Five countries, often overlooked, poised for 5%-plus growth

A recently-opened shopping mall in Tete, Mozambique, anchored by Shoprite.

A recently opened shopping mall in Tete, Mozambique, anchored by Shoprite.

With the pressure of tighter financing conditions, a slump in oil and commodity prices, drought, and reduced export demand from China, many African countries are experiencing economic deceleration.

Yet, according to the IMF, Burkina Faso, Central African Republic (CAR), Mali, Mozambique and the island nation of São Tomé and Príncipe are among the sizable cohort of countries that appear set to deliver strong real GDP growth of 5% and above for 2016, with further acceleration through 2017.

Natural gas prospects for a metal exporter

Despite a slump in commodity prices, better-diversified metal exporters, such as Mozambique, have tended to be less affected by challenging economic conditions. “The role of commodities is by far the largest among oil exporters, where net commodity exports ranges between 45% and 85% of GDP for countries such as Angola, the Republic of Congo, Equatorial Guinea, and Gabon,” the IMF notes in its 2016 regional economic outlook report, Sub-Saharan Africa: Time for a Policy Reset: “Even in Nigeria, a much more diversified economy, net commodity exports account for 15% of GDP.”

Though the IMF forecasts suggest strong real growth of 6% in 2016 and 6.8% in 2017, along with significant inward foreign direct investment (FDI), Mozambique’s looming sovereign debt crisis will require careful management. Much of the country’s recent development efforts were financed off the back of loans from the IMF, the World Bank, the African Development Bank (AfDB) and, as was revealed in April, previously undisclosed loans from Credit Suisse and Russian bank VTB.

Recent projects funded have included fishing vessels (financed by so-called ‘tuna bonds’) and infrastructure to facilitate the offshore drilling of reserves of liquefied natural gas. If realisable, the upside of the latter could be significant. A press release for PwC’s 2013 report, Africa Gearing Up, notes that the OECD expects Mozambique to, “become the fourth-largest exporter of liquefied natural gas globally and second-largest in Africa, after Nigeria.”

In an attempt to help restore donor confidence in the region, Rogério Zandamela, a former IMF senior official, was recently installed as the country’s central bank governor.

Foreign investment for an island nation

In São Tomé and Príncipe, FDI is a strong driver of growth. “Increased foreign direct investment in construction, agriculture, tourism and new projects funded by donors should lead to and boost future growth,” notes the AfDB. The country may also be set to gain from cocoa, the price of which has increased substantially over the past years, driven by poor growing conditions and increased demand for chocolate in emerging countries. The IMF expects the price to remain elevated.

A new president, Evaristo Carvalho, was sworn in on 3 September this year, following elections that were declared free and fair by the Portuguese Speaking Countries Community (CPLP).

Financial reform in a fragile country

Mali is experiencing growth off the back of a return to stability. In June 2015, a peace agreement was signed between government and Tuareg-led rebels, and financial reforms are also underway. An April 2016 review of Mali’s economic and financial reform programme (supported by the IMF’s Extended Credit Facility) was met favourably by the organisation. “Real GDP grew by 6% (in 2015), supported by strong performance in the agriculture and services sectors,” the IMF noted in a statement following the fund’s review mission to the country in April this year. Following the review, the IMF lists the medium-term prospects of the country “favourable”.

The reform programme has targeted increased tax revenue, government deficit reduction and the meeting of targets around domestically financed spending on education, health and social development.

New leadership and new stability

Burkina Faso and CAR also welcomed new leaders recently.

The appointment of Faustin Archange Touadéra in CAR in March this year marked the ushering in of the country’s first elected leader in three years, ending the tumult that ensued after rebels overthrew the government in 2013.

As commercial activities and consumption expenditure rebound, growth in CAR is set to rise, bolstered further by the resumption of the fragile country’s diamond export industry. Diamond exports from the nation were banned in May 2013 after the implementation of the Kimberley Process, which halts the sale of gems from war zones. The IMF anticipates real growth of above 5.7% for both 2016 and 2017, with the worsening terms of trade experienced by the country over the past years expected to moderate slightly through 2017.

Further north, Roch Marc Christian Kabore’s swearing in as Burkina Faso’s president-elect in December 2015 marked the entry of the country’s first new leader in three decades. With civil unrest beginning in 2014 and a coup the following year, his appointment brings much-needed change to a region set to benefit from increased political stability and the recovery of mining activities. Depressed prices of gold and cotton – two of the country’s major exports – will, however, moderate the upside.