Sub-Saharan Africa's contribution to global gross domestic product has remained at one percentage point for about the past 20 years. The area is the only global region where the poverty rate increased in those decades. Its per capita income level remains the lowest in the world.
Yet, one must wonder when the area will begin to develop and become attractive, beyond just South Africa, to mainstream international investors.
The time might be now to take a closer look. A new report by Goldman Sachs & Co., New York, states, "Sub-Saharan Africa is currently experiencing its best economic performance in many years." This improvement should awaken investors, whose capital and ability to enhance entrepreneurial ideas is crucially needed in the region.
Taking on the risk of such African investments in portfolios won't come easy, especially with years of intractable problems. "The unprecedented decline in absolute global poverty of the last 30 years has largely bypassed Africa," the report notes. "In 1970, 11% of the world's poor were in Africa and 76% in Asia. Thirty years later, Africa had 66% of the poor and Asia only 15%."
In that period, there have been striking divergences in economic performance among the sub-Saharan countries, the report notes. Botswana and Mauritius have been the best consistent performers, having "growth rates comparable to some of the star performers in Asia during the 1980s and '90s," according to the report.
"In the 1980s, Botswana grew at 6% per annum (one of the fastest growth rates in the world), before slowing down in the 1990s. For the decade 1992-2002, both Botswana and Mauritius averaged 4.8% and 5.3% growth, respectively."
Ghana and Uganda were other good performers, the report states. South Africa and Nigeria, placed in the middle tier in performance, averaged 2.3% and 2.4% GDP growth rates, respectively, in the 1992-2002 period.
"Sub-Saharan African countries are able to grow at a rapid pace and generate high income per capital when the conditions are right, as shown in the cases of Botswana and Mauritius," the report contends. "There are little grounds for the idea that the inherent structure of economics in (the region) make them unsuitable for the application of growth drivers that have worked in other settings."
Conditions for economic development include, according to the report:
• political stability, including peace;
• macroeconomic stability. "Empirical research confirms that high inflation ... unsustainable debt burdens and distorted foreign exchange markets reduce growth;"
• a sound investment climate, including "clearly defined property rights backed by an effective legal system, openness of trade, a robust and well-regulated financial sector, and competitive private markets;" and
• transparency in government.
The report notes signs of hope in the region, including improved macroeconomic and political stability.
The report, while crediting liberal economic and political policies, noted South Africa's "AIDS pandemic ... will dampen future potential growth," which nonetheless is expected to reach 5% growth in GDP per annum in the next few years.
Zimbabwe, under the misrule of Robert Mugabe, remains a problem and ranks at the bottom of the World Bank's governance indicators for the region, the Goldman Sachs report notes.
Under an optimistic scenario, the report projects for the entire region a 5.6% GDP annualized growth rate in the next 10 years.
The sub-Saharan region, the report notes, "potentially holds the greatest promise or the greatest lost opportunity to boost GDP growth."