African revival shifts east, a report by Deutsche Bank

Africa has been one of the fastest growing regions in the world over the past decade on a half. One popular view is that this is simply a manifestation of the super cycle in commodities and strong demand from China in particular.

A report explains that there are good reasons for this. Firstly, the region is heavily dependent on natural resources and its fastest-growing economies have tended to be the more resource-intensive ones.

Furthermore, the structure of most African economies has also changed little as compared to other regions. Agriculture still accounts for the majority of employment.

On the other hand, poverty rates are falling but only slowly as the benefits of growth have increased, this fluctuation has been disproportionately to the elites.

Critics argue that this is not good news for the region given the transition to slower and less resource-intensive growth in China.

Most countries in Africa are energy importers and will benefit from lower oil prices. Many are also largely producers of soft commodities, which should be less sensitive to the slowdown in capital spending in China. Even among the oil producers, support for reforms that proved elusive when revenues were booming may now be forthcoming.

Last month’s election of Muhammadu Buhari in Nigeria on a strong anti-corruption platform could prove to be an opportunity.

A report by Burgess and Schaffnit-Chatterjee at Deutsche Bank, the region’s centre of economic gravity will shift towards the less resource-intensive countries of East Africa, including Ethiopia, Kenya, Mozambique, Tanzania, and Uganda. These countries are economically more diverse and beginning to form a relatively large and well-integrated regional market.

Investment flows, including from China, already causing a shift in that direction.

The repost insists that the East African countries stand a better chance of delivering the structural transformation that will be needed to create jobs. This will be critical as half of the one billion new workers set to join the global labor force over the next twenty five years will do so in frontier Africa.

 

Download a complete report by Deutsche Bank here.

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