In recent years developments in many Sub-Saharan Africa economies have caught the attention of international investors who are looking for higher returns in emerging markets. The end of apartheid in South Africa sparked increased interest in the region initially and, since then, many countries have undertaken reforms backed by the IMF and World Bank prompting debt relief from the official community.
Growth has risen and the external position has improved in a number of countries over the past decade, although there has been a wide divergence in performance across the region. Before slowing to 2.1% in 2009 as a result of the global economic crisis, growth for the region as a whole had averaged 6.5% in the five year period 2004-2008 while the combined current account had swung from a deficit of 2.9% of GDP in 2003 to a surplus in each of the three years leading up to the global downturn. Resource-rich countries have attracted an increased inflow of foreign direct investment and there is a renewed focus on gaining access to international capital markets and developing local markets. Several countries besides South Africa now have a formal credit rating and have issued international bonds over the past few years, including Ghana, Gabon and Senegal. Others such as Nigeria, Kenya, Tanzania and Zambia are actively considering tapping the markets in the near future.
Many challenges remain, however, including improving governance, reducing poverty and unemployment, strengthening public financial management, and enhancing infrastructure. Addressing these issues will be key to raising living standards, moving to a higher growth path and attracting more foreign investment.
Sub-Saharan Africa Publications
Country Publications
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South Africa: Modest Growth Buffeted by Headwinds
February 29, 2012Activity picked up towards the end of last year, driven by stronger growth in retail sales which were boosted by above-inflation wage increases and record low interest rates. This momentum may not be sustained in 2012, however, as household debt deleveraging and a squeeze on disposable incomes may constrain growth in private consumption. Fragile global economic conditions will also dampen demand for exports.
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South Africa: Monetary Policy Risks Evenly Balanced
February 15, 2012The low interest rate environment is likely to persist in 2012, even though inflation is once more above the top of its 3-6% target range. The steady rise in inflation in 2011 was driven mainly by a surge in energy and food prices that we expect to dissipate gradually as the year progresses. Underlying price pressures remain reasonably well contained, reflecting fairly modest growth in consumer demand and a still large negative output gap.
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Tanzania: External Vulnerabilities on the Rise
February 08, 2012Strong growth in recent years, fuelled by domestic consumption, resulted in a widening current account deficit (estimated at 14% of GDP in 2011). External financing is a challenge, but should be manageable with the support of international financial institutions.
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EMLC Survey Results: Sub-Saharan Africa
January 31, 2012For the first nine editions of our IIF Emerging Markets Lending Conditions (EMLC) survey, we aggregated the results from banks in the Middle East, North Africa, and Sub-Saharan AFRICA in a single group. In the latest survey, however, we expanded our sample of banks in Sub-Saharan AFRICA and now have sufficient participation to construct a separate Sub-Saharan index. According to the first version of this index, the current grim mood has not spared banks in Sub-Saharan AFRICA. The overall Sub-Saharan Bank Lending Conditions Index was 42.9 in the fourth quarter of 2011, signaling that bank lending conditions in Sub-Saharan AFRICA are deteriorating.
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Nigeria: Cutting Fuel Subsidies Signals Structural Reforms
January 26, 2012The removal of subsidies on petrol at the beginning of the year was met with stiff resistance from labor unions and civil society, resulting in a scaling-back of the price increase to about 50%. Despite the partial climb-down, it is nonetheless an important first step in the reform of the energy sector and will enable oil revenues to be channeled more effectively toward badly-needed infrastructure investment and for job creation and growth.
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Ghana: Oil, Handle with Care
December 16, 2011Ghana extracted its first batch of oil from the Jubilee field in December 2010, and has since steadily ramped up production to around 85,000 bpd. The impact on the economy has been immediate and tangible with a growth rate forecast for 2011 of about 15%. Ghana needs to appropriately address the challenges that come with oil. Such challenges include an efficient and accountable management of oil revenue, the construction of the physical infrastructure that is necessary for the oil sector, and the proper macroeconomic policy.
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South Africa: Pace of Fiscal Consolidation Slows
November 10, 2011A likely shortfall in revenue, due to recent weakness in economic activity, prompted the government to revise its estimates for the 2011/12 consolidated fiscal deficit to 5.5% of GDP. While the deficit still shrinks over the forecast period, consolidation will now be slower than envisaged in the budget and government debt will plateau at just over 42% of GDP in three years time.
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