Good news for entrepreneurs. The governments in many African countries, including Burkina-Faso, Ethiopia, Mozambique, Rwanda, Tanzania, and Uganda, are providing a solid base for startups. You don’t have to mine or dig to get to profits.
With such a massive resource extraction industry on the African continent, an economic success story in Africa is often viewed as the result of an oil boom or large investments in the mining industry.
Take Zambia, where copper mining is credited with helping the country boost its GDP 6% between 2005 and 2012.
But according to the Economist, a recent report on sub-Saharan African economies by the International Monetary Fund (IMF) is challenging the perceived value of the resource extraction industry on African economies.
Eight of the 12 fastest-growing economies in Africa in recent years did not rely on natural resources. These economies grew more quickly even than the group of oil producers.
In six countries, Burkina-Faso, Ethiopia, Mozambique, Rwanda, Tanzania, and Uganda, all low-income states, GDP growth was at least 5% a year on average from 1995 to 2010, and growth in GDP per head of at least 3% a year. according to the IMF figures.
Some key drivers were improved macroeconomic management, stronger institutions, increased aid, and higher investment in human and physical capital. These measures translated into controlled inflation and public finances and higher tax revenues.
Based on World Bank data, these nations are generally less corrupt, enjoy more stable politics and are better governed than their African peers.
In spite of the “robust growth” achieved so far, the report notes that these countries still face “low productivity and capital stocks, significant infrastructure gaps, and limited structural transformation.”
Although the IMF classified these countries as “not resource intensive” during the years examined in the study, this is not the case today. Gold now accounts for a significant portion of Burkina-Faso’s economy.
Meanwhile, investment in Mozambique’s natural resource sector is expected to fuel significant economic growth over the next few years as natural gas and coal become major industries.
