Emerging Africa Plows Ahead With Strong Economic Growth

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With the rest of the world fighting back stagnation and recession, Africa has surged ahead as the global leader in growth. Even powerhouse economies in Asia, including Thailand, Indonesia, and Malaysia have been struggling amid global conditions, but over a third of African countries are enjoying growth rates in excess of 6%.


Kenya offering African bond sale

Continued strong economic growth has also been fueling foreign investment. Kenya is now looking to offer the largest international African bond sale in history with a sale of some 1.5 billion dollars worth of bonds. The bonds will target upgrading roads, infrastructure, and other essential components needed for a modern and globalizing economy. Some analysts have noted the ill timing of the plan, owing to the easing of U.S. sequestration policies, however analysts are confident that Kenya will find buyers, even if interest rates are higher.

African countries were able to secure bonds at yields of between 6 to 8 percent over the last few years. By Western standards such rates are high, but for African countries such rates might represent historical lows for market priced bonds. In the last few years investors were willing to take on additional risk at lower rates due to plummeting yields the rest of the world over. Now, with the U.S. looking to ease sequestration, investors have begun to pull their money out of emerging markets.

Africa’s largest economies

Still, Kenya is one of sub-Sahara Africa’s largest economies and over the years has proven more stable than many of its neighbors.  As such, many investors anticipate that Kenya will be able to obtain rates of between 6 to 8% even in spite of global conditions that encouraging investors to look outside of emerging markets for returns.

Kenya is not the only bright spot in Africa. Countries such as Sierra Leone, Chad, and Cote d’Voire have recorded growth rates in excess of 7%. Countries like Sierra Leone have been relying on mining exports and mineral extraction to drive growth, but as the world economy slows down the demand for such resources could dry up.

Still, other countries, such as Rwanda and Angola, are seeing the emergence of modernizing economies that could prove more resilient to global slumps. Rwanda’s government, led by strongman Paul Kagame, has been making investments in IT sectors, internet access, infrastructure, and tourism to help build Rwanda into one of Africa’s most modern economies. According to World Bank data, Kagame’s efforts have yielded growth rates 8.2% and 8.0% in 2011 and 2012 respectively.

Angola showing strong economic growth

Angola has likewise seen strong economic growth, and the capital of Luanda is emerging as one of Africa’s largest and most important regional finance centers. After years of civil war, Angola has been able to use stable political conditions to build up a massive oil industry that is now helping to fuel development in other sectors. Angola enjoyed a growth rate of 6.8% in 2012. Inflation and risings costs have become a concern, but so long as oil prices remain high, Angola’s future prospects look good.

Still, with unemployment rates remaining high across the region, especially among younger individuals, it is fair to wonder if conditions could be brewing for increased political instability in the future. Africa’s growth has come hand-in-hand with a period of prolonged stability for many countries. Yes, fighting is still occurring in some parts of Eastern Congo, and small groups of rebels are scattered throughout the region, but Africa is more stable now than it has been in the decades that came beforehand. This stability, however, is not guaranteed and if economic growth does not bring enough people into the fold, the risks of destabilizing scenarios will grow in the future.

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