Is Africa Suffering From Global Problems?

We often have great news to report on this site with regards the African economy.   There are many positive economic and social stories from across the continent, apart from a few obvious problem areas like Zimbabwe.  However there are some worrying economic indicators that suggest that the growth in Africa is not continuing unaffected by the general global problems.

Last year, African exports to China fell a massive 38% whereas in the other direction Africa imported more than 3.6% more – obviously not good news for African suppliers and producers.   Worst still in many ways was that foreign direct investment fell by about 40% in the first half of the year, without such investment infrastructure changes that are still needed will move very slowly.

Obviously China has suffered it’s own problems over the last 12 months and in some ways it highlights how dependent African growth is on the Chinese economy.   It is not inevitable that a Chinese slowdown will be matched by one in the African economy however it is very likely particularly as other countries are similarly affected and hence less likely to invest and buy from African businesses.

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Of course, investment is dependent on all sorts of considerations and in the past political instability has been one of the major problems.  Nowadays that is less of a problem in most countries but it has been replaced by other issues such as terrorism and climate change.    The effect of climate change has actually been cited by the World Economic Forum as one of the biggest risks to world economic development  and in Africa especially.

Ethiopia which has enjoyed some great economic success is now experience the biggest drought in decades,  IN Zambia there are issues with power deficits and problems with a weak currency.  Fiscal deficits and currency shortages are affecting many countries such as Angola and Nigeria.   There are a host of other problems which are severely impacting the African economic growth potential too.

The  good news that despite challenging global economic and local issues, the fundamentals that have attracted high levels of investment to Africa still remain.  There is a still a massive potential in the continent and there has definitely been improvement in overall levels of education, health and infrastructure in most countries.  Yet attracting more investment to Africa is essential and it will take more than a simple slidehow video maker to bring  the sort of finance required to make a real impact.

The story has changed in Africa and yet the positive developments over the last few years means that success is still possible,   It is important that African governments continue to transform their economies and invest wisely in their businesses.  It is likely that economic development could be fuelled by the agricultural sector – the one area where Africa has a potentially huge competitive advantage over the rest of the world.

John Collins