Why Africa is Becoming Less Dependent on Commodities

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There’s turmoil in commodity markets, but Africa, which for decades has depended on revenues from commodity exports to invest in economic growth, continues to outpace most of the world in economic growth, including developed economies.

Despite big commodity-price falls this year—oil is down by 50 percent—the continent will probably grow by 5 percent in 2015 (and more in the following years), The Economist reports. While lots of African currencies lost value in 2014, they have performed much better than during other periods when commodity prices were falling. Few African countries will fall into recession in 2015—unlike other commodity exporters such as Russia and Venezuela.

Why is Africa doing better than many expected? Two reasons stand out.

First, the continent’s economic growth is coming from other places as governments work hard to make life easy for investors. Foreign investors are becoming more interested in the non-resource sectors of African economies: a third of intra-African foreign investment is in financial services.

Second, many African governments are better at managing the inevitable booms and busts of commodity markets. Fiscal policies in many African countries have become more sensible. These days a larger proportion of African economies save money during the good times, then spend during bad. Read more here.

 

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