The main African economies in search of growth and productivity

The main African economies in search of growth and productivity

Africa’s five major economies, namely Algeria, Egypt and Morocco in North Africa, as well as Nigeria and South Africa in Sub-Saharan Africa, have experienced slower economic growth compared to the rest of the continent. This situation makes it more difficult to improve living conditions for the 400 million people who live below the poverty line in Africa.

These findings stem from McKinsey’s latest comprehensive study titled ” Reimagining Economic Growth in Africa: Turning Diversity into Opportunity“. This study examines in detail the economic performance of each African country as well as that of key economic sectors.

The study highlights the successes recorded by some countries on the continent while identifying the many obstacles to growth. It also proposes different solutions that could enable Africa to take full advantage of its great diversity and revive its growth after a decade of slowdown.

The study also reveals that these five major African economies contributed almost three-quarters of Africa’s gross domestic product (GDP) in 2019. Despite a significant increase in investment and exports at the start of the decade, their subsequent growth has quickly been hampered by many factors.

For example, Morocco is one of the 13 African countries grouped together in the study under the name “recent downturns“. These economies account for more than half of the continent’s commodity exports and recorded economic growth above the continental average during the first decade of the new millennium, but their growth faltered between 2010 and 2019. Algeria, it is considered a country with ” slow growing with an economy that has been growing slowly since 2000.

The McKinsey study highlights Africa’s diversity and points out that nearly half of the continent’s population resides in countries that have experienced sustained economic growth over the past twenty years. These economies, mostly medium-sized and located in East and West Africa, have averaged annual GDP growth of more than 4%.

According to Mehdi Lahrichi, Associate Director of McKinsey’s Casablanca office, quoted in a press release, ” there is no one Africa, as levels of economic progress, population growth, rates of urbanization and productivity differ widely across the continent. Thus, while countries such as Morocco, Egypt and Tunisia have achieved near-total urban electrification, a hundred million African city dwellers remain without electricity.“.

With one of the fastest rates of urbanization in the world and a booming working and consuming population, Africa, despite a disappointing performance over the past decade, is singled out by the report as a promising emerging market set to thrive. exponentially in the years to come.

One of the major trends driving this optimism. Employment in the service sector has increased by 30-39% over this period, and it is estimated that this sector will welcome almost half of new entrants to the labor market by 2030.

However, while services offer huge opportunities to boost economic output and job creation in Africa, this will only be possible if the sector’s productivity increases, the study points out.

In 2019, productivity in services in Africa was the lowest of any region in the world, and the sector experienced a productivity decline of 0.1% over the decade 2010-2019. This situation is partly due to excessive concentration in certain sub-sectors, such as commerce, whose productivity is hampered by a high level of informality and fragmentation. By contrast, high-productivity sectors, such as financial and business services, currently account for less than one-fifth of Africa’s gross value added.

Targeted measures to improve productivity in services include increasing digitalization and skills development. The study found that by achieving the same rate of productivity growth as major service centers in Asia, Africa could add $1.4 trillion to the continent’s economy by 2030, enabling to create 225 million jobs. This is a crucial issue given the rapid growth of the African labor force.

Other opportunities for productivity-based growth lie in increasing domestic production and exports to meet fast-growing local demand, strengthening regional ties, investing in improving resource productivity to support the global energy transition, and improving agricultural productivity. Agriculture, which accounts for almost half of jobs in Africa and is vital for the continent’s food security, must therefore increase its productivity, especially in the face of the growing challenges of climate change and rapid urbanization.

Mehdi Lahrichi, associate director of the McKinsey office in Casablanca and associate director of McKinsey in Morocco, quoted in the press release, underlines: “ While countries like Morocco, Ethiopia and Rwanda have managed to rapidly boost their agricultural production, other African nations are still lagging behind in terms of productivity. Our analyzes indicate that if African countries could match India’s agricultural productivity growth between 1980 and 1990, they could collectively add $200 billion to their economies by 2030, or $40 billion more than what is expected at current productivity levels. The fallout on food production and food security could be significant.”

In charting the way forward, the authors suggest that policy makers and key players in each country could take inspiration from the countries, cities and companies that have been sources of innovation, productivity and growth over the last decade. Based on a detailed understanding of their local context, decision makers can put in place models and innovations that will revitalize their economies. The report concludes by pointing out that “ Africa is not a single entity, but rather a patchwork of diverse strategies for success. Leaders can therefore lead the way by acknowledging this diversity“.


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