Africa’s growth slows down, but rate still above global average

NAIROBI (HAN) May 16.2016. Public Diplomacy & Regional Security News. Economic growth across Africa is likely to remain slower in the coming years than it has been over the past 10 to 15 years, according to Ernst & Young (EY).

The firm stated that the main reasons for a relative slowdown are not unique to Africa and are the same as those weighing down the global economy. Reasons include: a general slowdown in emerging market economies, and in particular the rebalancing of China’s economy; ongoing stagnation in most developed economies; lower commodity prices; and higher borrowing costs.

Despite the relative slow down, EY states that two-thirds of Sub-Saharan African economies are still growing at rates above the global average, and will remain the second fastest-growing region in the world for the foreseeable future, after emerging Asia.

“From an investment perspective, the next few years may be challenging – this is not because the opportunities are no longer there, but rather because these opportunities are likely to be more uneven than they have been. It is now more important than ever for organizations and investors, who sometimes place to great an emphasis on shorter term economic growth trends, to adopt a granular, fact-based approach to assessing investment and business opportunities for the long-term,” said Sugan Palanee, Africa Markets Leader at EY.

The fact that opportunities still remain high on the continent is further supported by the year-on-year increase in FDI project numbers in Africa in 2015 that occurred in a context in which the total number of FDI projects globally dropped by 5 percent.

Statistics show that Africa was one of only two regions in the world in which there was growth in the number of FDI projects over the past year.

EY’s attractiveness index shows that, despite macroeconomic challenges and a low-growth environment, South Africa still outperforms most other African economies.

The index also shows that Botswana, Mauritius and Rwanda, although small markets, have all got a strong track record in areas of business enablement, social development and economic management, and so perform relatively well.

The index also puts high growth economies like Ethiopia, Tanzania and Uganda in the top 10 score line in terms of macroeconomic resilience.