The economic outlook
Published: 05 January, 2012
The International Monetary Fund’s most recent forecast for sub-Saharan Africa anticipates average growth of 5.5 percent in 2012. These projections are in line with the expectations of This Is Africa’s sentiment survey. Only two respondents anticipated growth of under 5 percent, with most predicting levels of 5.5-6 percent.
A number of economies in West Africa are expected to exceed the 7 percent mark. Nigeria, the most important economy in the region, will grow at 6.6 percent. Ghana, Côte d’Ivoire and Liberia are expected to post growth of 7.3 percent, 8.5 percent and 9.4 percent respectively. Sierra Leone is forecast to grow by 51.4 percent in 2012 as major iron ore projects begin operations.
East Africa’s dominant economy, Kenya, will grow by 6.1 percent. The same figure is forecast for Tanzania, with Rwanda set to be the fastest growing economy in the region at 6.8 percent. Ethiopia and Uganda are both predicted to post growth of 5.5 percent. The Southern African region is led by Angola, Africa’s second largest oil producer, with growth of 10.8 percent, with Zambia and Mozambique forecast to grow at 6.7 and 7.5 percent respectively. South Africa, the regional giant, continues to struggle to breach the 4 percent growth mark, and is expected to hit 3.6 percent in 2012.
The drivers of growth
The majority of survey respondents attributed the region’s growth in 2012 to domestic factors, pinpointing population growth, urbanisation and increasing domestic consumer demand as the main drivers.
David Cowan, Africa economist at Citigroup, says: “One of the main drivers of growth tends to still be the structural story that is going on underneath - rising population, economic reform, the emergence of investment into the consumer market and growth driven by the telecoms sector on the mobile front.”
The primary external driver of growth in the region continues to be high commodity prices, particularly for oil and gas. Despite dropping significantly from the 2008 high of $150, they continue to hover around the $100 mark, due to strong demand from China and India.
Paul Collier, professor of economics and director of the Centre for the Study of African Economies at Oxford University argues that growth will be predominantly driven by this factor.
“As long as commodity prices hold up in the region at their present levels, then a lot of African countries are doing rather well. There are a lot of discoveries being made, discoveries coming on stream, so the thing has got momentum,” he says.
In accordance with this analysis, the extractive industries sector is expected to deliver much of the region’s growth in 2012. Graham Stock, chief strategist of Insparo Asset Management says: “The hydrocarbons sector is likely to continue to lead growth, particularly in West Africa. Activity will also accelerate in parts of East Africa where exploration activities have proved successful. Likewise, there are a number of mining projects that are advancing towards production.”
Africa’s growing consumer markets should continue to provide new investment opportunities throughout 2012, with a majority of survey respondents citing retail, services and fast moving consumer goods as sectors to watch. “The ongoing rise in household consumption will continue to drive growth in retailing and in the construction of shopping malls - albeit from a very low base,” Mr Stock says.