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SSA as the home of many of the least developed countries accounted for this poor performance could not be supported. This chapter explores this question further. SSA still remains less integrated with the major fastgrowing regions of the world. Its savings rate also continues to be low. This makes it more dependent on foreign capital flows for investment. But aid has been declining and the current account has deteriorated in many countries. After a period of rapid growth earlier in this century, prospects look gloomy unless the G20 steps in to provide more easy aid.

       Introduction

      Economic growth in Sub-Saharan Africa (SSA) has lagged behind that in other regions over the past half century (1965–2016). The actual performance can be contrasted with its potential. Many analysts have rated its potential for growth very highly. A key question thus arises as to why the region has performed so poorly.¹ A major reason that has been advanced is poor governance, which manifests in the form of high levels of political instability and civil unrest because of an extremely fractured society with many cleavages.² SSA has a large number of least developed countries (LDCs) as defined by the United Nations (UN) and also most of the failed fragile states as defined by the United Kingdom’s aid agency, the Department for International Development (DFID). The UN lists 48 countries as LDCs, and SSA contains 33 of these.³ However, there is no conclusive evidence that the LDCs have performed more poorly than those considered more developed or that the fragile states have performed more poorly. In the following section, we note briefly that Africa has performed more poorly than other regions. The low rate of growth of per capita income is accompanied by low levels of investment. Also, the African countries have not benefitted from their greater integration with the world economy. They have a high share of exports in GDP, but this has increased very slowly. We distinguish countries by the nature of commodities that dominate their export basket.

      In the third section, we further study performance in terms of export orientation. This analysis concludes that the weakest performance is by exporters of manufactures. Furthermore, we find that the performance of African countries seems to be influenced considerably by international factors. It is therefore important that the system of international economic governance including the The list also has a footnote that says General Assembly resolution 68/L.20 adopted on December 4, 2013, decided that Equatorial Guinea will graduate three and a half years after the adoption of the resolution and that Vanuatu will graduate 4 years after the adoption of the resolution. UNCTAD prepares an annual report on the LDCs. We have used the 2011 Report. G20 must seek to raise the growth rate of GDP in the developed countries, reform the institutions such as the World Bank and the International Monetary Fund (IMF) to increase the voice of developing countries and reverse the trend of the declining importance of aid.

      We also compare the performance of countries in Latin America (LA) with those in SSA by export orientation. Countries in SSA have grown more slowly than those in LA even when the export orientation was similar. However, the increase in share of exports of goods and services (XGS) in GDP and of gross fixed capital formation (GFCF) in GDP has generally been greater in SSA when countries with similar export orientation are compared. The final section has the conclusions from our analysis.

       African Economic Performance — Growth, Exports and the Current Account

      In this section, we compare the performance of countries in SSA with those in other regions. In the last five decades (1965–2015), SSA has been one of two regions that has fallen further behind the high-income countries with the gap in per capita incomes increasing (Table 1).⁴ Per capita income growth has averaged 0.7% a year, considerably less than that of the other regions.⁵

Table 1. Average Annual Growth of Per Capita GDP (annual average %)

      Note: EAP is East Asia and Pacific, LAC is Latin America and Caribbean, MNA is Middle East and North Africa, SA is South Asia and SSA is Sub-Saharan Africa. These regions are as used by the World Bank in its analysis.

      Source: World Bank Development Indicators and World Bank (2012).

      Countries in SSA fared particularly badly in the quarter century after the oil price increases in 1973–1974. However, they have fared better in this century. They grew faster than the high-income countries and also the regions of Latin America and Caribbean (LAC) and Middle East and North Africa (MNA). But their performance has worsened since the 2008 financial crisis. While growth in all the regions has suffered, the effect has been lesser in Asia, or in other words, the adverse effect has been more in LAC and SSA.

      There is also no evidence of convergence among African countries. Based on a simple regression, merely regressing growth over various periods against per capita income at the beginning of the period, we find no evidence of any convergence among the African countries over any period.

      A notable feature of the developments in the world economy over the past couple of decades has been the increasing integration of developing countries with the world economy with reduction in restrictions on the flow of goods and capital. SSA countries have participated in these developments. Owing to liberalisation, trade has increased substantially as a percentage of GDP.⁶

      The aim of trade liberalisation has been to raise the importance of exports and this has indeed happened (Table 2).⁷

      However, the increase in the share of XGS in GDP has been the least in SSA, perhaps because this region had the highest share during 1965–1973. Whereas the share of XGS in GDP had quadrupled between 1965–1973 and 2006–2007 for East Asia and Pacific (EAP) and almost quadrupled in SA and increased by more than 150% in LAC, the share increased by only 50% in SSA (Table 2).⁸

      While exports have grown slowly in SSA, the importance of remittances has increased rapidly, which has happened in South Asia (SA) also. Remittances, which were 1.8% and 0.8% of GDP in SA and SSA, respectively, in the early 1990s, increased to over 4% and 2%, respectively, by the end of the first decade of the 2000s (Table 3). The increased remittances considerably helped in preventing a large deterioration in the current account in the years before the onset of the financial crisis. Also, remittances are particularly important for LDCs and for the low-income countries; they are larger as a share of GDP for them than for other regions and may account for their economic performance.

Table 2. Exports of Goods and Services (% of GDP)

      Source: World Bank Development Indicators and World Bank (2012).

Table 3. Remittances (% of GDP)

      Source: World Bank Data Bank, World Development Indicators, World Bank. Washington DC.

      In contrast to the behaviour of remittance, the importance of aid has decreased (Table 4). The importance of aid as a percent of GDP had been diminishing in all the regions in the years before the crisis, partly because of slow growth in the resources given to the soft-aid agencies such as the International Development Association (IDA), and partly, slow growth also of bilateral aid because of high deficits in the budgets of the donor governments. The importance of aid has diminished even when it is measured as a percent of either GFCF or imports. It is important now only for SSA.

Table 4. Aid (% of GDP)

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