This year’s African Economic Outlook looks at recent macroeconomic development and structural changes in Africa. The latest trends include the following: 1) the recovery in economic growth has been faster than envisaged (real output growth increased to 3.6% in 2017, up from 2.2% in 2016, and is expected to accelerate to 4.1% in 2018 and 2019), especially among non-resource-intensive economies, which underscores Africa’s resilience, 2) structural change is taking place, but slowly; Africa’s recent growth and poverty reduction has been associated with a decline in the share of the labour force in agriculture (especially for rural females) and an increase in the productivity of the labour force, 3) although the proportion of poor people in Africa declined from 56% in 1990 to 43% in 2012, the number of poor people has increased; inequality has also increased, with the Gini coefficient rising from 0.52 in 1993 to 0.56 in 2008 (the latest figure available), and 4) Africa’s recent high growth rates have not been accompanied by high job growth rates (between 2000 and 2008, employment grew at an annual average of 2.8%, roughly half the rate of economic growth) and slow job growth has primarily affected women and youth (aged 15–24).
Recommendations for policymakers include: 1) putting in place programmes and policies aimed at industrialization, starting with modernizing the agricultural sector, 2) investing in human capital, particularly in the entrepreneurial skills of youth, 3) implementing reforms for attracting foreign direct investment in industries with strong competitive potential and thus allowing the private sector to create enough ‘good jobs’, 4) developing policies that empower the poor and low-skilled workers so that they can take advantage of the new opportunities that arise with structural transformation, and 5) developing infrastructure and optimizing the use of existing infrastructure by putting in place effective institutional arrangements. Furthermore, Africa should not wait for the international community to understand the potential global benefits of industrialization or to finance the infrastructure gap. The continent should adopt a more pragmatic approach to financing – infrastructure needs (USD 130–170 billion a year) leave a financing gap of as much as USD 108 billion. For an overview of new and innovative financing mechanisms, see chapter 4 of the report. To address this financing gap, African countries have a wide variety of options available, beyond foreign aid (e.g. remittances, foreign direct investment, market finance, and tax revenue).
It should be noted that African industrialization is beneficial to the global economy. For example, increased production of capital and consumer goods in G20 economies and in Africa would put into motion several multiplier effects, generating further demand for intermediate inputs, augmenting incomes, and increasing employment, which would generate an estimated 7.5 million jobs in the G20 economies.