The World Bank Group works in every major area of development. Find out what the Bank Group's branches are doing in South Africa. I needs to spend some time learning much more or understanding more. 0000002029 00000 n Not only did the quality of education increase, but the number of enrollees also had an effect on economic growth. So, what is the secret? This study note covers aspects of economic growth and development in South Africa. <>/Metadata 2831 0 R/ViewerPreferences 2832 0 R>> Our in-depth blogs and articles will take you deep into what is going on in the African economy right now, particularly in relation to the construction industry in sub-Saharan Africa. Together, such structural changes helped fuel an African productivity revolution by helping companies to achieve greater economies of scale, increase investment, and become more competitive. The achievement of progress in household welfare is severely constrained by rising unemployment, which reached an unprecedented 35.3% in the fourth quarter of 2021. This is to support the second phase of the government TreasurysCities Support Programme. "We now expect local economic growth to slow from 4.9% last year to 1.8% in 2022, under our baseline . There are many factors that have contributed to this steady rise, one among many is the new generation of workers who are far more educated. It has also affected other infrastructure such as water, IT, and service delivery (health and education). Africas rising consumption will create more demand for local products, sparking a cycle of increasing domestic growth. The key reasons behind this growth surge included government action to end armed conflicts, improve macroeconomic conditions, and undertake microeconomic reforms to create a better business climate. China, for example, has bid for access to ten million tons of copper and two million tons of cobalt in the Democratic Republic of the Congo in exchange for a $6 billion package of infrastructure investments,3 3. Lions on the move: The progress and potential of African economies. The conflict also affected the economys productive sectors, hydrocarbons, construction, and agriculture. Demand for commodities is growing fastest in the worlds emerging economies, particularly in Asia and the Middle East. This is not to say that African countries must follow an Asian model of export-led growth and trade surpluses, but they do need exports to finance the investments required to diversify. The conflict has affected all levels of economic life in the country. To start, several African countries halted their deadly hostilities, creating the political stability necessary to restart economic growth. Investment in humancapital enhances the workforce's ability to work and increasesproductivity. Attempts to build a democratic state post-Gaddafi rule disintegrated into a new civil war between rival governments in 2014. Measured in terms of purchasing-power parity (PPP), which takes into account the relative prices of nontradable goods in different countries. Key among these are the rate of investment, increase in the size of the workforce, and changes in economic policies. As for the agricultural side, agricultural raw materials are deemed more valuable locally and internationally. The unemployment rate is highest among youths aged between 15 and 24, at around 66.5%. Next, Africas economies grew healthier as governments reduced the average inflation rate from 22 percent in the 1990s to 8 percent after 2000. Africas long-term growth will increasingly reflect interrelated social and demographic changes creating new domestic engines of growth. Economic growth accelerated across the continent, in 27 of its 30 largest economies. As these countries diversified, their annual real GDP growth accelerated from 3.6 percent a year in the 1990s to 5.5 percent after 2000. Construction in Africa was quite demanding during those times. In 2022, Ethiopia experienced the highest inflation in a decade. Business can help build the Africa of the future. With IDAs help, hundreds of millions of people have escaped povertythrough the creation of jobs, access to clean water, schools, roads, nutrition, electricity, and more. Foreign exchange restrictions and mounting debt stretched the Horn of Africa countrys economy amid reports of massive government spending on the war effort. Perhaps the most surprising factor that affected the growth of the African economy is the price of metal. Political instability shortens policymakers timelines, leading to suboptimal short-term macroeconomic policies. Conflicts have marred Africa during the past several decades. Libyas conflict and political instability have also had a major economic impact on neighboring countries. Mining production fell while manufacturing production stagnated, as load-shedding and transport bottlenecks intensified. Gain a competitive advantage into the lucrative construction industry in sub-Saharan Africa with our in-depth construction market reports for sub-Saharan Africa countries. Through this, the construction sector in particular has significantly flourished. 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The GDP of African countries is expected to rise if conditions remain stable and if more innovations come rushing through the continent. This growth acceleration has started to improve conditions for Africas people by reducing the poverty rate. By 2014, the number of such households could reach 106 million. Of course, unforeseen factors like global pandemics cannot be avoided. Meanwhile, Africas labor force is expanding, in contrast to whats happening in much of the rest of the world. Finally, many Africans are joining the ranks of the worlds consumers. Gross Private Domestic Investment, or domestic investment for short, is getting more attention now more than ever. And the best thing about it is that the rest of the community andgovernments are also pushing for the same thing. The intensity of conflicts in recent years remains lower than that observed in the 1990s. The South African economy continues to recover from the effects of the COVID-19 pandemic, albeit more slowly than expected, with growth estimated at 1.9% in 2022. Thanks for excellent info I was looking for this information for my mission. These countries are diverse: some depend heavily on one commodity, such as copper in Zambia or aluminum in Mozambique. Meanwhile, Africa boasts an abundance of riches: 10 percent of the worlds reserves of oil, 40 percent of its gold, and 80 to 90 percent of the chromium and the platinum metal group. For countries in conflict, efforts should focus on limiting the loss of human and physical capital. 0000025811 00000 n September 21, 2022. 0000005192 00000 n I am a writer based in Kenya with vast knowledge in Business, Economics, Blockchain, Law and Environmental Conservation. Tantalum, in particular, has allowed the development of more powerful and compact electronics due to its unique conductive abilities. Natural resources accounted for just 35 percent of Nigerias growth since 2000, and manufacturing and services are growing rapidly. For China, the key factors driving its economic growth are domestic investment, trade openness, initial income, and rural share of the population. The diversified economies can also expand manufacturing, particularly in food processing and construction materials, for local and regional markets. Economic Growth and Trade. Determinants of Growth in Sub-Saharan Africa. Download an executive summary or read the full report. Data and research help us understand these challenges and set priorities, share knowledge of what works, and measure progress. The World Bank is supporting the implementation of a new wildlife initiative, a $8.9 million grant from the Global Environment Facility (GEF), to step up investment in South Africas wildlife and biodiversity sectors in the Kruger National Park, Addo Elephant National Park, and iSimangaliso Wetland Park. Factors driving down China's growth include inflation rate, domestic credit to the private sector, net ODA inflows, population growth, telephone density, and oil and agricultural/raw materials prices. But with the recent circulation of vaccines, and with the populace settling in again to the new normal protocols, things are starting to peak right up again. In the East Africa region, trade and investment barriers hinder economic integration and rapid population growth, including a growing youth population, complicate efforts to reduce poverty. Aligned with the South African governments National Development Plans for continued reforms to sustain economic recovery and reconstruction (for a more inclusive and resilient economy), the CPF charts a clear path for collaboration in the following focus areas: (i)increased competition and an improved business environment; strengthened micro, small, and medium enterprises and the supporting ecosystem to boost job creation; (ii) increased resilience to external (climate and health) shocks; and improvements in the infrastructure investment framework and selected infrastructure services. The authors wish to acknowledge the contributions of the following colleagues to this article: Martijn Allessie, Charles Atkins, Mutsa Chironga, Norbert Drr, Reinaldo Fiorini, Michael Kloss, Corrado Ruffini, Sven Smit, Amine Tazi-Riffi, Till Zeino-Mahmalat, and Nadia Terfous. Those are just the known reserves; no doubt more lies undiscovered. Subscribe to our email newsletter and stay updated. Economists have traditionally grouped them by region, language, or income level. A growing economy creates room for increasing electricity generating capacity. The economy experienced five years of contraction between 1982 and 1993. Measured in terms of purchasing-power parity (PPP), which takes into account the relative prices of nontradable goods in different countries. Global executives and investors must pay heed. Indeed, countries with and without significant resource exports had similar GDP growth rates. Growth in Sub-Saharan Africa is forecast to pick up to 2.6 percent in 2017 and to 3.2 percent in 2018, predicated on moderately rising commodity prices and reforms to tackle macroeconomic imbalances. Given the huge financial costs and the effect on Africas economic growth, it remains imperative to prevent the prevalence of conflicts. Hb```f````28(qHp]]B$@ j@Kg56FX@B,'\~(0keV>>yLRd2o8v61bpQa(dD Government spending from resource-generated revenue contributed an additional eight percentage points. 0000001160 00000 n Moreover, as openness of the economy increases, only high. This site uses cookies to optimize functionality and give you the best possible experience. Global data and statistics, research and publications, and topics in poverty and development, *Amounts include IBRD and IDA commitments, For project-related issues and complaints, The World Banks digital platform for live-streaming, Environmental and Social Policies for Projects, International Development Association (IDA), Country Partnership Framework (CPF)for2022-2026, Promoting Faster Growth and Poverty Alleviation through Competition. .chakra .wef-facbof{display:inline;}@media screen and (min-width:56.5rem){.chakra .wef-facbof{display:block;}}You can unsubscribe at any time using the link in our emails. 0000007040 00000 n Real GDP rose by 4.9 percent a year from 2000 through 2008, more than twice its pace in the 1980s and '90s. Aspects of this agreement have been challenged in court because of disputes over the mining rights. 0000008143 00000 n As of this writing, $6 billion has been finalized and $3 billion in funding is under discussion. Their cities added more than ten million people in the last decade, real consumer spending has grown by 3 to 5 percent annually since 2000, and 90 percent of all house-holds have some discretionary income. Companies already operating in Africa should consider expanding. They trimmed their foreign debt by one-quarter and shrunk their budget deficits by two-thirds. Our results suggest that domestic investment, net ODA inflows, education, government effectiveness, urban population, and metal prices positively and significantly affect Africa's economic growth. Altogether, the McKinsey report predicts $5.6 trillion in African business opportunities . stream 0000008939 00000 n Natural resources, and the related government spending they financed, generated just 32 percent of Africas GDP growth from 2000 through 2008.2 2. The continents growth also picked up during the oil boom of the 1970s but slowed sharply when oil and other commodity prices collapsed during the subsequent two decades. Rhino Bond investors agree to forego periodic interest coupon payments and instead direct the money to fund rhino conservation in two protected areas in South Africa. Wars, natural disasters, or poor government policies could halt or even reverse these gains in any individual country. The operation is the first budget support South Africa has received from the World Bank during the countrys post-apartheid, democratic era. Supported also by Switzerlands State Secretariat for Economic Affairs, it is in line with South Africas National Development Plan and Integrated Urban Development Framework. To be sure, urbanization can breed misery if it creates slums. Aside from metals, the spike in oil and agricultural products had a positive effect on the economy as well. Africa is expected to be one of the continents hardest hit by climate change, with increasing extreme weather events threatening the health of its people and economies. South Africa remains a dual economy with one of the highest and most persistent inequality rates in the world, with a consumption expenditure Gini coefficient of 0.67 in 2018. 3 0 obj 0000011740 00000 n But they increasingly export manufactured goods, particularly to other African countries. However, the war in the northern Tigray region, which began in late 2020, resulted in immense disruption. Others, like Kenya and Uganda, are already more diversified. Regional cooperation that would have propelled Africas economic growth in the larger context has also taken a blow from Libyas conflict. This elevated status translated to literacy levels of 88.4 per cent, a life expectancy of 74.5 years, and gender equality. crucial in the worlds fourth industrial revolution, the North African nation rose from one of Africas poorest countries to a continental leader, Ending Libyas political impasse could unleash limitless economic potential, How humanitarian crises hold South Sudan Hostage, BRICS New Development Bank breaks away from the US dollars dominance, Kenya looking East in search of new tourist source markets, Top gold crops in Africas agricultural industry. All focus areas are approached through a lens of harnessing the digital economy, empowering women and girls, strengthening public sector institutions and governance frameworks, and promoting integration and cooperation in the region and continent. Political instability and governance challenges have caused a significant loss of economic potential in Libya, estimated at $170 billion since 2011. Companies achieve greater economies of scale by spreading their fixed costs over a larger customer base. But in many African countries, urbanization is boosting productivity (which rises as workers move from agricultural work into urban jobs), demand, and investment. Alan Gelb, Vijaya Ramachandran, and Manju Kedia Shah. With all the necessary ingredients for further expansion, they stand to benefit greatly from increasing ties to the global economy. 0000008657 00000 n 0000006609 00000 n Aspects of this agreement have been challenged in court because of disputes over the mining rights. .chakra .wef-10kdnp0{margin-top:16px;margin-bottom:16px;line-height:1.388;}What is the World Economic Forum on Africa? ODA, or official development assistance, is a type of government aid provided for the stimulation of businesses, projects, trades, and other economic players. It forms part of the WBGs Digital Economy for Africa Initiative (DE4A), a collaboration between the African Union and the WBG. Rising oil prices have lifted their export revenues significantly; the three largest producers (Algeria, Angola, Nigeria) earned $1 trillion from petroleum exports from 2000 through 2008, compared with just $300 billion in the 1990s. 0000010318 00000 n In June 2022, the International Monetary Fund said growth likely fell to 3.8 per cent for 2021-2022 because of the war, a sharp fall in donor financing, and strained economic activity from the conflict. The socio-economic and fiscal fallout of the coronavirus pandemic and the geopolitical and geo-economic ramifications of the war in Ukraine, which threaten food security and Africas economic growth, further complicate the regional outlook for peace and political stability. The views expressed in this article are those of the author alone and not the World Economic Forum. Many economies in sub-Saharan Africa grew at a record pace before the pandemic. History shows that as countries develop, they move closer to achieving both of these objectives. According to the Institute for Economics and Peaces Global Peace Index 2022, five of the ten least-peaceful countries globally were in Africa. The economy in the entire continent has definitely taken a hit from COVID-19. The report provides insights and shows South Africa has good potential to continue to grow and expand its digital economy by building on its strong foundations, in particularly by including playing a regional leadership role to boost digital infrastructure and skills. Farmers have also benefitted greatly from the price increase. Now, more than half a decade later, the plan to have a steady growing economy is working. The annual flow of foreign direct investment into Africa increased from $9 billion in 2000 to $62 billion in 2008relative to GDP, almost as large as the flow into China. Already, spending by consumers and businesses in Africa totals $4 trillion. Hello constructafrica.com owner, Your posts are always well received by the community. Ethiopia represents a prime example of how political instability impedes Africas economic growth. 0000002007 00000 n However, the DRC has endured decades of violence and conflict throughout the Great Lakes region. The territory of the DRC is rich in vast natural resources that can drive prosperity for itself as well as Africas economic growth but political instability stands in the way. If you wish to read more Africaeconomy facts, make sure to subscribe to ConstructAfrica today. 6 Leading Factors for Africa's Economic Growth In the past, Africa has relied a lot on foreign direct investments to fuel its economies. 4 0 obj Keywords South Africa Education Economic growth Citation Download an executive summary or read the full report, Lions on the move: The progress and potential of African economies. Employment growth picked up in the first half of 2022, but the labor market situation remains challenging. We take another approach, classifying 26 of the continents largest countries5 5. At the same time, mass-migration as a result of flooding or droughts could put resources such as food, water and housing under pressure in areas less affected. Looking ahead, these diversified economies face the challenge of continuing to expand exports while building a dynamic domestic economy. Rolling scheduled power cuts (load-shedding) started in 2007 and have intensified exponentially, reaching close to 9 hours daily in 2022. Throughout Gaddafis reign, the administration launched ambitious social programs in housing, health, education, public works, and electricity. Domestic services, such as construction, banking, telecom, and retailing, have accounted for more than 70 percent of their growth since 2000. Our framework is useful for understanding how growth opportunities and challenges vary across a heterogeneous continent. Africa's economic pulse has quickened, infusing the continent with a new commercial vibrancy. The South Africa Financial Sector Development and Reform Program Phase 2 (FSDRP 2) is a five-year Bank technical assistance program, launched in September 2018, with a contribution from the Swiss State Secretariat for Economic Affairs. Ethiopia and Rwanda, for example, saw some of the fastest expansions in the worldan average of more than 7.5 percent per year over the past two decades. i\^_&T(HF-'7R{~oxc08!(iIj5UW0(%-|/n{g=:_UUje\mMiB D&TpS6d8Zg*xuwMY1'Q^f*pn;Re~(4e:~D6R,1=6ZV8,U4>?H!Z"Aa 8Z2I4C1 j=CI#46,Hrk[C. After declining through the 1980s and 1990s, the continents productivity started growing again in 2000, averaging 2.7 percent since that year. These factors affect not only productivity, but also efficiency. Although imperfect, this framework can guide business leaders and investors as they develop strategies for Africa and can provide new perspectives for its policy makers. Nigeria privatized more than 116 enterprises between 1999 and 2006, for example, and Morocco and Egypt struck free-trade agreements with major export partners. Anyanwu has observed that African countries have a high dependence on mineral exports for foreign revenues. We have developed a framework for understanding how the opportunities and challenges differ by classifying countries according to levels of economic diversification and exports per capita. Calls for the betterment of the people, rather than the extraction of resources, can be heard from far and wide. In a departure from previous strategies, the government has signaled its intent to make greater use of International Bank of Reconstruction and Development (IBRD) financing under the CPF. 0000006587 00000 n This paper decomposes manufacturing import growth rates in a selected set of large industrial and developing countries (five industrial and eight developing) and measures the relative contributions of domestic demand and market share changes for two separate periods 1991/92 - 2001/02 and 2001/02 - 2007/08. Type above and press Enter to search. Undeniably, the study has revealed that the general financial inclusion, penetration and availability dimension, . Inequality remains among the highest in the world, and poverty was an estimated 63% in 2022 based on the upper-middle-income country poverty line, only slightly below its pandemic peak. Libyas situation quickly descended into a destructive conflict during its political transition. The level of education is widely accepted as a factor in economicgrowth. The DPL supports the implementation of South Africas Economic Reconstruction and Recovery Plan, including priority reforms. Today, 40 percent of the continents one billion people doa proportion roughly comparable to Chinas and larger than Indias (Exhibit 2). A feasibility study and cost-benefit analysis for using bail-in as a recapitalization mechanism in South Africa (the Flac study) was published by the World Bank in December 2020 to provide guidance to the SARB on implementing bank resolution secondary legislation. Today Africa reports high levels of unemployment among other social issues causing governments' instability and low economic growth. These relationships involved investment, trade, and the presence of migrant workers from the three countries in Libya. Next, Africa's economies grew healthier as governments reduced . Inequality in wealth is even higher, and intergenerational mobility is low, meaning inequalities are passed down from generation to generation with little change over time. Fewer people lived below the poverty line in Gaddafis era compared to leading countries like the Netherlands. READ MORE: Ending Libyas political impasse could unleash limitless economic potential. By 2030, that share is projected to rise to 50 percent, and Africas top 18 cities will have a combined spending power of $1.3 trillion. Inflation in sub-Saharan Africa has risen significantly in the past two years. Supporting South Africas Just Energy Transition. At the time of Gaddafis ouster,Libya had Africas highest life expectancy and GDP per capita. A high volume of exports, plentiful natural resources, longer life expectancy, and higher investment rates have positive impacts on the growth of per capita gross domestic product developing countries. Domestic consumption is the largest contributor to growth in these countries. During that period, many African and Arab countries recognized and admired Libya. The factors that affect economic growth include political systems, social settings, economic freedom, human capital and institutional organization. Manufacturing and services account for just one-third of GDPless than half their share in the diversified economies. World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use. It also serves as the point of entry to the . Urbanization has a key role in the economys rise, too. The oil exporters generally have strong growth prospects if they can use petroleum wealth to finance the broader development of their economies. South Korea: Finding its place on the world stage. The continents four most advanced economiesEgypt, Morocco, South Africa, and Tunisiaare already broadly diversified. To be sure, many of Africas 50-plus individual economies face serious challenges, including poverty, disease, and high infant mortality. But in the long term, internal and external trends indicate that Africas economic prospects are strong. Economists regard political instability in Africa as a severe malaise harmful to economic performance. %PDF-1.3 % 0000030284 00000 n In that period, global analysts considered Libya a high-development nation in North Africa and the Middle East. From 1990 through 2008, Asias share of African trade doubled, to 28 percent, while Western Europes portion shrank, to 28 percent, from 51 percent. endobj 0000005145 00000 n TheWildlife Conservation Bond (WCB), also known as the Rhino Bond, (a $150 million IBRD bond) is the worlds first species impact bond linking investment return (under a bond issuance to conservation performance) to allow private and institutional investors to participate in a market that is historically a focus of donor and philanthropists. This approach can help guide executives as they devise business strategies and may also provide new insights for policy makers. Schwab Foundation for Social Entrepreneurship, Centre for the Fourth Industrial Revolution, Africa's future is innovation rather than industrialization. AFRICAN economies have shown impressive growth rates over the past 10 years, averaging over 5 percent. in incomeabove which they start spending roughly half of it on nonfood items. These trends have prompted growing social demands for government support, which could put the sustainability of public finances at risk if they are to be met. 0000008635 00000 n The remaining two-thirds came from other sectors, including wholesale and retail, transportation, telecommunications, and manufacturing (Exhibit 1). Manufacturing and services together total 83 percent of their combined GDP. Brain drain, low gross domestic product (GDP) per capita and growth reported across the continent requires an initiative on driving entrepreneurship development. The percentage of the population living below the upper-middle-income country poverty line fell from 68% to 56% between 2005 and 2010 but has since trended slightly upwards, to 57% in 2015, and is projected to have reached 60% in 2020. In addition to immeasurable human suffering, conflicts impose large economic costs.