Technology supports faster growth in Africa
Rapid-Growth Markets Forecast: July 2013
Advances in information technology and communications have helped sub-Saharan African economies to grow by 5% a year for the past decade.
We expect most sub-Saharan countries to grow faster than the world average for the next 10 years (see chart below).
Sub-Saharan Africa: annual GDP growth*
*Compound annual growth rate.
Source: Oxford Economics
Natural resources will remain an important growth driver, although the trend toward economic diversification will continue.
The three largest economies in GDP terms — South Africa, Nigeria and Angola — have substantial natural resources at their disposal.
Africa is attracting more FDI
Natural resources are a big attraction, but the potential benefits available from technological progress have helped make Africa a more attractive investment location.
Our Africa attractiveness survey 2013 highlights the key role of FDI in African growth in years to come, as a source of:
- Job creation
- Skills development
- Technology transfer
Penetration of modern technology offers new opportunities
Mobile telephone penetration is now over 50% in every major sub-Saharan country.
With the majority of the population having access to modern communications, this has several advantages:
- Banking and insurance: Mobile banking has surged in recent years, allowing people even in remote areas to manage their finances electronically. Industry sources estimate that there are 1.7 billion people worldwide without bank accounts, but with access to a mobile phone.
- Education: The rise in virtual learning could bring huge benefits in terms of knowledge and skills.
- Health care: The rapid spread of information is already having a positive impact on the quality of health care.
Technological advances have raised potential growth across Africa
The increasing use of mobile technologies could help sub-Saharan economies to catch up fast, by freeing up capital constraints and sharing skills and information.
Private credit already accounts for over 100% of GDP in South Africa and nearly 40% in Kenya. This facilitates start-up businesses and enables more efficient markets to develop.
If physical infrastructure, such as roads and power supplies, is improved (FDI may help with this), both international and intra-African trade will benefit.
We expect intra-African trade to grow strongly, compensating for a relatively subdued medium-term growth outlook in more developed regions.
Improved macroeconomic stability is needed
Technological improvements alone will not secure these benefits, however. Stable macroeconomic conditions are also needed.
For example, Ghana has tripled its per capita income since 1992, when reforms ended over 30 years of political troubles.
This stability has encouraged foreign investment, and Ghana recently began exporting oil for the first time. It has also become the first African country to meet the Millennium Development Goal of halving its 2000 levels of poverty and hunger.
Despite rapid economic growth in recent years, progress toward reducing corruption, ease of doing business and improving infrastructure has been slower.
But if continued progress can be secured through the rise in mobile technologies, the potential for even faster growth exists.