Sub-Saharan Africa tagged as growth "miracle"

Economic activity in sub-Saharan Africa (SSA) has expanded by more than 5% annually in the past three years – and a decade-long run of strong performance that was only briefly interrupted by the global downturn in 2009 – is expected to push GDP growth to 5.7% in 2013, well above that of the global economy. The IMF further said that most SSA economies are key participants in the solid expansion of the region.

In IMF’s World Economic Outlook October 2012, the institution predicted that 10 of the 20 fastest growing economies over the next five years will be African. Stable commodity prices, favourable policy environment and strong domestic consumer market will contribute to the region’s rapid industrial growth. Another important indicator is the high investor interest in the region, with foreign direct investments of about $31 billion expected to pour into emerging industries. Discoveries of oil, gas, and other minerals in African countries are also likely to trigger significant investments.

The same predictions have been put forth by the World Bank when its International Finance Corporation placed Mauritius in the 19th spot out of 185 countries in the world for "ease of doing business," which is above advanced economies such as Germany, Japan, and Switzerland. The report also had Rwanda at the 52nd spot as it reflects the positive results from the structural and institutional reforms under Rwanda Vision 2020, which aims to transform Rwanda into a middle-income economy by raising income per capita above $1,000 before 2020.

Nigeria, which ranks 131st in the list maintains its previous position, although some analysts believe that Nigeria has made substantial progress in its business environment and is now an attractive place to invest for multinational companies. Ghana, Botswana, Namibia and Zambia are also included in the list and rank well above the top 100.

The 185 economies the data set covered included: 46 economies in Sub-Saharan Africa, 33 in Latin America and the Caribbean, 24 in East Asia and the Pacific, 24 in Eastern Europe and Central Asia, 19 in the Middle East and North Africa, and 8 in South Asia, as well as 31 OECD high income economies. It measured and tracked changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and employing workers – areas that are considered important by foreign investors.

Booming consumer market
Strong domestic demand serves as a driver for growth in Sub-Saharan Africa, with consumer spending accounting for nearly 60% of GDP. Africa’s population is growing fast, with mass urbanisation inevitably driving industries – including plastics and rubber – into expansion. Sub-Saharan Africa currently has a population of 860 million, of which 400 million live in countries which have achieved a middle-income status or $1,000 per capita income. At present, 41% of Africans live in cities and, by 2033, it is projected that majority of the population will reside in urban areas.

A study by McKinsey showed that investors looking for a more lucrative market may very well focus on Africa where consumer spending is growing rapidly and where brand loyalty is strong. The consultancy estimated that consumer-focused industries could grow by as much as $410 billion across the region from 2012 to 2020. The study cited the contribution of the working age population whose share in the total population is rising by 2.5% from 2010 to 2020 as against the 0.5% in North America and 0.3% drop in Europe.