13 November 2013
Prospects for strong and sustainable growth in Africa are looking positive, with the continent now being better managed, Reserve Bank Deputy Governor Daniel Mminele told the second Institute of International Finance Africa Financial Summit in Johannesburg this week.
Africa’s resilience to the financial crisis can be partly explained by the rise in commodity prices, said Mminele.
“Africa has been increasingly better managed, with the improvements in governance helping to promote an overall conducive environment to growth and development. There has been a steady rise in the contribution of domestic demand to gross domestic product [GDP],” he said.
Mminele said central banks could make a meaningful contribution to growth by keeping inflation in check and creating an environment of financial stability.
“While most of the structural reform imperatives fall outside the mandate of central banks, I believe that central banks, by keeping inflation in check and creating an environment of financial stability, can make a meaningful contribution.”
Mminele said that to be effective in Africa, central banks had to fulfil more traditional roles: “Monetary policy can only play a facilitating role in enhancing the productive capacity of the economy.”
Many African countries are experiencing a rapid growth in the middle class. Estimates by the African Development Bank show that consumer spending by the continent’s middle class reached US$680-billion and accounted for 25% of Africa’s GDP in 2008. This figure is projected to reach $2.2-trillion by 2030.
“On the supply side, the rise of the services sector has been one of the defining characteristics of the structural change in African economies,’ Mminele said. “Telecommunications, banking and the retail sector have been flourishing in many countries.
“This has contributed to the improvement in Africa’s growth prospects which, in turn, has attracted the attention of foreign investors.”
Africa is regarded as an attractive investment destination by multinational investor groups that are keen to benefit from intra-Africa trade opportunities. Many investors that already have operations in Africa are looking to expand their footprint.
“As expected, multinationals from South Africa have seized the opportunity to expand their production networks across the continent. The number of projects in Africa originating from South Africa has increased by over 500% in the past decade,” said Mminele.
Between 2010 and 2013, South African multinationals made foreign direct investments (FDI) investments in 18 African countries. In 2012, South Africa invested in more new FDI projects in Africa than any other country in the world.
However, infrastructure, education and training remain the key challenges for the continent, Mminele said.