Is infrastructure development the biggest catalyst for economic growth in Africa?


Isabelle Alenus-Crosby

It is generally accepted that global economic growth will increasingly come from emerging markets. Following more than 20 years of hard-won political and economic reform, sub-Saharan Africa is set to play a very important part.

Before the economic crisis, sub-Saharan Africa had been growing quickly, with an average annual growth rate of 6 % YoY. Only in Africa has annual growth not stalled, reinforcing the belief that they may be overtaking other emerging markets more quickly than previously thought. The continent’s sustained growth is not only due to improved political and macroeconomic stability (and a strong commitment to private-sector growth), but also large investments in infrastructure.

In fact, infrastructure spending now amounts to $45 billion a year according to the World Bank. The importance of this cannot be underestimated. Many big infrastructure projects revolve around accessibility to the continent’s natural resources as sub-Saharan Africa is not only a major supplier of natural resources to the rest of the world, but also the region with the greatest potential for new discoveries.

As global growth resumes, the region should benefit from higher prices as well as higher volumes and the right infrastructure needs to be in place sooner rather than later. Africa’s road density is still sparse and the 48 countries of sub-Saharan Africa (with a combined population of 800 million) generate roughly the same amount of power as Spain (with a population of 45 million).

Africa’s water resources are abundant, but because of an absence of water storage and irrigation infrastructure, they are underutilised. With enough investment in this area, Africa can become self-sufficient in food within a couple of decades, which is key to the entire continent’s success. Investments in solar and wind power will ensure that Africa has enough power to become a world player.

Other areas are no less important. For instance, a recent $600 million private investment in high-capacity fibre-optic cable now connects southern and eastern Africa to the global Internet backbone, which is crucial to all companies across the continent, big and small.  With regard to ICT, Africa has already caught up with the rest of the world, and together with Africa’s railway systems being expanded by more than 1,000%, it is clear that the continent is on the right track.


Happy New Year


Isabelle Alenus-Crosby

The good news is that Africa’s economic outlook for 2014 remains promising with an overall projected growth of 5.3%. Should the global economy recover faster than predicted, then sub-Saharan Africa’s economy might expand by as much as 6.0% according to the IMF. This is consistent with the average long-term trend growth rate of approximately 5.5% between 2000 and 2010.

According to the World Bank, an economic rebound would also scale up investments in much-needed infrastructure (physical and economic) which will lead to policy reforms that will improve the overall business environment. In addition, African market performances in 2013 have proven that investments into Africa can continue to offer a sound return. Investment levels are expected to remain buoyant (again according to the World Bank), with private investments expected to double in areas such as consumption and infrastructure.

Happy New Year indeed!


African GDP – growing faster than previously thought?


Isabelle Alenus-Crosby

There have been various reports in the news lately that the impressive GDP statistics posted by countries across Africa may actually be underestimations, and that the continent’s outlook could be even better than previously thought.

GDP growth is correlated to a variety of data, and if this data is sparse (which is still very much the case across Africa), whole swathes of economic activity can be overlooked. Simply put, growth is measured by comparing current data to the base year. But without sufficient data, many “new” sectors, such as mobile telephony, have nothing to be compared to. And these new sectors have been growing quickly and steadily across the entire continent for almost a decade.

Until 2010, Ghana was using a 1993 base year. When it was finally revised by the statistical office, GDP estimates rose by over 60 %, translating to approximately 13bn USD of economic activity. Nigeria’s base year is still set at 1990. An upward revision is therefore imminent and likely to be even more impressive than Ghana’s. In fact, economists are predicting that the GDP for the whole of sub-Saharan Africa will rise by at least 15 % in the next couple of years! Where’s the champagne?