Publications
Partners
Cape Town - Africa owns 12% of the world's oil reserves, 40% of its gold and up to 90% of its platinum and chromium, according to the UN Economic Commission for Africa.
Of the 10 fastest-growing global economies, seven are in sub-Saharan Africa, International Monetary Fund data shows, while Europe and the United States are still trying to recover from the financial crisis.
In an interview with Deutsche Presse-Agentur (DPA), US economist David Hale spoke to the agency about Africa's key economic trends.
"There is a great deal of optimism about Africa's economic growth potential," said Hale.
"Five to 10% growth figures represent a big change from the last three decades. The problem, however, is that the continent remains poor. Africa accounts for 12% of the global population but for only 2% of global income."
Commenting on whether South Africa will remain the "gateway" to Africa, Hale responded: "West Africa is breaking out, overtaking southern Africa. A prime example is Nigeria, which has major gross domestic product growth.
"South Africa is set to become Africa's number two economic power this year, after Nigeria."
This is because of the huge investments Nigeria received after it privatised electricity, according to Hale.
"This could boost its growth rate from the current 6% to as high as 10%. By 2020, Nigeria's GDP is expected to be 50% higher than South Africa's. Nigeria represents the future, South Africa the past."
Nationalisation
Hale regards Burkina Faso and Mozambique as the most important sub-Saharan countries to watch.
"Burkina Faso looks good because it has opened up its mining policies and lowered taxes to attract foreign investors. Mozambique is embarking on lasting long-term growth, due to its newly discovered gas, coal and iron ore reserves.
"The big developments in East Africa are around oil and natural gas discoveries. That means Kenya, Uganda and Tanzania will become resource countries, while they used to be seen as agriculture and tourism countries."
Responding to the DPA's question on where he sees major hurdles to foreign investment, Hale said: "South Africa struggles with high unemployment rates, inflexible labour market policies, power shortages and lack of transport infrastructure that causes huge capacity constraints.
"In Nigeria, oil theft and corruption remain a major problem despite other, positive developments. (Africa's second-largest gold producer) Ghana has been struggling to privatise its mining sector."
Asked whether talk of nationalising natural resources in countries like Zimbabwe or South Africa is a deterrent to foreign investors, Hale acknowledged that there is uncertainty.
"But if you have clearly defined policies on ownership, which open the way to permitting, getting access to resources, you'll attract foreign investment. I think nationalisation is a dead idea, brought up by certain politicians for their own gain. If you're willing to privatise, you'll get the investment. The main dangers (to foreign investment) are high taxes and restrictions".
Dependence on commodities
Hale believes Africa still has a long way to go when it comes to developing its infrastructure.
"The logistical costs of operating in Africa are still much higher than anywhere else in the world, even in Latin America. There have been infrastructure investments in many African countries, but we need a lot more to bring down cost."
Asked about the key mining trends in sub-Saharan Africa, Hale said: "They depend very much on the commodity price. The gold price has come down by a third in the last two years.
"That's going to encourage gold exploration. There are huge discoveries of iron ore in West Africa, in Cameroon, Liberia, Sierra Leone. But ... they can't be developed without infrastructure. We're talking billions of dollars."
On the topic of foreign investment, Hale said: "China, India and Indonesia have been investing heavily in Africa. There remains a role for European capital. And one country that's often overlooked is Turkey. Turkish-African trade has gone up from $8bn five years ago to $26bn today."
Hale believes Africa has potential in manufacturing, as opposed to mining.
"If you look at some of Africa's highest growth countries, like Ethiopia, they don't have commodities. Ethiopia's economy is based on manufacturing and agriculture. Kenya has the (continent's) best high-tech sector. So, growth is not just based on mining.
"Mining is capital-intensive and labour-intensive, but if you really want to get an economic take-out for the majority of Africa's population, which could reach 2 billion people by 2050, you have to develop manufacturing."
