Press Releases

IIF Publishes First-Ever Regional Overview on Sub-Saharan Africa

Sub-Saharan Africa: Growing Strong, Challenges Ahead

Washington D.C., November 7, 2012 —

  • The world’s second fastest-growing region for a decade

  • Robust 4.7% annual average economic growth rate since 2007

  • External debt levels have fallen dramatically, enabling greater access to global financial markets

  • Improved macroeconomic management and resource wealth helped raise inward investment levels

  • Capital inflows have shifted from official to private sector and have risen markedly

  • Attractive yields draw private investors

  • Future growth dependent on reinforcing political stability, improved governance and deepening market-based reforms

The Institute of International Finance (IIF), the global association of financial institutions, today released its first regional report on Sub-Saharan Africa (SSA), covering seven countries including Cote d’Ivoire, Ghana, Kenya, Nigeria, South Africa, Tanzania and Zambia. These together account for 65% of the region’s economy. The analysis, conducted by the Africa and Middle East Department of the IIF, reveals that the seven have achieved an average annual 4.7% rate of economic growth since 2007, a remarkably strong performance during the global financial crisis. Excluding South Africa, the rate was 6.5%.

Mr. George T. Abed, Senior Counselor and Director of the Africa and Middle East Department at the IIF, commented on the release of the report: “After emerging Asia, Africa is the fastest-growing region in today’s world. Many countries on the African continent have achieved great progress in stabilizing their economies and consolidating their rates of growth. What is remarkable about this outcome is that it has been achieved during a period of unprecedented global financial turbulence. There are challenges ahead for Africa, but the trend of solid growth of the past decade looks sustainable over the medium term.”

The report, based on several ground-level research visits to the region, states that this strong SSA regional economic performance has been underpinned by a more democratic political process and better macroeconomic management, aided by an extended commodity boom and significant debt relief. For six of the countries in the report (excluding South Africa) total external debt declined from 62% of GDP in 2003 to just 17% in 2011. Budget deficits remain a problem for some countries as governments struggle to contain wage demands.

Capital flows have shifted from the public to the private sector over the past decade and remain focused on FDI, primarily in the extractive sector, but more recently in the telecoms and retail sectors. During 2000-2011, FDI in the seven countries included in the report rose more than five-fold, from under $3 billion to $15.5 billion. However, attractive yields have also drawn in portfolio investors, especially in Ghana, Kenya, Nigeria and South Africa. In 2011 for example, the report estimates that inward portfolio investments totaled around $12.5 billion, more than half of which was directed towards South Africa.

Capital accounts and markets have become more open and, together with better governance, this has facilitated a rise in portfolio investment in the past few years. The stock of portfolio liabilities in the seven countries covered in the report rose from $21 billion in 2001 to $167 billion in 2010.

Foreign investors have tended to focus more on the fixed income market than equities in the past few years, particularly in South Africa, due partly to the large yield differential between the country’s government bonds and U.S. and European treasuries. Fixed income activity has in addition been particularly strong this year, as foreign funds positioned themselves ahead of South Africa’s inclusion in Citigroup’s World Government Bond Index (WGBI), and Nigeria’s entry into the JP Morgan GBI-EM bond index.

Mr. David Hedley, Deputy Director of the IIF’s Africa and Middle East Department, said: “The progress that several of these countries have made in the past few years is impressive. The report stems in part from a much higher level of interest in the SSA region from our members that have a global reach, as well as potential new members within the region. We aim to provide all members with sound, in-depth analysis and data that will help them focus their efforts in terms of their own plans for expanding operations in this frontier market.”

Previewing the challenges facing the African economies, Mr. Abed stated: “We should keep in mind that Africa’s recent strong performance has been materially aided by massive debt relief and a sustained commodity boom. The future global environment may not be so accommodating. The prospects for continued growth in Sub-Saharan Africa remain contingent on greater economic diversification and on reducing dependence on commodity exports. Progress on political stability remains fragile, and this needs to be reinforced by building strong institutions, cementing further the rule of law, and improving public accountability.”

Coinciding with the publication of this new report, the IIF is staging its inaugural Africa Financial Summit in Cape Town, South Africa, on November 12-13. This event, hosted by Standard Bank, the largest African bank by assets and earnings, will bring together more than 100 financial sector leaders from across the world, as well as from Africa, for substantive deliberation on the progress and prospects for African economies and financial markets.


Gary Mead
Tel: 202-682-7459
Fax: 202-775-1430