Strong investment flows to Africa will sustain high economic growth on the continent even amid low oil prices and a slowdown in China, African Development Bank President Akinwumi Adesina said.
Africa may grow 4.4 percent this year despite increasing current account and fiscal deficits caused by falling export revenues and depreciating currencies, Adesina said Jan. 31 in an interview. GDP rose 4.5 percent in 2015, according to the Abidjan, Ivory Coast-based lender.
“It’s not all doom and gloom at all,” Adesina said in the Ethiopian capital, Addis Ababa. “Africa is not unraveling by any means.”
At least 10 African nations including South Africa and Angola are heavily exposed to reduced demand from China, as it accounts for about 30 percent or more of their exports, according to International Monetary Fund data. Nigeria, Africa’s largest economy, is struggling to cope with crude prices that have fallen more than 70 percent since their June 2014 peak to below $40 a barrel.
Governments should keep deficits in check and be cautious about floating more Eurobonds as U.S. interest rates rise, said Adesina, a former Nigerian agriculture minister. “It’s a race to the top of the yield curve,” he said about new debt sales. “They are going to pay a lot more money for that.”
Adesina said the development bank will focus on energy, infrastructure, industrialization and agro-industry during his term, which began in September and could be as long as 10 years. One ambition is to provide electricity access to all Africans by 2025, partly through the bank investing $12 billion in energy projects over the next five years and leveraging another $50 billion from businesses, he said.
African governments need to raise their investment in energy from 0.3 percent of gross domestic product to 3.4 percent to help achieve this goal, Adesina said. Investments should be financed using domestic resources such as taxes or pension funds rather than external borrowing, he said.