Economic growth in Sub-Saharan Africa is rebounding in 2017 after registering the worst decline in more than two decades in 2016, according to the new Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank.

The region is showing signs of recovery, and regional growth is projected to reach 2.6% in 2017. However, the recovery remains weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty.

Nigeria, South Africa, and Angola, the continent’s largest economies, are seeing a rebound from the sharp slowdown in 2016, but the recovery has been slow due to insufficient adjustment to low commodity prices and policy uncertainty. Furthermore, several oil exporters in the Central African Economic and Monetary Community (CEMAC) are facing economic difficulties.

The latest data reveal that seven countries (Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania) continue to exhibit economic resilience, supported by domestic demand, posting annual growth rates above 5.4% in 2015-2017. These countries house nearly 27% of the region’s population and account for 13% of the region’s total GDP.

The global economic outlook is improving and should support the recovery in the region. Africa’s Pulse notes that the continent’s aggregate growth is expected to rise to 3.2% in 2018 and 3.5% in 2019, reflecting a recovery in the largest economies. It will remain subdued for oil exporters, while metal exporters are projected to see a moderate uptick. GDP growth in countries whose economies depend less on extractive commodities should remain robust, underpinned by infrastructure investments, resilient services sectors, and the recovery of agricultural production. This is especially the case for Ethiopia, Senegal, and Tanzania.

A stronger-than-expected tightening of global financing conditions, weaker improvements in commodity prices, and a rise in protectionist sentiment represent downside external risks to the outlook. On the domestic front, risks to the current recovery stem from an inadequate pace of reforms, rising security threats, and political volatility ahead of elections in some countries.

“As countries move towards fiscal adjustment, we need to protect the right conditions for investment so that Sub-Saharan African countries achieve a more robust recovery,” says Albert G. Zeufack, World Bank Chief Economist for the Africa Region. “We need to implement reforms that increase the productivity of African workers and create a stable macroeconomic environment. Better and more productive jobs are instrumental to tackling poverty on the continent.”

The environment of weak economic growth comes at a time when the continent is in dire need of necessary reforms to boost investment and tackle poverty. Countries also have to undertake much-needed development spending while avoiding increasing debt to unsustainable levels.

In this environment, fostering public and private investment, notably in infrastructure, is a priority. The region experienced a slowdown in investment growth from nearly 8% in 2014 to 0.6% in 2015.

Why we need to close the infrastructure gap in sub-Saharan Africa

In this issue of the Africa’s Pulse, a special section is dedicated to infrastructure in the region, a sector in which investment could become a strategic tool for poverty reduction and economic development. Infrastructure is particularly important since the continent ranks at the bottom of all developing regions in nearly all dimensions of performance.

The report analyzes trends in infrastructure quantity, quality and access; explores the relationship between infrastructure growth and economic growth in the region; documents stylized facts on public investment in the region; and examines the quality of infrastructure spending.

“With poverty rates still high, regaining the growth momentum is imperative,” says Punam Chuhan-Pole, World Bank Lead Economist and the author of the report. “Growth needs to be more inclusive and will involve tackling the slowdown in investment and the high trade logistics that stand in the way of competitiveness.”

On the positive side, Sub-Saharan Africa has made great progress in telecommunications coverage in the past 25 years, expanding at a fast pace across both low- and middle-income countries in the continent. Access to safe water has also increased, from 51% of the population in 1990 to 77% in 2015.

But the challenges that remain are vast and deeply ingrained. For example, little progress has been made in per capita electricity-generating capacity in over two decades. Only 35% of the population has access to electricity, with rural access rates less than one-third urban ones. Transport infrastructure is likewise lagging with Sub-Saharan Africa being the only region in the world where road density has declined over the past 20 years.

The growth effects of narrowing Sub-Saharan Africa’s infrastructure quantity and quality gap are potentially large. For instance, growth of GDP per capita for the region would increase by an estimated 1.7 percentage points per year if it were to close the gap with the median of the rest of the developing world.

Closing the infrastructure quantity and quality gap relative to the best performers in the world could increase growth of GDP per capita by 2.6% per year. The largest potential growth benefits would come from closing the gap in electricity-generating capacity.

Public capital spending levels are too low to address the region’s infrastructure needs. According to granular budget data collected by the BOOST initiative for 24 countries in Sub-Saharan Africa, annual public spending on infrastructure was 2 percent of GDP in 2009-15. Roads accounted for two-thirds of overall infrastructure investments in the region. Capital spending on electricity and water supply and sanitation each accounted for 15% of total capital expenditures.

When analyzing public spending in infrastructure, the report found that countries spend significantly less money than they actually allocate to projects. This reduces the execution of projects earmarked for investment each year, a clear sign of the inefficiencies pervasive in the sector.

Public-private partnerships in Sub-Saharan Africa remain a very small market, with projects concentrated in only a few countries, namely, South Africa, Nigeria, Kenya, and Uganda.

“The analysis shows that the impact of public investment on economic growth can be improved if countries implement policies that make public investment more efficient,” says Chuhan-Pole. “There is evidence that countries with sound public investment management systems tend to have even more private investment.”

Improving the institutions and procedures governing project appraisal, selection, and monitoring are among the policies countries should implement to ensure they have a sound public investment system.

Overall, the report calls for the urgent implementation of reforms to improve institutions that foster private sector growth, develop local capital markets, improve infrastructure, and strengthen domestic resource mobilization.

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» Download: Africa’s Pulse | April 2017 (PDF, 7.14 MB)