The Underpinnings Of Africa's Growth Boom
BMI View: Sub-Saharan Africa's robust economic growth performance of the last decade has been more than a commodity-based boom and we therefore believe that economies in the region will prove more resilient to lower commodity prices, which we are forecasting on the back of our below-consensus view on Chinese growth, than many fear. Greater political stability, improved macroeconomic management and sovereign profiles and infrastructure development - particularly in the telecoms sector - have all been at least as important as high commodity prices.
Sub-Saharan Africa's (SSA) growth boom since the turn of the century is well-documented and undisputed. Indeed, in the period between 2000 and 2012, the region's average annual, GDP-weighted growth rate was 5.3%. Excluding South Africa - which drags the overall average down with its large weighting and slow growth rate - the region expanded by an average of 6.3% during the period. This compares to an average growth rate of 2.4% during the 1990's and 2.0% in the 1980's. What is more debated is what the main driver of this growth has been. Because the period of robust expansion has come at a time when commodity prices have been elevated, some observers argue that SSA's strong performance has largely been a resource boom. This obviously raises questions about what the prospect of lower commodity prices, which BMI is forecasting on the back of our below-consensus view on Chinese economic growth, will mean for the growth trajectory of SSA economies in the years ahead. While high commodity prices have certainly helped commodity exporters through increased production and investment, we believe that the expansion has been relatively broad-based, fuelled by a strong performance of domestically-oriented sectors.
The data support this view. As the first chart illustrates, on an average annual basis sectors such as construction, transport and communications and wholesale and retail trade have expanded more quickly than both the SSA economy as a whole and the mining and utilities component in particular during the growth spurt of the 2000s. As such, the mining and utilities component has seen its contribution to total output contract over the course of the decade. This not only suggests that strong growth has been about more than just resources; more importantly, it indicates that SSA economies, in general, will prove more resilient in the face of lower/falling commodity prices, than they have been in the past.
|Domestically-Oriented Industries Booming|
|Sub-Saharan Africa - Average Annual Growth Of Sectors, 2002 - 2011|