Economists cite several reasons. African countries that made certain reforms in the 1990’s – embracing market oriented economies instead of command style, floating exchange rates – were able to handle the economic crisis better and bounce back to expansive growth rates.
“Our prediction is that this year the continent will have a growth rate of 4.5 percent, next year 5.5 percent and then 6 percent”, claimed African Development Bank VP and chief economist, Professor Mthuli Ncube to South African media outlet Engineering News. This strong growth rate is driven by a few regions experiencing particular success.
While countries in East Africa, the continent’s fastest growing region, have employed useful macroeconomic management policies to deal with their rising populations, West Africa’s Nigeria has managed to diversify its own market by boosting agriculture’s contribution to GDP. Northern and Southern Africa have experienced less of a bounce back despite strong tourism and entrepreneurship.
That being said, Ncube stressed that certain risks need to be acknowledged that could not only hinder the growth of the less-developed economic areas in Northern and Southern Africa, but the entire continent. The usual dangers of political crisis and a rise in food prices are, of course, important factors to keep in mind, he warned. The real danger, however, seems to be the looming possibility that the global economy won’t recover from the recession, forcing Africa’s economies to become more specialized and commodity centered. To prevent this, Ncube noted, “what is missing in Africa is venture finance. There isn’t any in Africa.” So, while this is, without a doubt, a “great time to be marketing Africa” according to Ncube, African countries need to do more to ensure their security and longstanding sustainability in an unpredictable global economy.
Indeed, venture capital is needed at all levels of economic activity. Sky Fernandez and Lena Sene of the South African Chamber of Commerce in America describe the challenges of meeting the funding gap for small and medium-sized enterprises in Africa. See their first and second blogs to learn more!