By: Twumasi Duah-Mensah
*Contrary to ‘popular’ belief, Ghana is not expected to have a larger economy than the United States by 2035.
If you’ve seen some stories about the fastest-growing economies in the world, you might’ve noticed that of the top ten economies forecasted to grow the fastest, six of them are in sub-Saharan Africa, with the fastest being Ghana.
According to the World Bank, which uses GDP (gross domestic product) growth to measure which country’s economy will grow the fastest, Ghana’s GDP will grow by 8.3%.
Here are the other nine countries:
- Ethiopia – 8.2%
3. India – 7.3%
4. Côte d’Ivoire – 7.2%
5. Djibouti – 7%
6. Cambodia – 6.9%
7. Bhutan – 6.9%
8. Senegal – 6.9%
9. Tanzania – 6.8%
10. Philippines – 6.7%
2018 is expected to see an improvement in GDP growth for most sub-Saharan African countries. But economists are ambivalent about this growth.
While it is a great improvement from the 2014 oil price crash, economists are also quick to note what caused African economies to be hit so hard by the crisis in the first place: an over-dependence on oil. Economists are also wary of declaring that Africa is “rising” after a similar narrative arose before the 2014 crash.
This article will explore the crash (without all the complicated economics) and the deeper problem lying within African economies that are stunting economic growth.
Note – I’m mostly referring to sub-Saharan Africa when I talk about “Africa.” That is to say, I’m not referring to North African countries like Egypt or Morocco.
Africa Was Rising…
It was the best of times. And then it was the worst of times.
United Nations magazine Africa Renewal tells a story of a time long ago—when Africa was rising.
Angola. Chad. Ethiopia. Mozambique. Nigeria. Rwanda. Sierra Leone. These were all African countries on the rise just four years ago. There was a middle class rising. A middle class of tech-savvy entrepreneurs who bought the latest cars, smartphones, and clothes.
Africa was rising.
And then, it was falling. Down. To the ground. Fast.
…And Then It Wasn’t…
2014 was the year that the commodity price crash started. This meant that exports like gold, natural gas, copper, and oil especially became significantly less profitable. And the African countries aforementioned were very dependent on these commodities to make profit.
It forced countries like Saudi Arabia to expand their economy past oil—which led them to allow women to drive, as they needed an expanded workforce with unique skills.
It plunged countries like Venezuela into chaos—with no way to escape.
African countries didn’t suffer on the same level as Venezuela, but they certainly did not fare well. At all.
Oil prices were as high as $115 in 2014; in February 2016, they had fallen to $35. Copper prices fell to their lowest point since 1998 in February 2016. In June 2016, iron prices were one fourth of what they were in 2011.
If 2014 was the year that Africa slipped and fell, then 2016 was the year that it hit the ground. When it hit the ground, the continent of 1.216 billion felt the pain pulsate over and over and over.
Inflation rose with reckless abandon. Whole currencies had become worthless. Investors and companies ran away and took people’s jobs and livelihoods with them.
The prices of goods—like food that people desperately needed—rose. People didn’t have the income to afford these price increases.
Some countries like Ghana and Zambia desperately negotiated with the International Monetary Fund (IMF) for bailout loans. Without them, they would not be able to pay their exorbitant debt, and would collapse.
Africa was in deep pain.
…But It Came Back…
Soon, the healing process began. As commodity prices rose, the GDP growth of African countries rose. Income rose as investors and companies cautiously crawled back.
This leads us into this year: 2018. The GDP growth projections are encouraging, but it’s more of a recovery than another phase of “Africa rising.” Speaking of, let’s go back to that list.
The six African countries in the top ten for projected GDP growth are ones who are less reliant on commodities than other countries who suffered the most from the drop in commodity prices, showing the importance of African countries having more than one or two major industries to rely upon (i.e. diversification).
But the question is not if diversification is a must, but how to develop industries to diversify a country’s economy.
Experts recommend investment in other industries like agriculture Agriculture employs 60% of Africans on the continent and is the primary source of food and income for the continent. A growing population also makes the development of agriculture a must to produce food for a perennially starved continent.
To keep up with the rapid increase in demand, African farmers need new technology, better infrastructure, consistent electricity, and policies that promote agriculture as a viable sector. African farming also needs to adjust to the effects of climate change, something that the World Bank has worked to address by investing $16 billion in a new plan.
While African countries have slowly started to come back from their economic crises, they still have a long way to go to keep pace with the ever-changing world. They desperately need to rely on more than a few industries to avoid another bust like in 2014. Time will tell as to whether Africa can not only rise, but truly rise from its ruins.