Table 1 highlights the turnaround in the continent's recent economic growth. While Africa's recovery is less than giddying it is noteworthy by comparison with what went before.

Table 1. Key economic indicators for sub-Saharan Africa

	1992	1993	1994	1995	1996	1997b
Change in real per capita GDP (%)	-3.9	-2.4	-0.6	1.7	1.6	0.8
Gross investment as % GDP Whole region	16.3	15.8	17.0	17.3	17.0	16.4

Source: Fischer et al., 1998 (from IMF databases)

We all want to believe in a long-term recovery. But will the recovery be sustained or will it prove to be a false dawn? The paper examines the extent to which the growth recovery has been under-pinned by improvements in Africa's economic 'fundamentals.' This allows us to also assess the prospects for Africa's development towards the 21st Century.

What are the fundamentals in Africa?

There has much research into the sources of growth in Africa. The various factors can be characterised into four groups:

• 'Given conditions' such as low income, population growth, climate, natural resource endowment and landlockedness change very slowly.
• 'Intermediate factors' such as savings and investment rates, foreign aid, indebtedness, poor human resources and poor infrastructure.
• 'Policy factors' such as exchange rate competitiveness, fiscal and monetary policy, openness and public services.
• 'Institutional factors", such as law and order, political commitment and bureaucratic quality, in explaining development performance.

Have the fundamentals improved?

To what extent have the sources of growth in African economies improved and are likely to continue to do so?

Good Luck? Overall, it seems that a 'good luck' line of explanation of Africa's growth recovery can be firmly ruled out. The weather helped a little until 1996 but a booming world economy did not translate into conditions that added to Africa's recovery. 'Intermediate' variables. Savings and investment are particularly important, not only for their direct effects but also because of what they might tell us about sustainability. Unfortunately, the news here is not encouraging. Domestic investment and savings have remained stuck at under a fifth of GDP. Such rates of investment are simply inconsistent with adequate long-term growth. It is also worrying that trends in technological progress seem to indicate that the gap with the rest of the world is widening rather than narrowing.

Policy variables. The 1994 CFA devaluation was an important event for the performance of the Franc Zone countries. Also the longer-term movement towards greater exchange rate flexibility has contributed to the export expansion of the most recent years. But, with the partial exception of budgetary trends, there has not been much improvement of other aspects of macroeconomic management.

Politics and institutions. There is little dispute about the economic importance of political and institutional factors (to say nothing of their importance for human rights), nor about the fact that quite a substantial amount of potentially important political change has occurred in Africa in recent years. Although the overall trend is a slowly improving one, credit rating agencies give Africa by far the worst risk rating of all regions. But there is great variation between countries.

African Development in the 21st Century?

Certainly there are more grounds for optimism today than there have been for a long time. Well over half of countries are growing relatively strongly and there has been a welcome and long overdue improvement in Africa's export performance. Moreover, the growth recovery cannot be put down to just good luck. There are potentially huge gains if the continent can begin to take advantage of its 'catch up' potential.

But the obstacles remain large. The most serious factors are the continued depressed levels of investment and concern over political instability. There is also doubt on the extent of improvement in economic policy regimes.

It is still too early to provide more than a highly provisional judgement. Two things do seem likely though. First, rebuilding reputations and confidence in Africa will be a slow process. We should guard against any facile assumption that Africa can at last look forward to a prolonged period of catching up - not merely with other regions but even with the modest living standards it used to have. Second, outcomes are likely to differ greatly across the continent, just as they do at present. The African entrepreneur must pray that he or she has been born in the right country.

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