African na­tions race to $1 tril­lion mark

Lesotho Times - - Business -

AT­LANTA — Nige­ria is set to be the first African coun­try with an econ­omy larger than $1 tril­lion, ac­cord­ing to the lat­est pro­jec­tions from the US Depart­ment of Agri­cul­ture.

Africa’s most pop­u­lous na­tion, which re­cently held peace­ful elec­tions, re­vamped its gross do­mes­tic prod­uct data in 2014 and pulled ahead of South Africa to be­come the con­ti­nent’s largest econ­omy with a GDP of $469 bil­lion. Be­tween now and 2030, ex­perts pre­dict an­nual growth rates as high as 7.92 per­cent re­sult­ing in a GDP of $1.05 tril­lion.

“A lot of Nige­ria’s growth will come from agri­cul­ture and ser­vices are huge in Nige­ria,” says Charles Robert­son, global chief econ­o­mist at Re­nais­sance Cap­i­tal. He adds that he ac­tu­ally ex­pects the coun­try’s GDP to reach $1 tril­lion be­fore 2030. “Bank­ing, re­tail, tele­coms and Nol­ly­wood has been an ex­plo­sive growth story in past cou­ple of years.”

As a source of em­ploy­ment for 70 per­cent of Nige­ria’s pop­u­la­tion in 2013, the coun­try’s $56 bil­lion agri­cul­ture sec­tor cur­rently ac­counts for 24 per­cent of GDP and the coun­try’s min­is­ter of agri­cul­ture, Akinwumi Adesina, has said “the new mil­lion­aires of Nige­ria will be in agri­cul­ture.”

Rel­a­tive view Th­ese are huge num­bers by Nige­rian and African stan­dards — how­ever, they look less im­pres­sive next to oth­ers from around the world.

By 2030, the US econ­omy is ex­pected to reach $24.8 tril­lion, China’s GDP will ap­proach $22.2 tril­lion and In­dian out­put will be at the $6.6 tril­lion mark. African view Clos­est be­hind Nige­ria, when it comes to eco­nomic clout on the con­ti­nent in 2030, is South Africa with a pro­jected GDP of $810.6 bil­lion.

Given that power short­ages have caused the coun­try to cut its eco­nomic growth fore­casts for 2015 by 0.5 per­cent, this will be a key area of the coun­try’s in­fra­struc­ture which num­ber crunch­ers will be watch­ing.

In Fe­bru­ary, dur­ing his first full bud­get speech, Fi­nance Min­is­ter Nh­lanhla Nene iden­ti­fied the need to fo­cus on the coun­try’s power cri­sis, say­ing “elec­tric­ity con­straints hold back growth in man­u­fac­tur­ing and min­ing, in­hibit in­vest­ment in hous­ing and raise costs for busi­nesses and house­holds.”

Egypt is due to fol­low South Africa, with the con­ti­nent’s third largest GDP of $471.5 bil­lion. The US Depart­ment of Agri­cul­ture fore­sees an­nual grow rates con­sis­tently sur­pass­ing 4.2 per­cent in the next 15 years and Re­nais­sance Cap­i­tal is bullish on the North Africa coun­try.

“Only 10 per­cent of Egyp­tians have bank ac­counts,” says Robert­son, “so we can im­age bank­ing will be a big story [In Egypt] in the com­ing years.”

Prob­lem with pro­jec­tions While th­ese num­bers sug­gest sig­nif­i­cant growth is on the cards, pro­jec­tions for African economies have been re­vised in the past.

“Fore­cast­ing tends to be op­ti­mistic, es­pe­cially in un­der­de­vel­oped coun­tries,” says Morten Jer­ven, au­thor of ‘ Poor Num­bers: How We Are Mis­led by African Devel­op­ment Statis­tics and What to Do about It’.

“Mod­els of­ten over-pre­dict GDP and un­der-pre­dict in­fla­tion...u.s. Depart­ment of Agri­cul­ture is pre­dict­ing a sta­ble growth pat­tern for Nige­ria, and that is cu­ri­ous given that we have not seen that pat­tern in the past.” — CNN

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