African economies have recently performed well. Real gross domestic product (GDP) growth over the past three years has been robust and projections show that in the next five years the majority of the 10 fastest-growing countries in the world will be in Africa. This is a far cry from the 1980s and 1990s and also from when Africa was labelled "the hopeless continent” by The Economist a decade ago.
The African turnaround has mainly been attributed to improved economic management and the Highly Indebted Poor Countries (HIPC) initiative, although high commodity prices in recent years have also played a part. HIPC imposed fiscal management criteria on all those countries that sought access to debt forgiveness. But the debt cancellations under HIPC created fiscal space, which in turn enabled African countries to invest in vital infrastructure. Policy reform also required governments to withdraw from running businesses. In the 1970s and 1980s, most sub-Saharan economies were dominated by state-owned enterprises, the bulk of which were poorly managed and needed subsidies to exist. These subsidies contributed to high borrowing by governments.