Transforming Africa's Economies

Africa made impressive economic progress in the 1990s. Several countries sustained double-digit growth. The climate became more conducive to domestic and foreign investment. Capital markets broadened and deepened. demand for African manufactured goods increased in Europe and the United States. And in the Second half of the 1990s real GDP growth in Africa averaged 4% a year, exceeding the continent's high population growth rate of 2.8% a year. Export growth nearly doubled, to 8% a year. The recent economic recovery is reason for renewed optimism. But the recovery's sustainability is fragile - for two reasons. First, strong domestic savings do not underpin it. Second, Africa's economies remain vulnerable to outside shocks. Indeed, economic growth in the 1990s averaged only 2.1% a year, less than population growth of 2.8% and considerably less than the 7% growth needed to reduce by half the share of Africans in poverty by 2015, the internationally agreed target. The constraints on Africa's development do not preclude rapid and sustained growth. Instead, they point to the tasks ahead for Africa to develop and to eradicate poverty. Growth and development are possible if African governments and their development partners work hard to reverse the long-term constraints and structural factors behind the continent's poor economic performance. The key to achieving sustainable growth and reducing the vulnerability of African economies to outside shocks is transforming the structure of these economies. This will ensure that competitive industries produce high value-added products that can compete in the global marketplace. Achieving these goals requires an annual investment rate of about 40% of GDP.