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Can Africa sustain its economic growth momentum?

November 25, 2010

dangoteForget the days when the image of Africa in the developed world was one of rolling vistas of unspoilt safari parks, natural disasters and war.

In the last 10 years, western firms and investors have been showing much greater interest, ploughing increasing investment flows into the continent of 1 billion people.

In its World Economic Outlook, the IMF predicts sub-Saharan Africa will grow by an average of 4.7 percent this year, a rate that is second only to Asia.

Africa offers a higher rate of return on investment than any other region in the world, Razia Khan, regional head of research for Africa at Standard Chartered Bank in London, told a Thomson Reuters Newsmaker event this week.

Foreign direct investment has shown strong growth over the last few years, with more than half coming friom Asia in the second quarter of this year alone.

But some investors wonder whether the continent can sustain this kind of growth rate, especially since crises elsewhere in the world, such as the sovereign debt crisis in the euro zone, have prompted a flight of capital to safe havens.

Lack of affordable sources of long-term funds for businesses and corruption can also compound the problems.

Aliko Dangote, the founder and chief executive of Nigeria’s Dangote Group, which had a turnover in excess of $2 billion last year from operations in 10 African countries, told the event that while even he encounters challenges while doing business in Africa, the profits still outweigh the challenges.

Analysts like Khan say the continent’s abundant human capital, the elimination of trade barriers through increased regional integration and investment in infrastructure and the social sectors will ensure the continent can continue to enjoy healthy growth.

But the question remains. How will Africa’s economic story pan out? Can the continent in fact sustain such growth rates over the long term?

Picture:  Chief Executive of the Dangote Group, Aliko Dangote, speaks near the shadow of Standard Chartered’s Regional Head of Research Africa, Razia Khan, at a Thomson Reuters newsmaker conference in London, November 23, 2010.   REUTERS/Luke MacGregor


There is no doubt that Africa offers the highest rate of return on investment than anywhere in the world at the moment and in years to come, but if this growth is not translated into employment, basic amenities and infrastructure for the common man, then it wouldn’t be sustained. The people have to feel part of the growth, also with the current crop of leaders we have now, I doubt it, a lot needs to change for African growth to be sustained and attract more foreign investment.

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