## Growth in Sub-Saharan Africa is Diverging

_IMF News, November 14, 2024_

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**Canonical URL:** [Growth in Sub-Saharan Africa is Diverging](https://www.imf.org/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging)

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## Bibliographic details
- Authors: Saad Quayyum
- Published: November 14, 2024

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### Overview
- Sub-Saharan Africa is home to nine of the world’s top twenty fastest-growing economies this year.
- Headline regional averages mask a two-track growth pattern: a significant part of the region underperforms.
- The analytical note accompanies the latest Regional Economic Outlook for sub-Saharan Africa and examines divergence between resource-intensive countries (RICs) and non-RICs.

### Recent growth patterns
- Over the past ten years, growth in sub-Saharan Africa’s resource-intensive countries (RICs) has slowed sharply, falling far below growth in non-RICs.
- Incomes in RICs have essentially stagnated.
- This contrasts with the decade leading up to 2014, when RICs experienced rapid growth in line with the region’s strong overall performance.

### Drivers of divergence
- Two main factors largely drove the post–2014 divergence between RICs and non-RICs:
  - A dramatic decline in commodity export prices around 2014–15 as the commodity “super-cycle” ended; the terms-of-trade decline has only been partially reversed since then.
  - Pre-existing structural vulnerabilities that exacerbated the impact of the terms-of-trade shock, including poor business environment, limited human capital, weak governance, and poor management of resource revenues.

### Structural weaknesses
- Weak governance, systemic corruption, and an unfavorable business climate reduce productivity and output; effects are most severe when commodity prices fall.
- These weaknesses affect both the resource sector and prospects for economic diversification.
- Example consequences cited:
  - Potential theft of oil production undermines productive efficiency and diverts resources from productive uses.
  - Weak governance impedes private sector investment more broadly.
- Comparative note: fuel exporters outside the region, with generally stronger governance, have weathered the commodity price slump far better.
- IMF staff estimate: for every one-percent worsening in a country’s terms of trade, medium-term growth is around ¼ percentage point higher in countries with smaller governance challenges.

### Fiscal dynamics and resource management
- Poor resource management reinforced the original shock via a pro-cyclical fiscal bias.
- Fiscal policy in RICs is generally far more correlated with economic shocks, intensifying shock effects compared to other countries.
- Typical pro-cyclical behaviors described:
  - During commodity price booms, many RICs (particularly fuel exporters) embark on costly capital projects that are often poorly planned and implemented.
  - Corresponding sharp reductions in capital spending occur when commodity prices fall.
  - Many fuel exporters provide sizable fuel subsidies; subsidy costs increase as oil prices rise, limiting the ability to save during booms and crowding out growth-friendly development spending.
- Empirical fiscal point: the average oil-exporting country in sub-Saharan Africa has since 2011 consistently spent all its oil revenues in the year when they accrued.

### Development impact and urgency
- Reversing the divergence is a regional priority: RICs make up about two-thirds of sub-Saharan Africa’s GDP and population.
- It is also a humanitarian priority: poor growth performance has translated into poor development outcomes—progress in tackling poverty in RICs effectively halted in 2014.
- Child welfare statistics cited:
  - Compared to children in other parts of the region, a child born in a RIC today is expected to live 4 years less on average.
  - A child born in a RIC today is 25 percent more likely to live in poverty.

### Policy recommendations (The Way Forward)
- Establish a stable macroeconomic environment to reignite durable growth.
- Adopt more prudent and consistently implemented fiscal frameworks to address poor resource management challenges and improve growth resilience.
- Implement broad-based structural reforms to:
  - Strengthen governance.
  - Enhance the business environment.
  - Accumulate human capital.
  - Address infrastructure bottlenecks.
- Prioritize diversification for fuel exporters in light of the global green-energy transition.

### Article metadata
- By Saad Quayyum, Nikola Spatafora, Sanghamitra Mukherjee, and Hamza Mighri
- November 14, 2024

*Source: IMF News article "Growth in Sub-Saharan Africa is Diverging."*

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## References

- [REGIONAL ECONOMIC OUTLOOK FOR SSA](https://www.imf.org/en/Publications/REO/SSA/Issues/2024/10/25/regional-economic-outlook-for-sub-saharan-africa-october-2024)
- [SUB-SAHARAN AFRICA'S JOB CREATION CHALLENGE](https://www.imf.org/en/Blogs/Articles/2024/11/12/the-clock-is-ticking-on-sub-saharan-africas-urgent-job-creation-challenge)
- [PODCAST ON SSA OUTLOOK](https://www.imf.org/en/News/Podcasts/All-Podcasts/2024/11/13/AFR-REO-OCT-2024)
- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging_