The World Bank released its annual Global Economic Prospects [PDF] report for sub-Saharan Africa earlier this month, forecasting a GDP growth rate of 3.4 percent in sub-Saharan Africa for 2019. This is up from 2018 and represents a modest recovery from a downturn that began in 2015. But growth across the region remains uneven. Sub-Saharan Africa’s largest three economies, Nigeria, South Africa, and Angola, are predicted to grow below the regional average and will continue to disappoint investors who once hailed these markets as engines of growth. However, bright spots remain, with growth of over 6 percent in smaller, non-commodity driven markets such as Burkina Faso, Cote d’Ivoire, Ethiopia, Ghana, Niger, Rwanda, Senegal, Tanzania, and Uganda.
The promise of African economic growth has tantalized investors since the early 2000s. In 2010, McKinsey released Lions on the Move, a report predicting the region would generate as much as $2.6 trillion in revenue by 2020. Around the same time, investment in emerging markets was trending, largely due to the fact that investors could find returns nearly three times greater than those to be had in Western economies. Analysts eyed sub-Saharan Africa’s future population—1.5 billion by 2025—and wondered if the region was set to replicate the rapid industrialization and exceptionally high growth rates witnessed by Southeast Asia in the eighties and nineties. Particularly for the continent’s largest economies, this has not happened.
Economic prospects for all emerging markets have been challenging in the past four years, dampened by the strengthening dollar, fluctuating commodity prices, and trade uncertainty. Even with these headwinds, the growth forecast for sub-Saharan Africa is now below the average of other emerging markets. Larger commodity-driven economies—South Africa, Nigeria, Angola, and Zambia—are plagued by a combination of macro-economic headwinds and domestic problems like unemployment, political uncertainty, and corruption. Crucially, the average purchasing power has not risen in line with analysts’ hopes, meaning there has been little progress in reducing poverty, increasing worker productivity, or tapping into the promise of the region’s population boom. Slow progress towards key business needs like updating power and rail infrastructure also hurts investor confidence.
But these numbers belie enormous diversity. Ethiopia is on track to have nearly the highest GDP growth rate in the world, and a number of smaller economies like Tanzania, Kenya, Rwanda, and Ghana are growing at rates over 6 percent, a number on par or higher than China’s expected growth. These countries are also successfully attracting global capital through progressive policies aimed at diversifying their economies and growing the middle class.
The global economy is predicted to experience a deceleration in the coming years, hindered in part by trade uncertainty, rising inflation, and tightening Chinese credit, which are all likely to hurt sub-Saharan Africa’s prospects for growth. While some of these challenges will be difficult to avoid, others could be addressed domestically. Tackling corruption, investing in business infrastructure, and increasing average purchasing power through growing wages and jobs are critical to sustained economic development. It is no longer a given that the region’s largest economies are also its fastest growing or the best prospects for investors.
AUTHOR: Jennifer Spies led Facebook’s product development for the Middle East and Africa, and has over a decade of experience building products that connect communities. Prior to Facebook, she served as a foreign policy advisor for Middle Eastern economic security and worked with Google.org in Rwanda.