Loaded for Bear: Several African economies are growing fast, and they are not resource-intensive

Sub-Saharan Africa accounts for nine of the world’s 20 fastest-growing economies in 2024, according to the International Monetary Fund (IMF).

And while oil production is fuelling this expansion in a couple of notable cases, in general the fast growers are leaving their resource-intensive peers in the dust. 

As a new scramble gets under way in Africa for gas and the green metals needed to power the global decarbonisation drive, this state of affairs underscores the point that resource wealth is not a panacea for the region’s economic ills and can often be a curse.

To wit, Niger leads the way with estimates for a blistering growth pace of 9.9%, while Rwanda is on pace to clock 7%. Benin, Ivory Coast, Senegal and Ethiopia are set for growth rates of 6% or more. 

A handful of these growth spurts are linked to hydrocarbon production. But it is revealing to note that petrol states that have been in the oil game for decades – such as Angola, Nigeria, Gabon and Equatorial Guinea – do not figure in the top 20. 

Niger and Senegal’s performances are largely linked to oil production, but they are newcomers on this front. And this is what typically happens when a small, underdeveloped country starts producing hydrocarbons: it gets a growth gush off a low base. 

In the longer run, this initial surge slows, and such economies are extremely vulnerable to the commodity cycle, which takes no prisoners. 

“Over the past 10 years, growth in sub-Saharan Africa’s resource-intensive countries (RICs) – and especially in fuel-exporting economies such as Angola, Chad, and Nigeria – has slowed down sharply, falling far below growth in non-RICs,” the IMF said in a recent note.

“Indeed, incomes in RICs have essentially stagnated. This marks a sharp contrast with the decade leading up to 2014, when RICs experienced rapid growth, in line with the region’s strong overall performance.”

RICs include the likes of Ethiopia and Rwanda. In Rwanda’s case, it must be said that its economic data needs to be taken with a big pinch of salt. Critics of Paul Kagame’s sinister regime claim that Kigali cooks its economic books more thoroughly than a potjiekos. 

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The IMF says the divergence the past decade between the RICs and the non-RICs stems from two factors.

“First, RICs and especially fuel exporters experienced a dramatic decline in their commodity export prices around 2014-15, as the commodity ‘super-cycle’ – a period of sharply rising commodity prices – came to an end. Since then, the terms-of-trade decline has only been partially reversed,” it says. 

“Second, and critically, the impact of the terms-of-trade shock on RICs was exacerbated by pre-existing structural vulnerabilities, including a poor business environment, limited human capital, weak governance, and poor management of resource revenues.” 

“Poor management of resource revenues” effectively means siphoning, stealing and squandering.

“Weak governance, systemic corruption, and an unfavourable business climate take a toll on productivity and output – and the effects are most striking when commodity prices fall,” the IMF notes. 

Reversing this trend is urgent since RICs account for about two-thirds of sub-Saharan Africa’s gross domestic product (GDP) and population. And the social consequences are dire. 

“Compared to children in other parts of the region, a child born in a RIC today is expected to live four years less on average, and is 25% more likely to live in poverty,” the IMF says. 

(Source: World Economic Outlook / International Monetary Fund)

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