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The African Economic Outlook is the only annual report that monitors in detail the
economic performance of 53 individual countries on the continent, using a strictly
comparable analytical framework.
The focus of the 2013 edition is structural transformation and natural resources in
Africa.
Growth is robust, fuelled by Libyan rebound
Africa’s economy grew by 6.6% in 2012, up from 3.5% in 2011, in part because of a
rebound in Libya following its economic collapse during the 2011 revolution. Excluding
Libya, the continent’s GDP grew by 4.2% in 2012. Africa’s medium‑term outlook remains
favourable: The economy is projected to grow by 4.8% in 2013 and 5.3% in 2014 on the
back of expanding agricultural production, robust growth in services and a rise in
oil production and mining, all underpinned by increasing consumption and investment.
West Africa is expected to lead the way, with Central Africa and East Africa also
expected to perform strongly. Growth in Southern Africa will be dragged down by South
Africa’s weak recovery, while the slow pace of transition to democracy in North Africa
may continue to affect economies there, despite Libya’s strong recovery.
Average inflation in Africa increased to 9.1% in 2012, from 8.5% the previous year,
fuelled by higher food and fuel prices and, in some East African countries, rapid
credit expansion and exchange rate depreciation. Inflationary pressure should ease
in 2013 and 2014 as a result of relatively stable oil and food prices.
The main short‑term challenge for the continent is to consolidate stable macroeconomic
conditions in the face of the volatile global economy. Regulation of the private sector
must also be further improved. Addressing infrastructure bottlenecks and increasing
access to public services like education, health and security, would put countries
on a durable growth path while addressing poverty.
External financial flows hit record high
External financial flows to Africa have quadrupled since 2001 and hit a record high
in 2012. They ranged from an average of 4% of GDP in upper‑middle‑income countries
to 18% in low‑income countries. After declining in 2011, both foreign direct and portfolio
investment recovered in 2012. Remittances have also increased. Foreign direct investment
is projected to remain buoyant in 2013, increasing by over 10%. Southern African is
expected to be the main recipient, boosted by resource projects in Angola, Mozambique
and South Africa.
Emerging partners playing a greater role in trade
Europe and the United States remain Africa’s main trading partners, but emerging partners
like China, India and Brazil are becoming more important. Africa is also seeking to
strengthen regional integration by tackling challenges linked to the small size of
many of its economies. These include stiff competition in international markets and
impaired bargaining power in international trade negotiations.
Slow progress on human development
Many countries in Africa have improved their scores on the Human Development Index,
however progress remains slow. Income inequality is widening and education and health
indicators are deteriorating in some places, with the result that many people are
not benefitting from economic growth. Among many other benefits, human development
can help drive Africa’s structural transformation by speeding both the rate of innovation
and uptake of new technologies. Against this background, more attention should be
directed to improving the quality of education and healthcare systems and fostering
job creation in order to narrow income inequalities.
Governance is improving, but remains fragile
Many countries have made notable progress in improving their regulatory frameworks
and business environments and in strengthening democratic institutions. Multiparty
elections are now firmly taking root. However, as events in the Central African Republic,
Mali and Guinea‑Bissau show, some countries are losing democratic gains and returning
to cycles of violence and political instability. Rising terrorism and organized crime
are major threats to security. Combined with lingering cross‑border conflicts, they
are helping to create pockets of significant instability.
In 2012, popular protests in North Africa were driven mainly by demands for political
reform. Elsewhere, protests were mainly associated with economic and social issues.
Protests on the continent demonstrate a need to enable citizens to better engage with
their governments and provide feedback on the quality of services and policies.
Special Theme – the role of natural resources in driving structural transformation
African economies face the challenge of not just sustaining growth but making it more
inclusive. Structural transformation is fundamental to doing this, and Africa’s abundant
natural resource wealth can help make that happen by allowing the emergence of new,
more productive activities and better‑paid jobs. Regrettably, Africa’s record in this
area is weak: Productivity growth has been slow in recent years and has not created
enough of the relatively low‑skilled jobs in manufacturing that are needed to reduce
poverty.
Although natural resources have contributed no less than a third to Africa’s growth
during the last decade, much potential remains untapped. But this is changing: As
exploration and production expand, Africa stands to gain more from its resources.
Getting it right requires the right policies. To this end, this edition of the African
Economic Outlook recommends that countries follow a four‑layer approach to harnessing
natural resources for structural transformation:
1. Put in place the right conditions for structural transformation, including basics
such as infrastructure and education. Broad‑based tax systems and accountable institutions
that share power and deter rent‑seeking are also essential.
2. Meet the specific requirements of the primary sectors. These include good land
management, and specific skills and research. Agriculture needs transport infrastructure
and fertilisers, while extractive industries need the right incentives for exploration
and often specific infrastructure, especially energy.
3. Optimise revenue from natural resources and invest it wisely. State ownership has
not generally proven superior to private ownership in this regard, and in the past
many countries did not manage their resource revenues effectively. Lessons need to
be learned from these failings: Strong investment management, effective citizen oversight
and a stable expenditure framework are all essential.
4. Active policies are necessary to increase agricultural productivity and to develop
related businesses around extractive industries. Policy options for governments include
coordination of investments in training, infrastructure and logistics and research.
International firms also have a role to play by, for example, supporting local suppliers.
Key figures
Africa’s economy set to grow by 6.6% in 2012 and 4.8% in 2013.
Libya’s rebound accounts for more than a third of 2012 growth.
Inflation hit 9.1% in 2012; should moderate in 2013.
External financial flows set record in 2012, equivalent to 9.2% of Africa’s GDP.