The World Bank this week issued its Global Economic Prospects for January 2013, reflecting strong medium-term growth expectations for sub-Saharan Africa, a continuation of the solid growth seen.
Growth for the region was measured at 4.6% in 2012, 5.8% if one excludes the drag of South Africa, the region’s biggest and most globally integrated economy, with a third of countries recording growth of at least 6%. This growth was supported by robust domestic demand, steady remittance flows, high commodity prices and increased export volumes. This came despite monetary tightening in countries such as Nigeria, Kenya and Uganda and political unrest for example in Mali and Guinea Bissau.
Net private capital flows to the region were up 3.3 % to a record US$54.5bn, mainly from increased FDI which went up to $37.7bn from $35.7bn in 2012. This was a positive sign in light of the fact that FDI to all developing countries was down 6.6%. The FDI increase was driven primarily by investments into the extractive industries, although there were also notable increases in investment into the infrastructure related sectors of transport, construction, electricity, telecoms and water.
Data to gauge the all-important consumer sector (over 60% of sub-Saharan Africa GDP) remained scant, but the World Bank, using anecdotal evidence such as vehicle sales, as well as comprehensive retail data where available, surmises that consumer spending remained robust in 2012, except in countries where monetary stance was tight, political instability disrupted economic activity and adverse weather cut into agricultural sector incomes.
The World Bank expects the medium-term growth prospects to remain strong, driven by the same factors that underpinned growth in 2012. Overall, sub-Saharan Africa growth is forecast to average 5% from 2013 – 2015 (2013 – 4.9%, 2014 – 5.1% and 2015 – 5.2%), with the numbers excluding South Africa being 6.1%, 6.0% and 6.1% from 2013-2015, respectively. Primary risks to the forecasts are the fragility of the global economy and global risks such as political, civil and labour unrest and of course the potential impact of the weather on the all-important agricultural sector.
The fastest growing five countries in 2013 are forecast in descending order to be Sierra Leone (+11.1%), Gambia (+10.7%), the DRC (+8.2%), Mozambique (+8.0%) and Ghana (+7.8%). While lagging growth prospects in East Asia Pacific and South Asia, sub-Saharan Africa growth will be more roughly double that of the world aggregate, (obviously still from a lower base), and we believe this trend will continue to translate into increased investor appetite for the region.
Imara is an investment banking and asset management group renowned for its knowledge of African markets.