The New Magnificent Seven Nations Of Sub-Saharan Africa 1

The resilient seven

Sub-Saharan Africa has found the past two years to be challenging. However, there are a few countries from the region which the World Bank describes as exceptionally resilient; they are Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania.

These seven were identified by the Bank in the April edition of its semi-annual ‘Africa’s Pulse’ report. It categorized 45 countries from the region in four groups based on a comparison of their average annual gross domestic product (GDP) growth rates during 1995-2008 and 2015-17.

The aforementioned seven nations were the only ones which saw growth rates over 5.4% in 2015-17 – the top threshold. The report asserted that these countries corner 27% of the region’s population and account for 13% of its GDP.

They have replaced the following five which had emerged as the most resilient in the October edition of the report: Benin, Cameroon, the Democratic Republic of Congo, Mozambique, and Togo.

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Characteristics of resilient countries

The World Bank’s model classifies countries into the following five groups:

  • Established (>5.4% both periods)
  • Improved (>5.4% in latest period and <5.4% in the previous period)
  • Stuck in the middle (All remaining countries)
  • Slipping; and (<3.5% in latest period and >3.5% in the previous period)
  • Falling behind (<3.5% both periods)

5.4% and 3.5% are the two thresholds of economic growth rates. Those in the first two categories are known as resilient economies.

The World Bank observed that these economies generally witness robust and broad-based growth, have lower debt-to-GDP ratios, and have lower inflation rates than their peers. For instance, the debt-to-GDP ratio of the resilient seven was 40% in 2016 compared to 54% for other countries. Also, inflation was 4% in 2015-16 compared to 5.8% in others.

Investment worthiness

The model shown above takes into account only the economic growth rates across the two periods for which the World Bank has conducted its study.

But for investors, monitoring the fiscal state of these countries is also quite important, as discussed in the second article of this series. For instance, though Kenya is solidly placed, there are worries regarding a slowdown of its economy and on its rising debt burden. Further, Bloomberg’s sovereign credit risk model had identified Senegal – a resilient nation – as one of four countries which had the highest probability of default. Senegal was the most at risk among the four.

Hence, though this model can provide a shortlist of countries experiencing consistent growth across a given period, an overlay of other factors is necessary in order to safeguard one’s investment.

In the next article, let’s look at the challenges on investment faced by the sub-Saharan Africa region.

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