More NewsCommerzbank: Sub-Saharan Africa’s Crisis Resistance has Strengthened

Commerzbank: Sub-Saharan Africa’s Crisis Resistance has Strengthened

With economic growth of 6% forecast for 2014, sub-Saharan Africa continues to defy the weak global economy according to Commerzbank, which concludes in a new study that “the international financial crisis has scarcely affected the region.”

The bank suggests that this resilience partly reflects the region’s relatively low dependency on exports, amounting to less than 20%, to the ailing European countries. At the same time countries in the region rich in raw materials are benefitting from ongoing high prices for commodities, and are increasingly developing into lucrative growth markets arousing international interest.

Despite weaknesses in terms of the democratisation and efficiency of political institutions in individual countries, overall political and economic stability has increased. There are many reasons for the improved crisis-resistance. Debt relief on the part of the World Bank and the International Monetary Fund (IMF) has contributed to this, as has the increasing democratisation of countries, which also encompasses minorities, thus promoting stability and growth.

Infrastructure is Key

“An important key to the long-term increase in economic dynamism and the export earnings of sub-Saharan Africa is the development and improvement of infrastructure,” said Rainer Schäfer, head of Commerzbank’s country risk analysis.

To date infrastructure developments have essentially been geared to the transport of mineral resources and agricultural products. Although progress has been achieved at a number of ports, many land-locked states have had only limited access to cost-favourable transport by sea.

However, being a latecomer to ‘the global development carousel’ of the region also offers opportunities such as technological “leapfrogging”, the skipping of individual development stages, the study notes. It has been possible to tackle electricity bottlenecks, triggered by growing demand for energy in the wake of robust economic growth, from the very outset thanks to environmentally-friendly, cheap, and effective technologies.

“A great deal of appropriate opportunities open up to foreign investors with the corresponding know-how in the field of renewable energies such as solar technology, wind power, and biogas from biomass,” said Florian Witt, regional head of the Africa department at Commerzbank’s Financial Institutions. Ethiopia, Malawi and Mozambique have focused on biodiesel from the jatropha plant, which thrives in low-yield soils.

The study notes that its wealth of raw materials makes sub-Saharan Africa heavily dependent on the global economy. The key sectors produce for export, which generates hard currency for vital imports. The authors therefore include an analysis of how resistant sub-Saharan Africa is to external shocks and conclude that ongoing weak global economic growth has so far had only a limited impact on the region.

Discoveries of oil fields, such as in Angola, had placed the national economies on a firm footing. The economic ‘catching-up process’ was had strong momentum, which a weak global economy has not markedly slowed down. A further factor has the strategic significance which major economies such as China attach to sub-Saharan Africa, which has seen it attempt to safeguard its supply of raw materials, and prompted it to make further investment in the region.

“Even if the risk of external shocks cannot be fully excluded, we believe that the probability of a disaster hitting the countries of sub-Saharan Africa and severely affecting further economic development is, on the whole, low,” conclude Schäfer and Witt, whose findings tally with those of a separate
report on Africa by Standard Bank
.

Comments are closed.

Subscribe to get your daily business insights

Whitepapers & Resources

2021 Transaction Banking Services Survey
Banking

2021 Transaction Banking Services Survey

2y
CGI Transaction Banking Survey 2020

CGI Transaction Banking Survey 2020

4y
TIS Sanction Screening Survey Report
Payments

TIS Sanction Screening Survey Report

5y
Enhancing your strategic position: Digitalization in Treasury
Payments

Enhancing your strategic position: Digitalization in Treasury

5y
Netting: An Immersive Guide to Global Reconciliation

Netting: An Immersive Guide to Global Reconciliation

5y