Africa versus emerging markets : who is leading the race

Africa versus emerging markets : who is leading the race

The internal development of resources, infrastructure, and improvements in the governance are some of the ways in which the economic prosperity can be achieved.

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What are the growth perspectives of the african continent in the short terms, and how does it perform in comparison to other emerging markets such as China and India.

On one hand, Commodity prices have been substantially affected by the current slowdown of African economies major trading partners such as China and India.  African countries, whose economies have been relying on these commodities to sustain their developments have been seriously affected. In this respect, 2016 has been marked as the worst year for average economic growth for many African economies and in particular, has partially accounted for  Nigeria entering  into a new recession.

A major lesson from the current situation rests on the need for each african country to manage and diversify its economy in order to avoid an over-dependency on a single commodity.

Economic development of african countries have also been impacted by externalities such as the drought  and the uncertainty relating to trade policy direction in the US economy which have both affected the development of South AFrica’s economy. Social movements in Nigeria, have had a strong impact on the downsizing of oil production, and therefore on the situation of the country’s economic health, and have paved the way for Angola to become the largest oil producer in Africa in 2016.

Emerging Market- Economic Growth

In a similar pattern, other emerging markets such as China and India have also shown a timid growth. Even though  Chinese economy is largely supported by it

Huangjuewan highway inter-exchange

Huangjuewan highway inter-exchange

s government through it national policy of investments in infrastructure and exports, economic experts have forecasted that China’s efforts to boost its economy will come at a heavy price during President Xi’s next term. The International Monetary Fund (IMF) in effect, has urged the nation to focus on reducing the country’s very high amounts of corporate debt, currently growing at twice the rate of the country’s economy, and representing a serious threat of collapse.

Another major emerging market, India, has also experienced a decrease in its economic growth . This one is at its lowest since the last quarter of 2014. The reasons underlying India’s situation are mostly related to the country’s attempt to “demonetisate” its currency in november 2016 in an effort to curtail the shadow economy and crackdown on the use of illicit and counterfeit cash. Add corruption and dwindling trust of the entrepreneurs to the situation to this equation and you get a very depressed economy as an outcome .

Queue at Bank to Exchange INR 500 and 1000 Notes

Queue at Bank to Exchange INR 500 and 1000 Notes

Trade between Africa & Emerging Markets

The link between the african continent and the other emerging markets is very strong and obvious. Africa provides the energy and the resources that fuel the economic growth of China and India. If the commodity prices fail to pick up within the next six month, it may constitute, against all odds, a real opportunity for the African nations that may decide to focus their effort on diversifying their economies, and develop alternative sources of revenue . In this regard, countries such as Cameroon are already investing in IT infrastructure as a means to sustained a real economic alternative for its growth in the future.

What are the sound leads of diversification for african economies  ?

Economic development in Africa shows promises in terms of growth in the IT segment, clean energy initiatives, and an influx of new entrepreneurs in the region. The 2016 year end update by Earnest and Young depicted continued economic growth for Senegal, Kenya, Ethiopia, Côte d’Ivoire, and Tanzania. The political situation in the other regions such as South Africa is expected to stabilize eventually, leading to a trust-generating ecosystem that supports businesses  growth.

The over dependency of african economies on their commodities, and their dependencies with China and India has proven its limits. It is now time for african nation to focus and diversify their economy and invest on their own resources. There are many opportunities that can be availed by the African entrepreneurs and investors. The internal development of resources, infrastructure, and improvements in the governance are some of the ways in which the economic prosperity can be achieved. Eventually, when the international commodity prices rise again, Africa could be well positioned to create a global supply network with a much higher efficiency.

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