1. Weekly Commentary
QNB Economics
economics@qnb.com.qa
January 19, 2014
Could Sub-Saharan Africa Be the Next China?
Sub-Saharan Africa (SSA) continues its rapid
growth momentum. According to the latest
QNB Group estimates, the subcontinent grew by
5.0% in 2013 and is expected to reach 6.0%6.5% this year on the back of high investment
spending and a growing middle class. This
makes it the second fastest economic growth
performance in the world and begs the question:
could SSA be the next China? According to QNB
Group, strong infrastructure investment and
continued prudent macroeconomic policies will
be essential if the African subcontinent is to
achieve double-digit growth and reach emerging
market status.
down into single digits. More importantly, this
has enabled millions of Africans to escape
poverty and reach middle class status.
Real GDP Growth
(% change)
1980-1994
1995-2013
Ethiopia
Mozambique
Rwanda
Tanzania
The economic renaissance of the African
subcontinent started in the mid-1990s.
Following years of corruption and economic
mismanagement, a new generation of African
leaders started on the difficult path of structural
reforms with support from the International
Monetary Fund (IMF) and the World Bank. This
required bringing inflation under control,
increasing tax collections, reducing wasteful
subsidies, and redirecting government spending
toward long-term investments in human capital,
like education and health. At the same time, the
international community granted most SSA
countries generous debt relief that enabled them
to exit from an unsustainable debt burden
accumulated during the 1970s and 1980s.
The results of this economic renaissance have
been remarkable. From stagnation and high
inflation in the 1980s, several African countries
have managed to grow rapidly for the last two
decades under moderate inflation. Countries like
Ethiopia, Mozambique, Rwanda, Tanzania and
Uganda on average quadrupled their real GDP
growth rates, while bringing inflation generally
Uganda
Average
-2
0
2
4
6
8
10
Sources: IMF World Economic Outlook and QNB Group analysis
Behind the macroeconomic statistics though, an
even more interesting story about the SSA
economic renaissance emerges. While SSA
economic growth was primarily linked to
international commodity prices in the past—
cocoa, copper, crude oil, etc.—the new growth
drivers are increasingly linked to a rising African
middle class. For example, SSA is the fastestgrowing mobile phone market in the world:
mobile licenses grew at an average compound
annual growth rate of 44% during 2000-12,
according to the GSM Association. This has
unleashed a digital dividend that extends from
mobile banking in Kenya to the launch of smart
taxi cabs in South Africa. Another important
driver is the rise of the African consumer.
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2. Weekly Commentary
According to a 2012 study by McKinsey &
Company, the SSA consumer industries will
grow by USD400bn during 2012-20, representing
the single-largest business opportunity in the
subcontinent. This growth is driven by Africa’s
population—the fastest growing and youngest
in the world—being increasingly urbanized,
educated and digitally-savvy.
What is stopping SSA from growing faster and
becoming the next China? According to QNB
Group, the next phase of the African renaissance
will need to be driven by large infrastructure
investment
and
continued
prudent
macroeconomic policies to support the rapid
QNB Economics
economics@qnb.com.qa
January 19, 2014
growth in other sectors of the economy. As
many have experienced while traveling in
Africa, airports are overcrowded, electricity
supply is unreliable, ports are inadequate and
roads are mostly unpaved. What is needed is to
fill this infrastructure gap to enable the
subcontinent to reach double-digit growth. This
will need skillful policies for governments to
finance such large investments while avoiding
another unsustainable debt burden that could
cripple the fiscal discipline achieved during the
last two decades. With strong infrastructure
investment and continued prudent policies, the
African subcontinent will undoubtedly turn into
an economic might.