African economies often seem like victims of divine whimsy. Most of the continent’s workers are farmers, reliant on the rains. Much of its wealth comes from oil and minerals, at the mercy of markets. When prices are high, as they were in the first decade of the century, Africa booms. But in recent times drought and a commodities slump have stymied growth. In 2016 economies in sub-Saharan Africa grew by just 1.4%, the slowest rate for two decades.
Now the gods are smiling, faintly. Commodity prices are up. Better harvests have helped reduce inflation. Governments in the region have already sold about $12bn of international bonds in 2018, a full-year record. In its latest regional update, published this week, the IMF forecasts growth across sub-Saharan Africa of 3.4% this year.
Abebe Aemro Selassie, the director of the IMF’s African department, plays up the potential for faster growth. “The question I ask is why isn’t a country growing at 6 or 7%?” But he frets that the recovery is fragile. Rising debt or a weaker world economy could stop it in its tracks.
Aggregate figures for the region are driven by three big economies, all recovering from recession. Nigeria and Angola stumbled when oil prices fell; in the former, militants also choked off production by blowing up pipelines. Both made their situation worse by trying, quixotically, to prop up exchange rates. They have now seen some sense. Nigeria partly eased restrictions on its currency last year to encourage investment and is pumping more of the black stuff. Angola has let its currency slide by 28% against the dollar this year, though the adjustment will make it costlier to repay dollar-denominated debts.
South Africa, the third big beast, is also on the mend. Cyril Ramaphosa, its new president, took over in February with promises to lure $100bn of investment and stop the rot in state-run firms. That was enough to save the country’s only investment-grade credit rating. But Mr Ramaphosa will struggle to achieve many of his goals because of infighting in his party, the African National Congress, says Azar Jammine of Econometrix, a consultancy. One in four jobseekers can’t find work.
These three countries are less of a drag on regional growth than they were (see chart). But their recoveries are modest. The IMF expects that income per person will shrink in all three in 2018, for the fourth consecutive year. This mirrors a wider trend. In 12 countries with about one-third of the region’s population, incomes per person declined last year. They will fall again in most of them this year.
Instead, the sprightliest performers are a group of midsized economies, from Ivory Coast to Tanzania, with sustained growth rates above 5%. Most import oil. Their cities are swelling and they are reaping the rewards of innovations like mobile banking. Many (though far from all) have sound economic policies. Most are holding down inflation. Their consumer class is small but growing. And politicians are cutting plenty of ribbons. Kenya and Ethiopia have new railways. Senegal has a new airport. Public investment has added to growth in the short run. It could help in the long run, too, if better infrastructure boosts trade.
But three risks loom. The first is public finances. Governments have borrowed heavily to replace oil revenues or fund capital projects. The median level of public debt rose from 30% of GDP in 2012 to 53% last year. The median country’s interest payments now swallow a tenth of revenues. Six governments are already in a debt crisis. Anzetse Were, an economist in Kenya, questions whether public investments there will do much for productivity. She thinks some of the money may have been diverted into private pockets.
A second risk is the world economy. Distant trade wars could crimp demand for African raw materials. Hikes in American interest rates would push up the cost of refinancing debts. And the oil price is still too low for many African exporters. Even if it doubled, Cameroon and Nigeria would still not balance their books.
The third risk is politics. Elections typically rip holes in public budgets and can cause months of uncertainty. The only thing worse is not holding a vote at all. In the Democratic Republic of Congo, while billionaires bicker over cobalt, the president is driving his country off a cliff.
Some think growth rates are a distraction. “We don’t see it,” says Courage Gamli, a Ghanaian barman, of his country’s recent spurt. The numbers are only a rough guess: a rebasing of the calculation next month may add more to Ghana’s GDP than several years of actual growth. A more basic problem is how to share the benefits. “The economy is growing but it’s not translating into jobs,” says George Boateng of the African Centre for Economic Transformation, a think-tank in Accra.
In 2002 some 57% of Africans were extremely poor, based on the World Bank’s benchmark income of $1.90 a day. In 2013, after a long resource-fuelled boom, 42% were. More children were in school; fewer died young. There is reason to worry, then, when the IMF says that regional growth will hover below 4% for the next few years. Since populations are rising, income per person will creep up by barely 1% a year. That makes Africa look more like Italy than China. Better keep praying.