Africa’s Economic Growth Story, as Told by a World Bank Chief Economist

By Andreas Stargard

Andreas Stargard
Andreas Stargard

Our editor had the pleasure of attending the Corporate Council on Africa‘s live lecture by Dr. Albert Zeufack on the state of the African economy yesterday.  Dr. Zeufack is the World Bank’s Chief Economist as to the Bank’s Africa Region portfolio.  Here are some notes from this insightful event…:

To lead off with the [sub-Saharan] elephant in the room, the overall economic measures of the African continent are disproportionately affected by its three largest economies, namely Nigeria, South Africa, and Angola.  Together, these three nations make up 60% of the African economy.   And with their own declining or stagnating growth rates, they’ve brought down African GDP growth overall since 2016.  The remaining 45 or so sub-Saharan economies continue to grow at above 4%, however.

The World Bank predicts an above-3% growth for the next two years.  However, in per capita terms, Africa has stagnated or even regressed, given the continent’s high population growth rate.  Job creation (and crucially so in the formal sector) remains a key criterion for the continent’s economic improvement.

Dr. Zeufack presenting at CCA

Two of fastest-growing economies are Ethiopia and Rwanda — not only in Africa but indeed worldwide, as Dr. Zeufack points out.

2020 will remain a challenging year, with brighter prospects for 2021 and beyond according to the World Bank’s Chief Economist on Africa, whose Afronomics podcast can be found here (background here).

Macroeconomically speaking, foreign investment growth is declining (in terms of rate), with absolute levels stagnating.  Also, quite interestingly, the structure of debt is changing across Africa. While public debt (and interest payments) will remain high, its creditors no longer consist of the old “Paris Club” but rather of new bond holders, other Asian emerging markets, etc., thus foreclosing another HIPC bailout.  Private lenders would have to take a big haircut.

Many African HIPC countries spend 90% of their tax revenue on paying off external debt (or even merely interest) and their government salaries.  Eradicating poverty is therefore a long shot for this decade, says Dr. Zeufack.

Climate change likewise disproportionately affects (negatively) the continent, through increased cyclones, drought, and floods on the east coast, and desertification and coastal erosion in the west, affecting the large western seaside urban areas.

On its CPIA scale (which stands for Country Policy and Institutional Assessment), used to allocate World Bank funds, Rwanda performs at the top in Africa and all IDA countries, showing functioning reforms in its investment climate.  Cabo Verde, Kenya and Senegal also perform well.

Mauritius remains the top-performing overall in terms of business climate, with Rwanda, South Africa, Kenya and Senegal likewise scoring comparatively well.

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