A quarter of the countries in the Sub-Saharan Africa region posted growth exceeding 7% last year, underscoring the region's economic boom.
Excluding laggard South Africa, the SSA countries collectively clocked 5.8% growth last year, compared to the 4.9% averaged by the rest of the developing world, according to the World Bank's latest report on the region published on April 15.
The region is expected to continue its impressive growth in the next two years, averaging 5% in 2013 and 5.2% in 2014.
"Increased investment flows are supporting the region's growth performance, with investment-to-GDP ratios increasing by an average of 0.5% points per annum over the past decade," said the bank. "In 2012, for instance, net private capital flows to the region increased by 3.3% to a record USD 54.5 billion, notwithstanding the 8.8% decline in capital flows to developing countries."
The region attracted foreign direct investment (FDI) valued at USD 37.5 billion last year, a 5.5% improvement over the previous years as natural resources, minerals and hydrocarbons in West and East Africa emerged as investment magnets.
"While the extractive industry sector dominates in terms of the value of overall FDI flows, investment in the services sector, notably among infrastructure-related projects in construction, transportation, electricity, telecommunication and water, has been expanding," the bank said.
Large economies with significant populations such as Nigeria, South Africa and Kenya also saw investments pouring into retail and consumer banking by foreign institutions.
Indeed, Africa is an attractive investment destination. The United Nations World Investment Report 2012 noted that data on the profitability of FDI -- i.e. FDI income as a share of FDI stock -- showed a 20% return in Africa in 2010, compared with 14% in Latin America and the Caribbean and 15% in Asia."
And the growth has not remained restricted to resource-rich countries.
"Even though resource-rich countries have been growing faster on average during 1996-2011, some resource-poor countries such as Ethiopia, Rwanda, and Mozambique have also grown fast, driven by services and agriculture," said the bank.
"In contrast, in Angola, Nigeria and Zambia - three of Africa's longstanding resource-rich and faster growing countries - resource rents and services make up the lion's share of growth."
Tapping bond markets
Spurred by investor confidence, African countries have also tentatively tapped the international market for growth. Zambia issued a debut 10-year USD 750 million euro bond last year, which was oversubscribed. Others like Ghana, Namibia, Nigeria and Senegal have also dipped their toes in the international debt market in recent years.
Meanwhile, South Africa and Nigeria - the region's two largest economies - have been included in the indices of global financial institutions such as Citibank, JP Morgan and Barclays Bank, which has allowed African countries to tap into a global investor base.
Earlier this year, the International Finance Corporation - a member of the World Bank - said it will issue a USD 50 million denominated in the Nigerian naira currency to support the country's domestic capital markets.
"Vibrant domestic capital markets are the foundation for lasting growth--and in Africa, they can mobilize capital to close the financing gap for key sectors such as infrastructure and housing," said Jingdong Hua, IFC vice president and treasurer.
"The IFC Naira bond will be a milestone achievement as we continue to work with governments and local authorities to strengthen domestic capital markets in the region."
Last year, the IFC also launched its Pan-African Domestic Medium-Term Note Program, targeted at Botswana, Ghana, Kenya, Namibia, Rwanda, South Africa, Uganda, and Zambia.
Impoverished nations
While the region has made huge economic, political and social strides, poverty levels remain stubbornly high throughout Sub-Saharan Africa.
Poverty head counts in resource-poor countries fell from 65% in 1995 to 49% by 2011, which suggests at least half the population in many countries still lives below the poverty line.
Resource-rich countries have not been able to move the needle too much either, falling from 47% in 1995 to 40% in 2011 despite significant improvement in GDP growth, according to World Bank data.
And these figures may even be misleading. The bank notes that GDP rates are often calculated on outdated population rates, which may understate actual poverty levels.
Despite the progress, the region is far from making a significant dent in poverty levels.
"African countries will need to bring more electricity, nutritious food, jobs and opportunity to families and communities across the continent in order to better their lives, end extreme poverty and promote shared prosperity," said the World Bank's Africa vice president Makhtar Diop.
"Without more electricity and higher agricultural productivity, Africa's development future cannot prosper. The good news is that governments in Africa are intent on changing this."
© alifarabia.com 2013
