A recent Economist article addressed the hopes in Africa to stimulate the world economic growth. In the recent ten years, Africa has been catching up with Asia in terms of GDP growth and is likely to become the fastest growing area in the world.
A general account of Africa can be found at The history of Africa, by BBC. McKinsey has published an analysis on this topic (full article here). The McKinsey Global Institute (MGI) has found that resources accounted for only about a third of the growth in Africa, with the remaining two-thirds resulted from internal structural changes stimulating the economy. Wars, natural disasters, or poor institutions could prevent growth in certain countries. But in the long-term, internal and external trends indicate that Africa’s economic prospects are strong. The authors suggest two reasons:
First, Africa has benefited from the rapidly rising commodity prices in the past decade. “Oil rose from less than $20 a barrel in 1999 to more than $145 in 2008. Prices for minerals, grain, and other raw materials also soared on rising global demand.”
Second, the governments in African countries have taken the initiative to end armed conflicts and improve macroeconomic and microeconomic environment to create a better business environment. Examples are the privatization of State Owned Enterprises in Nigeria between 1999 and 2006 and the struck free-trade agreements with major export partners in Morocco.
African countries have diverse growth paths. The four most developed African economies—Egypt, Morocco, South Africa, and Tunisia—are already quite diversified. Some countries rely heavily on oil exports, such as Libya and Nigeria. There are transition economies, like Ghana and Kenya, which have begun the process of diversifying sources of growth. Some of these countries depend heavily on one commodity. Also there are economies such as the Democratic Republic of Congo and Ethiopia which still need to strengthen the basics. “The key challenges for this group will include maintaining the peace, upholding the rule of law, getting the economic fundamentals right, and creating a more predictable business environment.”
There are barriers to the economic growth in Africa as well, and health and education are some of the most salient ones. But the high investment returns there and the rich resources, along with changing structures of African economies, means the continent is likely to become the engine for global economic growth in the years to come.