Diversity champion required. Despite the pickup in average African economic growth rates over the last 15 years, there is a view in the development literature that its underlying economic resilience remains questionable. Some of this stems from recent commodity price dip ostensibly exposing the lack of economic diversification and robustness of many countries. The latest Africa's Pulse from the World Bank identifies only Ethiopia, Rwanda and Tanzania, as "established" high growth performers in the sense of being able to maintain average expansion rates of 6-8% over both 1995-2008 and 2015-17. Cote d'Ivoire, Kenya, Mali and Senegal are classified as "improvers" with increases from 4-6% to 6-8% over the same period. Meanwhile, other much larger economies such as Nigeria and Angola have slowed abruptly ("slipping") largely due to an over-dependence on oil sales for exports and government revenues, while Gabon, Republic of Congo, Burundi and Zimbabwe have, according to Washington, "fallen behind" with low growth rates in both periods. The majority of the other countries are "stuck in the middle".
Tale of the tail? Of course, we would not expect a uniform performance across all African entities. But the World Bank analysis does open up the possibility that the rise in the overall pace of activity largely reflects outsized gains in the upper tail of the cross-country growth distribution (i.e. Ethiopia and Rwanda) rather than the continent as a whole. As a quick cross-check, we have looked at the median growth rate, which is robust to tail behaviour, as well as several indicators of growth volatility since the 1980s.
It's not wagging the dog. In a nutshell, our analysis casts doubt on the idea that the rise in activity is concentrated. For a start, the median pace of annual activity has generally been higher since 2000 than over the previous 20 years. The key exceptions stem from the fallout from the 2008-09 financial crisis while the more recent fallback in commodity prices has also pressed on momentum. It is also worth noting that cross-country volatility has also trended south, which lines up with the idea that the improvements have been broad based across the continent.
But there are some interesting and unexpected nuances. Get in touch to find out more.