While African economies are set keep up robust growth amid a slowdown in the global economy and in commodity price, they need to diversify into value added sector to jump start their growth into a higher level.
This was expressed during a seminar featuring a panel of economic analysts in Johannesburg. Moderated by Anushuya Gounden, the head of Africa Desk at professional services firm Deloitte, panelist noted that the World Bank says investment flows to Sub Saharan Africa are set to double from $ 43 billion in 2008, the onset of the recession, to $ 86,1 billion in 2015. The bulk of these flows are foreign direct investment, “which tends to promote infrastructure development and hence, job creation.”
The World Bank expects GDP growth in Sub Saharan Africa, excluding South Africa, to rise to 6,1 % this year, up from 5,8% last year. South Africa’s economic growth is forecast at 2,7% this year, a decline from 2,4% last year and 3,1% in 2011.
Panelist Jorge Maia, head of research and information at the Industrial Development Corporation said that foreign direct investment is not the only driver of growth in the region. He notes that a rising proportion is actually domestic investment and it is finding its way into sector such as manufacturing and telecoms, thereby slowly diversifying many African economies which were mainly driven by mineral extraction and agriculture.
The seminar noted that African economies need to diversify more rapidly and play an increasing role in world trade, supplying a broader range of goods to global markets.
Panelist identified basic manufactured goods as a source of export growth, while an even bigger opportunity lies in food processing. Africa’s strategic position as custodian of 60% of the world’s arable land puts it in a great position to become a global food supplier.
Rapid urbanisation, which will see Africa’s major city’s population increase exponentially over the next few decades, will also drive demand for a range of goods, from food to affordable telecommunications. Gounden said this could lead to some regions of the continent becoming “the world’s bread baskets”.
Regional integration was identified as another driver of growth. But Mahoney noted that the process, as spoken about and driven by politicians over the past few decades, has not taken off. Harford said the only way for regional integration to happen is for companies, especially multinationals, to pursue growth and thus have to negotiate and invest in better trading conditions across countries.
Simon Harford, a partner at Actis, said the private sector remains a key source of employment creation. In South Africa, government is the only sector that has shown consistently positive employment growth over the past few years.