Africa has seen an outpouring of economic success in recent years due to increased infrastructure, human capital and political stability. Recently, the continent has been housing some of the world’s most powerful economies, including South Africa, Nigeria and Egypt. However, despite this overall success, there are still many facets of developing countries that aren’t typically found in developed ones, such as limited infrastructure or resource scarcity.
Starting from scratch, a country transitioning from developing to developed goes through a number of stages. First and foremost, economic growth is necessary to build the basic infrastructure required to support the necessary human capital. In addition, fair institutions ensure that economic growth is sustained over time and that society benefits from it for decades to come.
The gross domestic product (GDP) per capita measures annual income averaged at purchasing power parity so it can be used as an accurate indicator of the standard of living across countries. As one can see below, there are not many major differences in African nations when compared to those in other regions when it comes to growing their economies over time.
While there is a positive correlation between economic growth and GDP per capita, there are other aspects that also play a role in determining economic success. For example, resource availability can be very crucial in producing economic growth by boosting productivity and lowering the cost of doing business.
Africa is rich in natural resources such as oil, gold, diamonds, silver and phosphate. The rate of population growth is another factor that can impact an economy’s ability to grow. As the population increases, demand for staple goods and services grows and spurs the economy to sustain growth. Africa’s population is forecasted to rise from 1.2 billion in 2017 to 2.5 billion in 2050, which will help drive economic growth over the long term.
While it may come as a surprise that African economies are performing so well, when we take a look at the state of their institutions, we see that they have much room for improvement.
Economies that have a weak rule of law often see lower levels of economic activity as compared to those with strong institutions and effective functioning legal systems.
Africa has a high poverty rate, notably among the youth. The average African person lives on roughly US$1.25 per day. A country’s governance and rule of law are two other major factors that can impact economic growth and help guide the country down the path to success due to the positive correlation between them.
Like many developed countries, Africa is seeing an increase in productivity and technological advancements that can be measured by how much extra value per worker it adds to GDP.
While many developed countries have seen a decrease in unemployment among their populations over recent history, Africa still suffers from high levels due to low labour force participation rates across both genders and workforce participation rates for youths.
Since the current structure of African economies is so dynamic, many factors contribute to their economic success and failure. Economic growth, institutions and resources with an emphasis on population growth trends and resource availability play an important role in determining the growth of Africa’s economy and the success of its people. In all three areas, we see countries performing very well when compared to those across the world.
African economies have been performing extremely well over the last decade and have reached levels that are comparable to those of developed countries. While there might be some negative impacts from the dramatic rise in population growth rates, overall, there will be many positive effects from this transition, including improved infrastructure, higher quality education for future generations, and increased access to goods and services.
The future for Africa is very bright as it continues to make strides toward sustaining a strong middle class and moving toward becoming a developed nation. Despite being vastly different from developed nations, the processes of building economic infrastructure, developing institutions, and creating wealth are all very similar in nature. There are many factors that contribute to such success and as one can see from looking at the data, Africa is an amazing example of how these factors impact economic growth.
One of the most interesting aspects of Africa’s economic success is that it has developed regionally and not nationally. This means that while some African countries like South Africa and Kenya are relatively developed, other countries – such as Gambia and Mali – are still in the process of transitioning from developing to developed. While it may be tempting to compare the success of regional economic growth with an average country’s transition from developing to developed, it is important to take a much closer look at each country’s individual progress. While there are many factors that contribute to an African economy’s success (institutions, governance, resource availability), one must acknowledge how these factors vary depending on where one is located on the continent.
The emergence of strong economies in Africa is a relatively recent phenomenon and is still ongoing. Many African countries are still considered developing, and the transition to developed status is a slow process. However, there are some African countries that have experienced significant economic growth in recent years, such as Ghana, Rwanda and Ethiopia. The emergence of special economic zones in Africa has played a crucial role in driving economic growth on the continent. These zones, which offer special tax and regulatory incentives to businesses, have attracted foreign investment and helped to spur industrial development.
The Dawa Industrial Zone in Ghana has the potential to greatly contribute to the country’s economic growth. The zone, which is located 25km east of Tema, is a multipurpose industrial park made to suit specialised industry groupings, including but not limited to automotive, pharmaceutical, textile, agro-processing and technology industries. As an emerging special economic zone, it has the potential to drive industrial development and accelerate economic growth in the region.
In conclusion, the emergence of strong economies in Africa is a slow process, but the emergence of special economic zones in Africa is helping to accelerate economic growth on the continent by attracting foreign investment and promoting industrial development.
The writer is an award-winning financial advisory, trade and transformation consulting professional with almost two decades of enterprise leadership experience across EMEA.