According to EY, Africa is on an upward curve. The World Bank has indicated that the continent could be on the verge of an economic takeoff, much like China was 30 years ago.
Growth is underpinned by a longer term process of economic and regulatory reform that has occurred across much of the continent since the end of the Cold War, a period during which inflation has been brought under control, foreign debt and budget deficits were reduced, state owned enterprises privatized, regulatory and legal systems strengthened, and many African economies opened up to international trade and investment.
Most African economies proved resilient through the global financial crisis, with the sub-Saharan region, for example, rebounding very strongly from a slight dip in 2009 to grow, according to International Monetary Fund (IMF) estimates, by more than 6% in 2012. EY highlights that the region is expected to grow by more than 7% in 2013, and by an average of almost 8%/y over the 2014 – 2018 period.
As an aggregate market, Africa is large: according to the IMF, in purchasing power parity terms, its GDP share of the world total was estimated at approximately 4% in 2012, which is almost equal to India and greater than Russia and Brazil. Business leaders are planning new developments and expanding existing ones, demonstrating why Africa’s share of new global foreign direct investment (FDI) projects has improved recently.
Looking forward, EY outlines that capital investments are forecast to grow to US$ 150 billion in 2015 and create more than 350 000 jobs per year. Although Africa currently attracts more than 5% of global FDI projects, EY believes this does not reflect the increasing attractiveness of the African growth story. Although Africa’s proportion of global FDI has grown to some extent over the last decade, it does not accurately reflect a region that has one of the fastest economic growth rates and highest returns on investment in the world.
For information on how the oil and gas industry has contributed to African economic growth see also 'Oil and gas in Africa'.
Adapted from a report by Emma McAleavey.
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