African growth set for new chapter in spite of Euro-zone problems

Thus, news that China's GDP grew by 8.9 percent in the last quarter of 2011, while slightly lower than the previous quarter, is good for Africa in particular as it points to continued demand for the continent's commodities.

The new adage "If China and India grow, Africa will grow" continues to ring true; however there are challenges emanating from Africa's other key trading partners, Europe and the US.

A knock-on effect

The challenge for African economies is going to be the slowdown of the economies of key trading partners. As we are still, predominately, in commodities trading, Africa will be negatively affected by a slowdown in global demand. So the impact of the stresses of the Euro zone and the deficits in the US will have a knock-on effect.

This slowdown will be countered to some degree by growing trade with India and China. The European debt crisis presents both a challenge and an opportunity for the continent. The challenge is that investors are genuinely hesitant to venture out as their traditional investment destinations of Europe and the US are now in crisis. But, at the same time, capital has to search for better yield and a portion of it will come to Africa.

Time for Africa to look internally?

What was high risk is no longer high risk. Maybe this is time for Africa to look internally as we stimulate our own intra-Africa trade, which risen from 6 to 13 percent of total trade volume. Increases in intra-Africa trade reduce dependencies on the unpredictable economies of our foreign trading partners.

The European crisis could result in reduced foreign and development aid for a number of African countries.

Africa must now search for quality growth, which comes from a broader range of sectors and trickles down to benefit larger proportions of the populations.

How will we use foreign direct investment?

African countries have to decide how we are going to use foreign direct investment. We need to decide whether we are going to use it to grow societies or simply widen the income gap.

Ethiopia is an example of an economy that will do well, growing at 7.5 percent, without the aid of any oil exports. Apart from South Africa, other key markets include Nigeria and Ghana, Kenya for its regional positioning, as well as Zambia and Tanzania. Rwanda, with its population of 15 million, proximity to the Democratic Republic of Congo, and the strides it has made to be business friendly is also likely to prosper..

The real risk to long-term sustainable growth is the income disparity between the rich and poor. Unless this is addressed, Africa will face serious challenges in the medium term.