The apparent end to the commodity super-cycle has sent shock waves across the global economy. It has sparked turbulence in world stock markets, put pressure on currencies, and fuelled major concerns about prospects for growth and the stability of public finances.
Africa has not escaped this pessimism. Questions have been asked about the continent’s economic future, with widespread fears that the remarkable gains of the last two decades could be reversed. The mood reminds me of the IMF/World Bank meetings I attended at the height of the Asian Financial Crisis nearly twenty years ago, when analysts were predicting the Asian miracle was at an end. They underestimated the potential of Asia then, and I believe the potential of Africa is being underestimated now.
As someone who led the African Development Bank for a decade until 2015 and witnessed first-hand the continent’s economic transformation, I believe Africa is much more resilient than this current knee-jerk pessimism suggests. Instead, I believe that if the right policies are put in place and well-targeted private investment continues, the continent’s progress will actually accelerate.
I am not suggesting that the rise in demand and prices for commodities has not been important for Africa’s economic progress. But the continent’s turnaround began well before the commodity bull-run.
The focus on commodities has downplayed the importance of other sectors such as IT and services. Recent statistical reviews of the economies of countries such as Nigeria and Ghana, for example, have shown the size and growth of these sectors have been consistently under-estimated.
Nigeria, of course, as a major oil producer, is among the African economies more heavily dependent on natural resource revenues. For these countries, tough decisions will be needed to find alternative sources of revenues. There may be short-term pain, but many countries have seen the benefits of such reforms in the past
The reality, however, is that only a very few out of Africa’s 54 countries are heavily dependent on mineral wealth. It is investment and growth in regional trade and consumer demand, which have been the main drivers of their growth.
These economies – which include Côte d’Ivoire, Ethiopia, Kenya and Rwanda – stand to gain from lower oil prices. They are already seeing less pressure on their balance of payments.