Africa increasingly less dependent on commodity prices

The drop in commodity prices will be one of the major challenges facing the global economy this year – with Africa especially hit due to its high production of iron ore and oil. But the good news is that sub-Saharan Africa (SSA) is becoming increasingly less dependent on commodity prices for its economic survival. “Although the region’s economic growth rates for 2015 have been downgraded by the International Monetary Fund (IMF) from 5.8% to 4.9% – on the back of falling oil prices – a number of countries in sub-Saharan Africa are increasing their diversity through recent structural changes to their economies,” said Dr Lyal White, director: Centre for Dynamic Markets at the Gordon Institute of Business Science (Gibs). He added that, despite the downgrade, SSA had outstripped global growth every year for the past 15 years and Africa would continue to surpass international growth averages by between 2% and 3%. So that’s the good news. But White cautions that the many challenges affecting the global economy will impact Africa too. “In 2015, increasingly more African markets will be exposed to structural deficiencies (such as a lack of skills to implement a structural change in the economy), progressively weaker institutions and poor competitive performance,” he commented. Market uncertainty in the European Union, China’s major growth slowdown – the biggest since 1990 – and a lack of clarity around the renewal by the United States of the African Growth and Opportunity Act (Agoa) could significantly impact SSA’s forecast growth. “Furthermore, there are some important elections coming up in key African markets and the world is holding its collective breath to see how well these go. Unfortunately, if socio-political issues arise on the continent, most African countries are tarred with the same brush,” he pointed out. INSERT & CAPTION The continent hasn't built up the necessary trade institutions to ride out the global market volatility. – Dr Lyal White