NEW YORK – Africa’s economy has demonstrated a marked resilience through what has been one of its toughest years. Despite the deadly Ebola epidemic and political instability in certain regions, predictions show that the African economy is expected to grow.
The OECD 2015 forecast has been scaled back from 5.7 percent growth to a slightly more modest 4.5 percent, but this remains positive news for a continent which has historically shown turbulent growth rates. Even more surprisingly, Africa has shown a certain degree of immunity to the recent downturn in the prices of international commodities such as crude oil, which fell by more than half from June 2014 to January 2015.
The numbers economists and researchers have seen are promising. West Africa, which was severely impacted by the Ebola crisis, reported growth of about 6.0 percent over the past year, and Nigeria, although it was not as affected by Ebola, showed growth of 6.3 percent. It is worth noting that Nigeria’s growth was sparked by non-oil sectors, which is a positive sign given that Nigeria relies partly on oil to support its economy.
Another boost may be given to Africa’s economy throughout the predicted population boom, which is expected to double the current population by 2050. Economic growth was seen in China and India after major population increases and it is hoped that Africa’s boom will have similar results. To successfully accommodate this uptick, Africa must absorb an additional 23 million young workers into labor market.
To take on the growing number of work-ready youths, African businesses could benefit from expansion and further development, which may result in the ability to hire more employees and continue to grow the economy at a sustainable rate.
GOAL, a humanitarian INGO working to alleviate struggles such as poverty, hunger and a lack of education abroad, believes that partnerships between local African enterprises and larger corporations are the solution to developing the economy. The key to fostering strong partnerships can be found in shared value projects; however, a survey by GOAL and the Michael Smurfit Graduate Business School found that although 80 percent of those asked were aware of the meaning of shared value, only 18 percent actually partook in it.
One of Africa’s major challenges is that it is not yet involved enough in global value chains, or GVCs, which would help it to unlock the potential held by its local markets. Participation in GVCs would require countries to develop more products that would require an international chain of production, such as technology or automobiles.
Secondly, it is not uncommon that African enterprises are too small to truly expand due to a lack of risk capital. Many local businesses make use of microfinanace, allowing them just enough money to invest in their enterprises, but not enough to significantly grow them. Additionally, these companies may not have a developed business strategy, leaving them ill-prepared to connect with a larger, more powerful partners.
GOAL believes that this is where INGOs come in. One of GOAL’s success stories involves Microsoft4Afrika, an initiative helping to introduce more technology into Africa to encourage economic development. GOAL is working alongside Microsoft4Afrika to create a mobile app that will enable farmers in Uganda to reach out to buyers and markets as well as financial institutions, insurance providers and weather forecasters.
GOAL states, “It is envisioned that the new app will help increase the agricultural efficiency, productivity and incomes of many thousands of smallholders. Paddy Barr [a Microsoft executive]will help build the business capacity of private-sector agricultural platform providers, potentially to host the new mobile phone app.”
It is hoped that the app will grow tech firms not only in Uganda but also in Zimbabwe. In its explanation of the anticipated ripple effects Devex states, “These technology businesses work in turn with finance providers, social enterprises, aggregators, and mobile phone companies to strengthen the local business ecosystem and create opportunities for some of the world’s most marginalized communities.”
It is possible that new opportunities like these could be obtained by some of the African youths looking for employment. As Africa continues to grow in economy and population, partnerships remain an effective way to promote development and continued improvement throughout the region.
– Amy Russo