African Economies Looking Beyond Oil and Gas in Response to the Collapse of the Commodities Market
The first quarter of 2016 has proven to be difficult with few bright spots across Sub-Saharan Africa economies. According to Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and the latest data for the region, economic activity in Sub-Saharan Africa slowed in 2015 to its lowest rates since 2009 with GDP growth averaging only 3.0%, down from 4.5% in 2014. The plunge in oil prices and other commodities is the primary reason for the economic downturn. Compounding this reduction in revenue into the national treasuries is the fact that a number of countries lack the policies which would allow them to address the shortfalls and to successfully pivot the economy to other productive activity. To correct this, many countries are now creating enabling environments for other industries and sectors in an earnest way. While the immediate impact of these policies may not be evident yet, it is clear that the long-term strategy for diversification is crucial to stabilizing the economics and encouraging growth across multiple sectors and population segments.
More and more African governments have begun to about the opportunity to diversify their economies through agribusiness. However, in most instances the enabling environment has not yet been put in place to support this sector as a source of real national economic growth. So far, real progress in agribusiness has only been made in a handful of countries. In Nigeria, for example, where the “oil bust is beginning to hit the streets”, according to a Wall Street Journal article this week, President Buhari and many State governors are showing unprecedented commitment to the agribusiness sector. The Minister of Agriculture and Rural Development, Chief Adu Ogbeh, recently explained that the “the goal of the present administration was to build an agribusiness economy capable of meeting Nigeria’s domestic food security requirements and generating exports to broaden the national revenue base”. In Zambia, the United Bank of Africa (UBA) recently invested over US$25 million in the agriculture sector in order to support diversification programs and economic growth.
As urbanization continues to expand in many African countries, the challenge will be figuring out how to continue to support economic diversification. The report Africa’s Pulse makes the case for Africa to “harness the power of cities as engines of economic growth” and for supporting “Africa’s agricultural and rural transformation” by creating a destination for the labor released by the agribusiness sector as it becomes more mechanized and a market for domestically grown produce. Time will tell if the strategy begins to show dividends.