On June 10th, 2016, the Bretton Woods Committee hosted a virtual conference entitled Regional Spotlight: Economic Outlook for Sub-Saharan Africa. The event featured Roger Nord, Deputy Director of the IMF’s Africa Department, and Bretton Woods Committee Member Carolyn Campbell, Founding Partner and Managing Director of Emerging Capital Partners (ECP).
Nord began the discussion with a brief summary of the IMF Regional Economic Outlook’s main findings, reporting that 2015 growth in sub-Saharan Africa fell to its lowest level in 15 years. He described a tale of two Africas; one that has been hit hard by falling commodity prices, especially in the oil sector, while the other, including countries, such as in Cote D’Ivoire and Tanzania has seen fairly robust growth. He asserted that sub-Saharan Africa, as a whole, is going through a difficult but temporary rough patch.
Despite near term conditions, Nord stated that long-term growth prospects for the region have the potential return to 6+% annual growth. To reach renewed prosperity, he prescribes a short-term adjustment to the new reality of low commodity prices through fiscal adjustment and adaptive exchange rate policy.
For the medium and long term, and in order to return to higher levels of growth characterized during the “Africa Rising” period, he outlined three main policy priorities: raising more domestic revenue separate from the oil sector; strengthening competitiveness through stronger business infrastructure; and creating more inclusive growth by lessening income and gender inequality. He stressed the importance of ensuring the region’s demographic dividend as an opportunity rather than a threat. By 2035, over half of the entrants into the global workforce will come from sub-Saharan Africa. This offers tremendous growth potential if countries can provide health, education, and competitive job training to leverage the next generation workforce.
Campbell followed Nord’s remarks with an overview of her firm’s investment strategy in the region and how it has evolved over time. Their initial investments 15 years ago were primarily in infrastructure; their funds now include investments in financial services and consumer businesses. ECP is taking advantage of domestic spacing opportunities, underpinning Campbell’s optimism in the region’s long-term growth prospects. Campbell argued that continued development and reform--including more inter-regional trade negotiations to reduce double taxation--will be critical to achieving this growth potential.
Campbell claimed that East Africa is one of the most fertile regions in the continent for investment. Its relative proximity to Asia has created opportunities for Asian sovereign investments, trade agreements, and coastal infrastructure investments that have bolstered growth and continue to create new opportunities. Increased integration in East Africa will correspond with an increased capacity for growth. In this vein, Campbell believes that it is important to look not only at linkages between countries, but also linkages between large cities. East Africa’s large cities have comparative advantages that pose compelling prospects for future economic efficiency.
Nord offered insight into the roles that the IMF and other IFIs can play in encouraging investment from the private sector. Multilaterals can assist countries in creating an enabling regulatory environment, providing guidance on debt sustainability, as well as establishing a framework for public-private partnerships. For institutions and regulations to work, risk must be balanced between African governments and the private sector.
Nord and Campbell agreed that Africa must invest in energy infrastructure to expand access and provide electricity alternatives. Volatile oil prices and severe dependence on oil sales as the majority of government revenue is unsustainable. The speakers shared an optimistic long-term outlook for the sub-Saharan African economy and see China’s enormous investment in the region as an indicator of potential prosperity.
The virtual conference concluded with Q&A from audience participants, where Nord and Campbell addressed questions on economic diversification, infrastructure investment from public and private sectors, debt sustainability, spillovers from South Africa into the neighboring countries, and a discussion about the merit of the oft-made comparison between East Asia and other emerging markets including sub-Saharan Africa.