but  a  few  areas  which are    ready and promising in terms of investment returns but which can also contribute to  addressing  challenges  of  inequality   and  rampant  unemployment   on  the African Continent.

First,  Agriculture; The African continent  is  currently  home  to  60%  of  the world’s total uncultivated,  arable land. As the world’s population increases rapidly (recently exceeding the 7 billion mark and 9 billion in 2050), global agricultural production must rise to feed these growing numbers. This creates business opportunity for the manufacture and marketing of products such as fertilizers, pesticides and seeds as well as a demand for food processing and ago - processing such as grain refining, value addition and packaging.  Value opportunities exist in textile industry and commodities such as tea, coffee just to name a few. "In fact Africa in now ready to be next hub of textile production.  The growth  in  agro-industry  has  been  buttressed  by  improved  business environment  through  implementation  of  the  Comprehensive  Africa  Agricultural  Development  Programme  (CAADP).  Already,  a  growing number  of  private  equity  funds  are  springing  up  to  finance  agricultural production in Africa. 

Second, Tourism;   Several African countries have become world’s favorite tourism destinations.  According  to  the  United  Nations  World  Tourism Organization,  tourist  arrivals  into  Africa  in  the  year  2012  exceeded  49 million  and  are  likely  to  pass  the  50  million  mark  in  2014. There are opportunities in luxury safari lodges and a luxury retreats.  

Third,  ICT ; This   is  one  of  the  fastest  growing  and  most  promising  sector. There  are  well  over  1  billion  mobile  phones  in  Africa  and  the  use  of computer  is  rapidly  expanding.  A  whole  range  of  business  opportunities exist  from  e-commerce,  international  call  centers,  mobile  services  to assembly/and or manufacturing.  

Fourth, Infrastructure;   Investing in infrastructure is critical to Africa’s growth.  While there have been significant improvements in the development and quality of infrastructure across the continent, there is still a clear- cut  deficit.  Needless to say,  this  shortfall  has  its  consequences, including  bottlenecks  in  the  smooth  running  of  trade  and  export  activities.

While funding infrastructural development in Africa is not cheap, the continent requires about $93 billion annually to cover infrastructure needs. Of course,  the  financing  capacity  of  individual  country   governments  is limited;  hence  there  are  opportunities  for  private  investors  to  partner  with African  public  and  private  in  the  development  of  under- performing infrastructure —such  as  investing  in  reliable  power    supply,  water resources, roads and railway systems among others.  

Fifth, Fast moving consumer goods:  With Africa’s exploding middle class (over 300 million people) always looking to be serviced with new products, Africa’s  fast  moving  consumer  goods  sector  looks  promising.  There is a huge and ever- growing opportunity for manufacturers and retailers   of FMCGs like food, beverages, and homecare and personal care products. 

Sixth, Mining:   Several African  countries  have  vast  deposits  of  mineral resources  that  have  been  left  largely  unexploited  because  of  a  lack  of technical  know - how,  as  well  as  the  financial  incapacity  to  embark  on capital - intensive  mining  projects.  The  continent  also  has  a  wide  array  of mineral  resources  which  include  iron  ore,  coal,  bauxite,  gold,  tin,  lead,  oil and  zinc  which  haven’t  been  exploited.  This creates an investment opportunity for our European friends without compromising Africa's chance to  benefit  from  value  addition  and  wealth  creation  opportunities  in  both artisanal as well as industrial mining. 

Securing  our  future  in  the  21st  Century  requires  us  to  secure  our prosperity. This means harnessing economic growth wherever in the world it is occurring.  It means supporting  our  private  sector  and  ensuring  that  it can  compete  in  an  increasingly  competitive  global  marketplace.  It  means strengthening  our  relationships  with  our  strategic  partners,  deepening  our understanding  and  working  together  to  seize  the  opportunities  that  it presents. 

By H.E. Dr. Anthony Mothae M Aruping

Commissioner for Economic Affairs, African Union Commission.

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