| JOHANNESBURG, April 26
JOHANNESBURG, April 26 Africa's brisk economic
growth over the past decade has been consumer driven, a
much-hyped trend that masks the uncomfortable fact that the
region remains far too reliant on commodities.
Sub-Saharan Africa's growth has been second only to Asia and
cracked along at 5.8 percent last year, according to a World
Bank estimate, if South Africa, the continent's biggest economy,
About two-thirds of growth in the past decade has been
driven by domestic demand, which has been stoked by a number of
factors including the continent's fast-growing and young
population. Consumption has had multiplier effects into a range
of services including banking and finance.
Yet unlike in Asia, Africa's consumer boom has been
financed mostly by income generated from the export of natural
Without developing a manufacturing sector the world's
poorest continent has effectively skipped, or missed out on, the
industrial revolution that has powered China's rise. And that
leaves it vulnerable to a sharp slowdown as the global
commodities boom now looks to be faltering.
While commodities in the past decade only accounted for
between a quarter and a third of African growth, depending on
your measure, most of the $38 billion of Africa's net foreign
direct investment inflows in 2012 were into extractive
Natural resources still account for three-quarters of
sub-Sahara's exports, according to the World Bank's latest
Africa's Pulse analysis of the region's economy.
It notes that the value of exports from the region soared to
$420 billion from $100 billion between 2000 and 2011 - a
promising trend that is also very much a double-edged sword.
"A lot of the growth in that value has been driven by the
commodity boom rather than increased volumes or production,"
said Russell Lamberti, chief strategist at Johannesburg-based
economic consultancy ETM Analytics.
Signals abound that the commodity boom, which accompanied
Africa's fastest era of growth, is running out of steam.
Having poured $400 billion into commodities over the past
decade, many investors are now selling. The lower airfare and
cheaper food that may result will need a long lead time, while
many African countries will feel pain in the meantime.
Take fast-growing Angola, Africa's top crude producer after
Nigeria. Its exports are worth around 65 percent of its GDP, and
oil comprises 98 percent of total exports.
Consumption there has also been growing rapidly and the
splurge has been on imports. So any sharp fall in oil production
or prices could stymie that boom.
Government income in the big crude exporters would also take
a massive hit. In Nigeria, oil and gas accounts for 80 percent
of state revenue and 95 percent of foreign exchange.
"Any downturn in the oil price on the international market
would certainly lead to lower fiscal revenues, and hence may
have an impact on fiscal spending and economic growth," said
Thalma Corbett, head of research at NKC Independent Economists.
On the flip side, domestic demand in Africa has been
supported by slowing inflation and falling oil prices will curb
that further in the region's many crude importers.
EVEN SOUTH AFRICA VULNERABLE
Even South Africa, the biggest, most diverse and developed
African economy, remains heavily resource-dependent.
Its gold industry has been in terminal decline for decades
as shafts plunge deeper, ore grades decline and costs climb,
knocking it from the world's biggest producer by far to number
five, according to the World Gold Council.
Yet customs data shows bullion remains its top export by
value, worth over 70 billion rand ($7.61 billion) last year or
about 10 percent of the country's total exports, according to
customs data. Metals and minerals account for well over a third
of export earnings.
So South Africa was dangerously exposed when a wave of
violent, illegal strikes hit its platinum and gold sectors last
year, triggering violence that killed more than 50 people.
Its current account deficit in the last months of 2012 hit
6.5 percent of GDP, as mining exports fell and foreign
investment flows dried up because of the labour unrest.
Credit agencies downgraded the country's sovereign rating
because of the violence and the rand currency weakened.
One could be forgiven last year for thinking that South
Africa was just a commodities story. Yet mining only accounts
for around six or seven percent of the country's GDP. Finance,
real estate and business services are by far the biggest sector,
representing over 20 percent and manufacturing accounts for
around 12 percent.
Manufacturing has been in relative decline in South Africa
and though it has made some headway elsewhere in the region, it
remains tiny on a global scale. From 2000 to 2011, the value of
Africa's manufactured goods rose to $33 billion from $13
billion, according to the World Bank.
The region's commodity exports grew far faster and remain
worth about 13 times as much by value.
Africa's overall consumption of the past decade, and the
growth it has spurred, will clearly not be sustainable if
commodity prices continue to come off the boil.