According to the report, which is aimed at helping businesses make investment decisions and governments remove barriers to future growth, political risk factors such as instability and corruption remain the main barriers that discourage investment in Africa.
The fifth edition of the annual survey, by global accounting firm Ernst & Young, acknowledges that economic growth in 2015 is “likely to be at its slowest in five years,” due to the impact of lower oil prices on “the Nigerian and Angolan economies, as well as South Africa’s sluggish growth.” Though the continent overall annual economic growth is the lowest in five years, some parts of the continent will enjoy steady economic growth, the report states. “Ethiopia, Kenya, Tanzania, Mozambique, Zambia and Cote d’Ivoire are among 22 economies in Sub-Saharan Africa that are expected to grow by more than five percent this year.” For instance, the survey reveals that by attracting 32 foreign-direct-investment projects in Ethiopia, which accounts for only 4.4 percent of total FDI projects in Africa, the country generated “an astonishing 18.5 percent of FDI jobs in Africa.” “The inflow reflects the combined attractions of Africa’s second-largest population, numbering 94 million, and an affordable workforce,” the report found.
In spite of global economic stagnation, existence of security threats and challenges in North and West Africa, and widespread corruption across the continent, it has been widely acknowledged that Africa, in recent years, has enjoyed continuous economic growth. According to World Bank, FDI inflows to the region grew 16 percent to a near-record of $43 billion in 2013, boosted by new oil and gas discoveries in many countries including Angola, Mozambique, and Tanzania. It's no coincidence that more than 400,000 new companies were registered on the continent in 2013, according to African Development Bank. The International Monetary Fund estimates economies in sub-Saharan Africa will grow 5.8 percent in 2015, compared with three percent in the United States and 7.1 percent in China. In assessing the past decade of economic performance in the continent, The Economist stated in their June publication that “Africa was among the world’s fastest-growing continents—its average annual rate was more than 5 percent—buoyed in part by improved governance and economic reforms.”
The paradox is that like the previous years, the humanitarian and security situations in many parts of the continent in 2014 and 2015 are particularly concerning. In addition to fragile security situations in some parts of the continent, trade among African countries still remains very limited, mainly because of poor infrastructure connectivity. It is also quite true that many African countries lack sufficient economic diversification and productivity and that is why fluctuating oil and commodity trading prices affect economic development in Africa in general. But still various economic institutions predict that African countries are among the few which still score steady economic growth.
Even though investor perception declined, there is good news for the continent. The EY’s attractiveness survey indicates that due to foreign direct investment 188,400 new African jobs were created. Meanwhile, “capital investment into the continent surged to $128 billion, up 136 percent. Spurred by a handful of megadeals, the average investment increased to $174.5 million per project, from $67.8 million in 2013” the survey found.
Moreover, the survey indicates “Africa’s share of global capital investment and job creation hit an all-time high in 2014. Only Asia-Pacific attracted more FDI funds than Africa last year.” Despite increasing optimism regarding Africa's economic progress, many underscore that agriculture must be at the heart of any economic development, because most Africans, including the vast majority of Africa’s poor, continue to live and work in rural areas, principally as smallholder farmers. In the absence of transforming agricultural sector structurally, the majority of Africans will be cut adrift from existing development promises.BLOG COMMENTS POWERED BY DISQUS