Why East Africa leads in continental growth, by SAP chief

As the world starts to recover slowly from a year of constant disruptions and challenges, East Africa is leading other regions as the fastest growing economy, with Ethiopia and Rwanda recording strong growth.

Managing Director for Central Africa at Systems Applications and Products in Data Processing (SAP), Pedro Guerreiro, in a statement yesterday, referred to the Brookings Institute report that East Africa’s share of the continent’s economic growth rose from less than 20 per cent in 2018 to more than 32 per cent in 2019.

According to the African Development Bank (AfDB), digital transformation, a fast-growing service sector, has contributed more than half (53.8 per cent) to the region’s Gross Domestic Product (GDP), replacing agriculture’s contribution which declined from 33.4 per cent in the early 2000s to only 28.3 per cent in 2018.

Guerreiro quoted data by the International Labor Organisation (ILO), stating that the number of employment opportunities in the region’s services sector had doubled between 2000 and 2020, while opportunities in the agriculture sector would grow at a slower pace.

He also noted that the World Bank had estimated that digital transformation driving the growth of the service sector would connect every African business, individual, and government to digital technologies by 2030, and it could also boost growth by two per cent per year, and reduce poverty by one per cent per year.

According to 2012 reports, East African Community (EAC), which covers Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda, launched its 2012- 2032 industrialisation policy aimed at creating a market-driven, competitive, and balanced industrial sector that draws on the advantages of the region, and to grow the contribution of manufacturing to East Africa’s GDP from an estimated 8.9 per cent currently to 25 per cent by 2032.

However, in a 2019 report, East Africa Development Bank (EADB) had noted that insufficient investment in the industrial transformation was the main reason for the decreasing contribution of industry to GDP growth.

The bank advised that other countries wishing to drive greater industrialisation should improve regional infrastructures, such as roads, rail networks, energy, and communications in order to establish special economic zones with compelling incentives and greater investment in human capital development.

Guerreiro pointed out that Africa’s education reform, which is among the factors responsible for East Africa’s growth, had improved since 2000, noting that the number of African kids attending primary school grew from 60 million to 150 million with a vanishing gender gap that now sees many girls attend school as boys.

He added that, although, Kenya and Tanzania were notable for their efforts to drive education reform and expand access to schooling for more children, the number of people with primary education in Kenya is expected to increase by 25 per cent by 2030, while those who have completed secondary or tertiary education would grow by 60 per cent over the next decade.