Released October 17, 2013 | JOHANNESBURG
en
Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Although weak commodity prices have trimmed economic growth prospects in Sub-Saharan Africa for 2013-14, the rate of economic expansion in the region will remain robust with a gross domestic product (GDP) growth rate of 5% in 2013 and 6% in 2014. This represents an overall 0.5% downward revision of the growth rate forecast in April 2013, according to the International Monetary Fund.
Like other areas where emerging or developing economies are the majority, the region remains vulnerable to external shocks. Any significant reduction in China's growth rate would affect African countries, which have built their mining- and oil-based economies on trade with China.
Growth has been strong in countries with projects under development in the infrastructure, energy and natural resource sectors. These include Ghana (2013 GDP: 7.9%, 2014 GDP: 6.1%) and Mozambique (7.0%, 8.5%).
A sharp decline in oil and commodity prices would affect exporters and could hit countries like Angola (5.6%, 6.3%) and Nigeria (6.2%, 7.4%), which do not possess adequate fiscal buffers.
The threat of political volatility and subsequent security risks could continue to affect countries such as the Central African Republic (-14.5%, 2%) and Libya (-5.1%, 25.5%). With a massive upward swing in the forecast for the two-year period, Libya is a prime example of political instability and oil dependence producing an unmanageable situation. Another dramatic illustration of the result of oil dependency are the contrasting growth rates forecast for Sudan (3.9%, 2.5%) and South Sudan (24.7%, 43%). As the newly independent South benefits from control of the region's oil production, Sudan is reeling from the loss of the same resource.
In the coming year, the African Development Bank (AfDB) will continue to focus on the continent's infrastructure deficit, which is holding back Africa's economic growth per capita and reducing private-sector productivity. Low energy access and high tariffs continue to be major challenges. An average rural electrification rate of 10% leaves swathes of the population lacking access to electricity.
Africa's rail network density ranges from 30 kilometers (km) of track to 50 km per million people, in comparison with Europe's ratio of 200 km to 1,000 km of track per million people. Rapid urbanization poses challenges for public-service delivery and transportation. Only 28% of the region's population has access to improved sanitation facilities.
Education, health, business growth, and home life are all inhibited by an infrastructure deficit. In the agricultural and food sector this deficit--poor irrigation and road networks, lack of storage and inadequate processing infrastructure--causes post harvest losses and hinders Africa's essential agriculture industry, limiting economic growth.
The AfDB says that despite its huge agricultural potential, Africa continues to import $30 billion in foodstuffs annually, and that large segments of the continent's population still suffer from chronic hunger. The challenges presented by inadequate food production and supply will be compounded by population growth; the current population of 1 billion is forecast to grow to 1.6 billion by 2030. It is estimated that by 2050, food production will need to increase 70% to meet the demand from urban populations.
AfDB is supporting efforts to meet this challenge by pursuing inclusive economic "green growth" through policies, programs and projects that invest in sustainable infrastructure; competently manage natural resources; build reliance to natural disaster and enhance food security.
It is reported that more than 2,000 mining projects are under development or beginning operations in Africa, especially iron ore. In North Africa, Mauritania has discovered new iron ore resources estimated at 830 million tons near the mining operations at Zouerate. Currently, the country produces about 12 million tons of ore annually which contributes 50% of national exports. The industry targets production of 40 million tons per year with an investment of $5 billion.
In Guinea, the world's largest unexploited iron ore body at Simandou is heading toward production with a target of 95 million tons per year. The project has been the subject of some wrangling between the government and mining companies, and illustrates the need for mining developers in Africa to be aware of the operating and regulatory conditions under which the mine will be allowed to develop. These include the expression of "resource nationalism," whereby the host nation is seen to be the owner of the mine site and can impose a "carry" charge, or direct levy on exploration and mining operations.
The latest example of this comes from South Africa, where the government has proposed a carry rate of 20% on all oil and gas exploration and production--plus the right to offer to buy another 30% of a project at market "related" rates at a future date. This comes just as the government is due to publish the proposed guidelines and regulations for shale gas exploration in the Karoo region. The shale deposit is estimated to be the fifth-largest in the world. The project is up against strong opposition on environmental and water issues. However, the government is looking to exercise a 20% carry on shale gas production and is therefore likely to be give an okay at this stage, for exploration/feasibility operations.
The continent remains vastly unexplored in terms of mineral resources. Southern African Development Community (SADC) countries that produce 66% of Africa's mineral exports by value are likely to see a change as new territories bring projects online. As always, the key in Africa is infrastructure.
Major opportunities for investors and developers exist in the infrastructure, energy, manufacturing and agriculture sectors. Raw material inputs exist on the continent and the workforce has been proven to have talent and potential. To tap into these markets, Africa must bring these elements together at the right time, with the right capital investment, and in a secure regulatory environment.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Like other areas where emerging or developing economies are the majority, the region remains vulnerable to external shocks. Any significant reduction in China's growth rate would affect African countries, which have built their mining- and oil-based economies on trade with China.
Growth has been strong in countries with projects under development in the infrastructure, energy and natural resource sectors. These include Ghana (2013 GDP: 7.9%, 2014 GDP: 6.1%) and Mozambique (7.0%, 8.5%).
A sharp decline in oil and commodity prices would affect exporters and could hit countries like Angola (5.6%, 6.3%) and Nigeria (6.2%, 7.4%), which do not possess adequate fiscal buffers.
The threat of political volatility and subsequent security risks could continue to affect countries such as the Central African Republic (-14.5%, 2%) and Libya (-5.1%, 25.5%). With a massive upward swing in the forecast for the two-year period, Libya is a prime example of political instability and oil dependence producing an unmanageable situation. Another dramatic illustration of the result of oil dependency are the contrasting growth rates forecast for Sudan (3.9%, 2.5%) and South Sudan (24.7%, 43%). As the newly independent South benefits from control of the region's oil production, Sudan is reeling from the loss of the same resource.
In the coming year, the African Development Bank (AfDB) will continue to focus on the continent's infrastructure deficit, which is holding back Africa's economic growth per capita and reducing private-sector productivity. Low energy access and high tariffs continue to be major challenges. An average rural electrification rate of 10% leaves swathes of the population lacking access to electricity.
Africa's rail network density ranges from 30 kilometers (km) of track to 50 km per million people, in comparison with Europe's ratio of 200 km to 1,000 km of track per million people. Rapid urbanization poses challenges for public-service delivery and transportation. Only 28% of the region's population has access to improved sanitation facilities.
Education, health, business growth, and home life are all inhibited by an infrastructure deficit. In the agricultural and food sector this deficit--poor irrigation and road networks, lack of storage and inadequate processing infrastructure--causes post harvest losses and hinders Africa's essential agriculture industry, limiting economic growth.
The AfDB says that despite its huge agricultural potential, Africa continues to import $30 billion in foodstuffs annually, and that large segments of the continent's population still suffer from chronic hunger. The challenges presented by inadequate food production and supply will be compounded by population growth; the current population of 1 billion is forecast to grow to 1.6 billion by 2030. It is estimated that by 2050, food production will need to increase 70% to meet the demand from urban populations.
AfDB is supporting efforts to meet this challenge by pursuing inclusive economic "green growth" through policies, programs and projects that invest in sustainable infrastructure; competently manage natural resources; build reliance to natural disaster and enhance food security.
It is reported that more than 2,000 mining projects are under development or beginning operations in Africa, especially iron ore. In North Africa, Mauritania has discovered new iron ore resources estimated at 830 million tons near the mining operations at Zouerate. Currently, the country produces about 12 million tons of ore annually which contributes 50% of national exports. The industry targets production of 40 million tons per year with an investment of $5 billion.
In Guinea, the world's largest unexploited iron ore body at Simandou is heading toward production with a target of 95 million tons per year. The project has been the subject of some wrangling between the government and mining companies, and illustrates the need for mining developers in Africa to be aware of the operating and regulatory conditions under which the mine will be allowed to develop. These include the expression of "resource nationalism," whereby the host nation is seen to be the owner of the mine site and can impose a "carry" charge, or direct levy on exploration and mining operations.
The latest example of this comes from South Africa, where the government has proposed a carry rate of 20% on all oil and gas exploration and production--plus the right to offer to buy another 30% of a project at market "related" rates at a future date. This comes just as the government is due to publish the proposed guidelines and regulations for shale gas exploration in the Karoo region. The shale deposit is estimated to be the fifth-largest in the world. The project is up against strong opposition on environmental and water issues. However, the government is looking to exercise a 20% carry on shale gas production and is therefore likely to be give an okay at this stage, for exploration/feasibility operations.
The continent remains vastly unexplored in terms of mineral resources. Southern African Development Community (SADC) countries that produce 66% of Africa's mineral exports by value are likely to see a change as new territories bring projects online. As always, the key in Africa is infrastructure.
Major opportunities for investors and developers exist in the infrastructure, energy, manufacturing and agriculture sectors. Raw material inputs exist on the continent and the workforce has been proven to have talent and potential. To tap into these markets, Africa must bring these elements together at the right time, with the right capital investment, and in a secure regulatory environment.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
