Although the growth of Africa’s top two economies, which make up nearly 40 percent of the continent’s GDP, declined in 2015, owing to the slump in commodity prices and policy inconsistencies, the African Development Bank (AfDB) on Monday said that the continent’s economy will grow by 3.7 percent this year and 4.5 percent in 2017, if private investment and consumption is strengthened.
Growth slumped significantly in the Sub-Saharan Africa (SSA) in the final quarter of last year and recent data show that growth is still under pressure, with Nigeria, Africa’s largest economy contracting by 0.36 in the first quarter of 2016.
GDP expanded 3.0 percent year-on-year in Q4 2015, down from the 3.5 percent increase recorded in the previous quarter, marking the slowest expansion since Q1 2010. The SSA region, therefore, grew 3.5 percent in the full year 2015, significantly below the previous year’s 5.1 percent growth. The effect of poor growth in Nigeria and South Africa was largely felt; the region’s two biggest economies expanded 1.8 percent and 0.6 percent, respectively in the fourth quarter of 2015.
With 2016 already looking bad for Nigeria and South Africa, SSA’s growth in 2016 is also threatened but the continent’s apex bank believes African countries will accelerate growth potentials in their economies if more is done to recover “commodity prices” and “global economy strengthened”.
SSA has been one of the fastest growing regions in the last decade, but recent global economic developments reflected in the decline of commodity prices and volatile exchange rates pose a real challenge for policy makers, according to a recent report by The World Bank Group.
While the AfDB is right about the conditions for growth in sub-Saharan Africa, there are other issues that may need to be tackled in the continent’s most important economies. The emergence of a militant group, Niger-Delta Avengers, blowing up oil installations in the Delta is sure to hurt Nigeria’s major source of revenue, especially at this time of cheap oil. The country’s disruptive foreign exchange policy is also a challenge.
South Africa on the other hand is billed to hold local government elections in august, with its vociferous youth leader, Julius Malema threatening to take up arms against the government; many experts believe such utterances may scare investors. There are also corruption scandals that have been coming up in recent times.
Despite Nigeria and South Africa drawing closer to a recession, the bank is optimistic that things may turn around if the right thing is done.