Nairobi has been named as an emerging hub for global start-ups. [Photo/nairaland.com]
The African Development Bank (AfDB) in conjunction with the Development Centre of the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP) have released the African Economic Outlook (AEO) 2017 report at the ongoing African Development Bank Group’s 52nd Annual Meetings in India.
For its 16th edition, AEO 2017 highlights that Africa’s economic growth slowed down to 2.2% from 3.4% in 2015 due to low commodity prices, weak global recovery and adverse weather conditions, which impacted on agriculture production in some regions. However, it is expected to rebound to 3.4% in 2017 and 4.3% in 2018.
Further, East Africa was the fastest growing region at 5.3% real GDP growth, followed by North Africa at 3%. Growth in other regions was anaemic, ranging from a low of 0.4% in West Africa, dragged down by the recession in Nigeria, to 1.1% in Southern Africa, with South Africa, the region’s largest economy, posting only 0.3% growth.
“Although economic headwinds experienced in the last two years appear to have altered the ‘Africa rising’ narrative’, we firmly believe the continent remains resilient, with non-resource dependent economies sustaining higher growth for much longer spell. With dynamic private sectors, entrepreneurial spirit and vast resources, Africa has the potential to grow even faster and more inclusively,” stated Abebe Shimeles, Acting Director, Macroeconomic Policy, Forecasting and Research Department, at the African Development Bank.
Africa’s growth increasingly relies on domestic sources, as shown by dynamic private and government consumption that combined, accounted for 60% of growth in 2016.
This growth also coincides with progress in human development: 18 African countries had achieved medium to high levels of human development by 2015. Finally, foreign direct investment, attracted by the continent’s emerging markets and fast urbanisation, stood at USD 56.5 billion in 2016 and is projected to reach USD 57 billion in 2017. Such investment has diversified away from the natural resources sector to construction, financial services, manufacturing, transport, electricity, and information and communication technology.
“The key to successful development in Africa is to nurture the emerging culture of entrepreneurship, to use the famous words of Hernando De Soto, “el otro sendero” (the other path) for development; a path that can unleash high-octane creativity and transform opportunities into phenomenal realisations,” said Abdoulaye Mar Dieye, Regional Director for Africa at the United Nations Development Programme.
Businesses with fewer than 20 employees and less than five years’ experience provide the bulk of jobs in Africa’s formal sector. Additionally, the advent of digital technologies and new business models is blurring the boundaries between manufacturing – which is now bouncing back at 11% of Africa’s GDP - and the services sector.
Cape Town, Lagos and Nairobi have been named as emerging hubs for global start-ups, especially in sectors such as financial technology and renewable energies.
“African economies cannot miss out on their next production transformation. Entrepreneurs should be lead actors in Africa’s journey into the fourth industrial revolution,” said Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary-General on Development.
According to the Outlook, Africa has high untapped potential for entrepreneurship. In 18 African countries for which statistics are available, 11% of the working-age population set up their own firms to tap specific business opportunities. This level is higher than in developing countries in Latin America (8%) and in Asia (5%). However, few of them invest in high-growth sectors, grow to employ more workers or introduce innovations to markets.