economy To faster change

After a period of falling per capita incomes that started in the 1970s, Africa finally saw a turn around
from about 1995, with initially modest increases in per capita incomes. However, the
last few years have actually seen average per capita incomes in Africa grow by above 3% on
average, partly due to the resource boom, but also due to improved economic policies.
Sub-Saharan Africa is a very small player in the global economy. At current exchange
rates, sub-Saharan Africa produced only 1.4% of global GDP in 2005 and had an average per
capita income that was 1/41 of that of the high income countries. Adjusting for differences
in purchasing power, the gap shrinks to 1/16, which is still enormous. In PPP terms, Africa
is clearly the poorest region in the world.
The growth experiences vary considerably across countries and over time. The countries
that receive much Swedish aid today generally did badly in the 1980s, somewhat better in the
1990s and many have been doing very well since the turn of the century. The average for
the main recipients of Swedish aid in 2001–05 is 2.2% growth in per capita income per year,
which is slightly better than the sub-Saharan African average of 2.0%. Civil war has been
an important cause of bad economic performance in several countries in Africa, and the
elimination of remaining conflicts as well as the maintenance of peace is very important for
progress in poverty reduction.
The industrial sector, including manufacturing, has not been able to expand as hoped for
at independence or as it has done in Asia. The import-substitution policy that was pursued to
support manufacturing growth in Africa achieved some results in the 1960s, but the policies
did not lead to the creation of a manufacturing sector that could compete internationally. In
1960, sub-Saharan Africa supplied 4.2% of world exports, but by the turn of the century this
had shrunk to only 1.4%. By 2005, however, Africa had increased its global market share somewhat
due to the boom in natural resources such as oil, and this is, of course, also one of the
reasons for the growth acceleration. The bulk of African exports are raw materials, agricultural
products and also tourism services. There is still no breakthrough in terms of manufacturing
exports. Even if Africa is of marginal importance in world trade, African economies are more
dependent on the world market than are those of high income countries.
Africa is not only the poorest region in the world, but it also has an increasing share of
the world’s population. The population growth rate is declining in Africa as in other regions,
but since the region is lagging economically, it has not come as far as the other regions in the
demographic transition process. The result of this is that the sub-Saharan African share of
the world population has increased from 7.4% to 11.5% over a 45 year period.
Economic growth requires investments, and investments are financed by savings. They
can be domestic savings or international savings transferred to the country. The African
region saved 17.6% of GDP in 2005, which is low compared to the fast growers in Asia.
Official financial flows or aid were US$ 30.5 bn in 2005, foreign direct investments US$ 16.6
bn and other private transfers, which include various forms of private remittances, were US$
9.8 bn. Foreign direct investments in particular have increased in recent years, mainly in the
natural resource sector.