Macroeconomics - The US Dollar Appreciating Versus Other Currencies
Economic statistics link trade deficits to investment prospects and fiscal growth. A rise in the budget deficit of the U.S. government causes a rise in actual interest rates. Capital inflows affect such trade balances for example, if the U.S. economy offers better investment opportunities than other nations, the country’s capital flow will increase significantly. With flexible exchange system, the capital inflow tends to increase the value of the U.S dollar in correlation to other currencies. This rise in value of the dollar consequently makes U.S. exports rather less appealing to foreigners and U.S. imports become relatively less expensive; thus, net exports go down. Since 2008, the global economy has gone through significant changes influencing crosscutting growth in all the regions. However, Africa has been resilient in the face adverse challenges such as domestic conflict, worldwide headwinds, and internal supply shocks. Thus, Africa has experienced robust economical growth over the past decade.
Africa’s fiscal growth has drastically increased over the past decade. This robust economic growth has seen the continent become a hub of new commercial vibrancy. Figure 1.0 below illustrates Africa’s GDP trends between the years 2001 and 2012, with projections for 2013-2014. The figure illustrates an average growth of Africa’s economic performance since the year 2001, averaging above 5%. It also approximates the growth of North Africa and Sub-Saharan Africa averaging at 4.5% and 5.6% respectively. 1n 2011, Africa experienced a notable decrease in growth down to 3.4% from approximately 5% in the previous year; attributed to the Arab civil unrest in North Africa. However, the region recovered strongly in 2012, lifting the continent’s growth to roughly 7%. As Figure 1.0 shows, the economic growth rate of Africa between 2013 and 2014 expected to remain constant at about 4%.

Figure 1.1: Africa's Economic Growth Rate (2001 - 2014)

The Driving Force behind Africa’s Economic Growth
In the past decade, Africa has observed a remarkable economic growth. In spite of some noticeable progress, its causes, growth power, and likely staying resilient remain a subject of great discussion. Research conducted by the McKinsey Global Institute explain how escalating oil prices, natural resources such as minerals, and other commodities have facilitated the rise in Africa’s GDP from 2000. However, the research found that resources accounted only for nearly a third of this growth. Two thirds of the growth attributed to internal structural changes conducted by individual countries, which have spurred the wider domestic economy.
Another study of different sectors of the economy shows that growth has become progressively broad based in recent years. Different sectors are gaining relevance, either complimenting or supplementing the presumed important sectors (McKay, 2013). Specifically, there has been an increase in share of manufacturing, agriculture, and the service industry. Figure 1.2 shows that Africa is not only reliant on natural resource exports but has diversified to other sectors to achieve its current growth rate.
One of the central drivers of Africa’s development has been the growing orientation of trade in relation to fast- emerging and rapidly growing markets. This has aided in reducing the previous trade vulnerability and economic crisis, which in earlier decades plagued traditional markets such as the U.S and E.U. African countries that do not have natural resources for exportation such as Ethiopia and Rwanda have recorded increased growth rates in the past ten years. This is in comparison to the growth exhibited by their counterparts who rely heavily on commodity exports in the same period.
Figure 1.2: Sectoral contribution to GDP (Percent, 2012). | 0% | 5% | 10% | 15% | 20% | 25% | Mining and quarrying | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Agriculture | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale and retail, restaurants, etc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Finance, insurance, and real estate, etc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Manufacturing | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Public administration and defense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Transport and communications | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Construction | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Electricity, gas and water | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other services | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

General Strategies That Have Aided Africa’s Economic Growth
Numerous African countries have seen remarkable transformation in their political and governance systems. These countries have taken major strides in improving their democracy and accountability levels. Better constitutional changes and public administrative processes have enables most African countries to put in place better economic policy management. However, ethical issues are a major deterrent to African democracies. Other issues such as internal wrangles, regional wars, unequal distribution of domestic resources, and natural disasters, continue to reverse gains made by individual countries and the continent as a whole.
Concentrated efforts by countries and the African Union, towards reducing poverty have created a favorable environment for internal and external trade. This has been achieved through civilizing democratic processes, undertaking microeconomic reforms, and improving macroeconomic conditions. Secondly, several African countries have improved their regional and international relations, which has fostered greater economic growth and political goodwill. Next, Africa’s economy has grown healthier because of reduced average inflation rate down from 22% in the ‘90s to 8% after the year 2000. They also cut down their foreign debt by a remarkable one-quarter and minimized their budget shortfalls by two-thirds.
Lastly, African governments have progressively implement policies aimed at energizing their markets. The continent has seen more public and private partnerships (PPO) struck to maximize on market share growth. Privatized state-owned corporations increased their levels of trade openness, decreased corporate taxes, and strengthened their legal and regulatory systems. They also offered vital physical and social infrastructure. A good example is the government of Kenya which established a strong PPO model that saw the establishment of the Kenya Private Sector Alliance (representing the private sector), partner with the Kenya Chamber of Commerce and Industry (representing the public sector commerce) to concentrate the country trade efforts towards achieving the vision 2030. Nigeria also privatized over 116 enterprises in the period between 1999 and 2006. Morocco and Egypt on the other hand entered into a free-trade agreement with its major export partners.
It is important to note, although different governments policies are far from the optimum scenario, these significant first steps have allowed the private sector to come out as a strong ally to the government. Collectively, such structural modifications have helped stimulate an African productivity front by helping business attain superior economies of scale, become more competitive, and increase investment.
Global Economic Alliances
Internal and external developments show that the Africa’s economic prospects will continue to enjoy great financial benefits from increasing global demand natural resources such as oil, minerals, food, natural gas, arable land, and resources. The McKinsey Global Institute research found that the liquid-fuel consumption of the world would rise by 25 percent over the next decade. This will be double the pace of the ‘90s. Similar growth is shown by projected demand for most hard minerals. The current known reserves Africa, shows that the continent boasts of an abundance of wealth at: 10% of the global oil reserves, 40% of gold, and 80% - 90% of the platinum and chromium metal group; no doubt, more reserves lie undiscovered.
Demand for Africa’s commodities and economic ties are growing rapidly in the Middle East and Asia. Even though there has been a longstanding commercial relationship between Africa, the U.S, and Europe, Africa is currently conducting at least 50% of its trade with rising economic regions.
This continental trade shift has facilitated new developments in world economic relationships in which countries get into multiple long-term trade agreements at once. A good example is China’s trade agreement with the Democratic Republic of Congo (DRC) to utilize its 10,000,000 tons of copper and 2,000,000 tons of cobalt over for a $6 billion infrastructure investments package. Other Asian and Middle East countries are also following this trend.
The increase in global demand for African commodities has given African governments’ added bargaining power. They are now better placed to negotiate deals that are favorable to their countries and of greater economic to their natural resources. In addition, foreign investors are willing to offer up-front payments and royalties to in country natural resource extractions. They are also willing to offer natives technological training, trade and resource management skills.
Concurrently, Africa is fast gaining access to global capital. In the year 2008, the flow of direct investment into Africa improved by $62 billion, from $9 billion in 2000 —relative to GDP. This is nearly as great as China’s inflow into China. Other Africa’s sectors that have drawn resource sectors have received remarkable new foreign capital in the resent past are tourism, construction, telecommunication, and the textile industry.
Africa’s diverse economic-growth paths
While long-term prospects of the continent are strong, the growth curve of each individual country will differ from the other. Economists have conventionally clustered countries by region, income level, and/or language. However, Mc Kinsley and company have taken the approach of categorizing Africa’s 26 largest countries depending on their level of fiscal diversification and per capita exports. This approach emphasizes on the development toward two correlated objectives.
The first emphasis is on diversifying the economy. As economies shift from agrarian systems of economy to urban economies, numerous sector of the economy contribute to growth. The percentage share of GDP that is contributed by natural resources and agriculture reduce with the increase of the service and manufacturing sectors, which produced new jobs opportunities and lift household incomes, raising up domestic demand. Averagely, an increase in each 15% in services and manufacturing as a part of the GDP is related with a replication of per capita income.
The second emphasis is on enhancing exports to funding investment opportunities. Emerging markets need huge investments to build up modern infrastructures. Exports are the main means for earning the hard currency, which comes from imported capital goods. Africa amount to approximately half of this investment.
African Nations that have Undertaken Reforms to Boost their Economic Growth 1) South Africa
South Africa economy is the greatest and the most developed economy in Africa. This export-based economy attributes its success from rich natural resources. It is also a leading producer of gold, platinum, chromium, and iron. South Africa has approximately grown at the rate of 4.5% per year in 2002 – 2008. This was its fastest growth period since its established democracy in 1994.
South Africa’s diplomatic and stable transition in its democracy is recognized worldwide as one of the greatest accomplishments in Africa’s history. South Africa has ensured vested foreign investment in a large-scale in various sectors of the economy to guarantee continued foreign involvement in the country. Due to its strategic and geo-political significance in the regional and the global context, the international community places a high premium on its stability for example major concerns form the U.S and from Europe have continued to invest in South Africa for a long period. The country has also a sizeable number of citizens from major foreign communities, who guarantee for continued international interest and involvement in South Africa.
There have also been essential political and constitutional changeovers implemented by the republic of South Africa from the April 1994 elections. In 1996, the country adopted a new constitution, which later became the supreme law South Africa. This became a model of democracy, which achieved entrenching fundamental human rights through separation of powers. The negotiation process that saw its adoption, as well as the subsequent elections confirmed the country’s commitment to democracy, and their ability to solve their differences amicably. This commitment continued seamlessly after the “post-Mandela era.”
South African also focused on developing itself through a strong socio-economic pillar. Economic advancement and socio-economic progress took centre-stage of the countries policy objectives. The country developed the RDP (Reconstruction and Development Program) and the (GEER) Growth, Employment and Redistribution Strategy, both basic policy declarations documents that address the economic growth intended to foster socio-economic progress.
In 2014, the economy of South African expanded to 0.6% in the first half of the year. The agriculture, transport, and financial sectors contributed to the country avoiding recession. On a quarterly basis, stock on mining shrank by a 9.4% annualized, after a 24.7% decline in the previous period; hurt by a decline in the production of gold and platinum. Manufacturing was at 2.1% from a 4.4% fall in that period. Decreased production was realized for; petroleum, beverages, food, beverages, rubber, chemical and plastic products, motor vehicles, motor parts and accessories, glass and chemical products, rubber and plastic products; motor vehicles, parts and accessories, gas, water, electricity, wholesale and retail trade, glass and non-metallic mineral products amongst others decreased by 0.6% and 0.2%, respectively.
The largest contributors in the same period come from general government services by +2.9 %, communication, storage, and transport by + 4.0%. The finance sector, business and real estate services rose by +1.5 percent. The banking sector also boosted the economy by a 0.3% growth while the agriculture sector and construction advanced 4.9% and 5 percent. South Africa development was a collective responsibility of all the main actors in the economy having the right attitude, commitment and will power to implement the strategies set by the government:
The private sector wholly supported the principles outlined in the GEAR such as fiscal deficit reduction and the importance on budgetary reforms; friendly investment strategies, trade liberalization and establishing consistent monetary policies.
On the other hand, the government stayed committed to fulfilling its targeted budget shortfalls. The government started planning for a 4% budget deficit in 1997-1998 as a part of a general strategy to move the budget deficit to 3% by 1999, and to shrink the government's "dissaving" by 0.6% in 2000. The strategy remained on target.
Trade unions remained dedicated to the shared compact involving government, labor, and employer institutions. New tax measures introduced to support restructuring in manufacturing and fixed investment to increase competitiveness, promote small and medium manufacturing, and facilitate higher labor absorption. Equitably accessible incentives developed to stimulate investment in the manufacturing industry in South Africa, created for to local and international firms, among other interventions. 2) Angola
The rapid increment in economic growth over the decade has also seen Angola rise up enormously since the ending of the civil warfare. Security and peace have greatly been an establishment of the rapid growth within the country. This has seen Angola rise up to the international platform emerging regionally as a powerhouse. A sustained boom in the oil prices following the rebuild from war 27 years ago has seen Angola become among the wealthiest nation in the region. United States is a big beneficiary of the county’s oil deposit as it is in the sub-Saharan region the second largest oil producer.
However, Angola experienced a negative GDP growth impact in the years 2008-2009 because of price violation during the world’s economic crisis. The violation in price saw the economy wildly fluctuate to 2.4% in the year 2009 from 13.8% in the previous year. International prices of oil largely affected Angola’s economical performance as it has in the past suffered because of market shocks.
Currently, the Angolan establishments are more disposed to route to a fresh IMF aid mechanism, which entails presenting a plan to the IMF with strategies that focus on attaining economic stability. The nation will not look for financial aid from the organization, but rather economic counsel and assistance in scrutinizing the plan’s execution. In this form, the possibility of meddling, this, according to Angolan authorities, has always been associated with a diminished conventional financial hold up programme. Angolan officials illustrate their existing scheme as joining peace and solidity with the long-term aim of building an independent society founded on the statute of law. A vital aspect of upholding steadiness has been firm fiscal control, mostly keeping down prices of foodstuff and other essential supplies. To attain this, the government is able to sought and preserve a single-digit price rise rate. However, this goal has been a touching objective during the past ten years, and increase in price expected to stay in the lower digits for a couple of years that may follow.
Gas and oil are the most important Angola’s industries by far. In reliance on export, incomes from the dominating oil industries hold the majority share of the financial activity is found in this sector. Although oil export income will remain the country’s majority source of foreign revenue for years, its share will decline seeing to the advancement of other sectors. This is due to diversification of government economic plan. Mining, alongside the mineral sector diversification, offers new significant growth opportunities. Transportation sector, Construction, and energy are expected to benefit from the public up scale. The administration of the Angola government has followed efforts to modernize and regenerate infrastructure. With this vision, they are able to facilitate the normalization of fiscal activity and fomenting growth of activities without the extraction sector. China contracted to provide millions of dollars of oil-backed credit to economic infrastructural growth that was at US$ 2 billion lend in 2004. The conditions of the education sector illustrate some positive headway.

Costs and Benefits of Economic Growth
Economic growth has numerous pros and cons. Part of the advantages of economic growth are social benefits such as improved living standards, creation of new jobs, improved business performance and confidence, accelerated growth on capital effect, fiscal growth and potential environmental benefits.
Growth is a critical avenue through which a countries per capita income is capable of rising and absolute poverty reduced developing economies. Growth also creates new employment opportunities even though it results in changes of patterns of employment. Counties that experience business growth have greater confidence and have a positive impact on profit. A growing economy enhances tax revenues and generates the money required to finance public finance spending. Increasing demand and output promotes investment in capital, which helps to sustain a country’s gross domestic product growth by increasing long run aggregate supply. In the end, as country grows richer, they have surplus resources at their disposal to invest in newer ventures and cleaner technologies.
It is not all of the benefits of economic growth that are uniformly distributed. An increase in the real GDP accompanied by broad income and wealth disparities in society. This mirrors an incline in relative poverty. According to Geoff Riley (2012), the ‘Gini coefficient’ is one of the ways to measure the disparities in the income and wealth allocation in different countries. The Gini co-efficient has a maximum value of one, thus the higher coefficient value, then more substantial the inequality. Countries such as Sweden, Denmark, and Japan usually have low Gini coefficient values whereas South American and African countries have a huge gulf between the household income of the richest citizens and the poorest of the population.
There are numerous policy lessons that emanate from studying the economic growth trends in African countries. First, there is an ongoing danger of stagnation per capita income if African economic policies remain unchanged. As a result, there will be increased marginalization of individual countries and the persistence-escalated levels of poverty, and a consequent danger of policy and political instability and political that uphold the cycle of public and policy mismanagement, poor performance, and low economic security.
On the other hand, growth can drastically improve, provided sound policies of development are factored in the development process. Deliberate efforts have to be made to remove macroeconomic inefquities and alterations. Although macroeconomic policies in Africa’s economies have been considerably amended, there is great room for improvement especially when it comes to structural policies when it comes to promoting openness in foreign trade and strengthening the monetary aspect of the economy. It is essential to secure progress in all levels of policy areas that affect the political and economic growth if African continents are to raise their level of investment, which is the main factor that impeded the continents growth take-off.
However, the kind of economic growth required to cause lasting decrease in poverty levels in subsequent the years, lies in promotion of the provision of sufficient training and education, and in getting rid of existing lack of core infrastructure. Without a solid and long-term resumption of growth, tackling poverty may not be sufficient to stimulate the political support required to secure a strong dedication to policy reform. This involves the threat of stagnation of reform, with a detrimental incidence on the growth of prospects. When that happens, counteractive policy interventions need implementation along with a countries structural reform, to even out the existing inequalities in income allocation in order to foster decrease in poverty while strengthening the commitment to reforms.
Policy efforts developed for African countries deserve special attention and support by foreign communities. Benefits from a sustained continual growth of emerging economies are likely to extend to their neighboring countries and their dedication to developmental change treated as public good. When developing policy reform programs for a country, the first step is a solid development blueprint/policy. After that, would be to identify the most suitable institutional framework to undertake the desired reforms in all the policy areas, based on country-specific characteristics.
Institutions play a central role in maintaining a solid economic take-off in Africa, where in the past, policy changes been constantly scaled back, or overturned, due to lack of suitable supportive institutions. Therefore, there is a deep affiliation between build suitable institutions, economic and social development, and policy reform. In spite of the fact that there is a better understanding of the link between in-depth country-to-country information, guidelines on how African countries can develop and implement policies aligned to international best practice need to be given.
On the other side of analytics, further study need to be considered. These studies are readily available. It would be paramount to conduct further analysis of the factors that can lead to a lasting rise of productive investment. Such studies need to ensure the investment boom does not result in unsustainable foreign debt. Incorporating a culture of savings into a countries development policy, and studying models that lead to greater resource mobilization for the domestic economy, is a sure strategy for gaining economic growth in Africa.
In looking at the how Africa has and can continue to enjoy robust economic growth as a whole, the growth potential of each country should not be taken in isolation. The overall effects of growth spillovers considered when assessing potential of emerging economies and specific sectors can accelerate domestic growth. Sustainable take-off in an emerging economy can occur in broader geographical areas that foster economic ties and collaborations with developing economies. Even stronger economic growth happens when emerging economies collaborate with developed countries such as the U.S.

Works cited
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