Following the sluggish 1990s, the early years of this millennium witnessed spectacular growth in sub-Saharan Africa, giving rise to the Africa Rising narrative – the notion that it was inevitable that the region and the continent at large were poised to continue on this trajectory. Sadly, much retrogression took place from 2010 to 2019.
Exhibit Number One of the retreat is the downshifting of the continent’s gross domestic product (GDP) to a yearly average of 3.3% during that ten-year period from the previous decade’s 5.1%, according to a new study by the McKinsey Global Institute, released a fortnight ago. The deceleration was due to factors from waning demand for commodities to deteriorating economic fundamentals in Africa’s major economies.
Had the GDP growth of 5.1% notched up from 2000 to 2010 continued to 2019, the tally would have been $3-trillion instead of $2.6- trillion, with much of the difference explained by pedestrian growth in the Big Three economies of Nigeria, South Africa and Egypt. A big chunk – about 30% – of this difference is attributable to slowing growth in Nigeria, which tumbled from a yearly rate of 11% from 2000 to 2010 to a measly 3% from 2010 to 2019 as trade, which is responsible for a third of the country’s services-related GDP, fell in lockstep with consumer spending on goods.
Egypt made the second-largest contribution to Africa’s economic deceleration during the second decade of the current millennium, with its slowing oil and gas production shaving 11% off growth, while South Africa consistently grew at a low pace.
Africa’s average yearly GDP expansion of only 3.3% between 2010 and 2019 compares with India’s and China’s growth rates of 6.4% and 7.2% respectively.
Other tell-tale signs of Africa’s regression between 2010 and 2019 are a decline in foreign direct investment in 31 of its 54 countries – with the steepest contractions in Nigeria and South Africa – and the ballooning of the external debt burden by 24 percentage points decade-on-decade to 57%. Moreover, debt- servicing costs doubled, while current account balances halved, making it harder for African governments to invest in growth. In 2022, the continent’s debt-to-GDP ratio stood at 67%, a further deterioration triggered by increased government expenditure during the Covid-19 pandemic, weak management of public finances and high inflation.
All these factors conspired to depress productivity growth from 2.2% between 2000 and 2010 to 0.8% between 2010 and 2019.
These bleak statistics, however, obscure the successes of some of the continent’s countries that can serve as models to establish productivity as the foundation of the continent’s economic growth instead of the volatile commodities that have historically played this role.
Indeed, the McKinsey Global Institute contends, African countries could add a collective $1.4-trillion to their economies – almost double the value added by services today – by matching the productivity growth of Asian countries, while rekindling industrialisation and increasing intercontinental trade would be crucial complements.
Yet another potential boon is the expected move of 500-million Africans from the countryside to cities by 2040, which would increase the need for better infrastructure and more productive jobs for these migrants. Similar investment in smaller secondary cities could take the pressure off the larger cities, thus spreading the rising productivity and incomes more broadly.
The McKinsey Global Institute is also optimistic that more than half of Africa’s 345 companies with a yearly revenue of more than $1-billion could increase their collective yearly earnings of $1-trillion by more than $550-billion by 2030 by accessing new markets and increasing productivity, thus yielding dividends such as increased income tax for governments.
Africa’s lacklustre economic performance between 2010 and 2019 may have been a major setback to the Africa Rising narrative, but it was by no means a death knell.