Africa's 2001 growth faster than other developing regions

Source: Business Week

http://www.mmegi.bw/2002/July/Friday19/10341463811002.html

JOHANNESBURG: Better macro-economic management, strong agricultural production, and an end to conflicts in several countries, saw Africa grow faster than any other developing region in 2001, according to the latest UN Economic Commission for Africa (UNECA) report.

But, Africa's average gross domestic product (GDP) growth of more than 4

percent in 2001, masked wide disparities among countries, the report

said. Moreover, economic growth remained fragile, and at current rates of

progress Africa would not achieve any of the Millennium Development Goals

set by the UN," said the report, distributed at the launch of the African

Union (AU) in Durban, South Africa.

However, there were many reasons for "cautious optimism" about Africa's

medium-term prospects - including the opportunities created by the US

African Growth and Opportunity Act (AGOA), the European Union's

"Everything but Arms" initiative, the New Partnership for African

Development (NEPAD) and the launches of the Doha Development Round and

the AU.

"Ultimately, though, Africa's future depends on how it addresses economic

and political governance, resolves civil conflicts, and responds to the

need for deeper economic and social reforms," the report said.

The global slowdown following the 11 September attacks had a less

pronounced impact on Africa than expected, and GDP was estimated to have

risen to 4.3 percent in 2001 from 3.5 percent in 2000.

Africa's emerging markets experienced a sharp increase in private sector

capital flows - with net private inflows to countries like Algeria,

Egypt, Morocco, South Africa and Tunisia nearly doubled from US $4.9

billion to US $9.5 billion. Net equity investment jumped from US $5.2

billion to US $9.3 billion, mainly reflecting large-scale deals in

Morocco and South Africa.

Africa's share of Foreign Direct Investment (FDI), an important form of

external finance, dropped from 25 percent in the early 1970s to just 5

percent in 2000, the report said. South Africa's FDI in other African

countries was the continent's most important source of this finance at an

average of US $1 billion a year since 1994.

However, Africa's integration had been slow with the average African

country conducting only 8 percent of its trade with other African

countries - and 92 percent with the rest of the world.

Aid to Africa from most donors fell to almost half the 1991 level of US

$32 billion by the end of the 1990s. However, aid from Arab countries had

increased.

African economies grew faster than expected. The number of countries with

growth rates higher than 3 percent, increased from 26 in 2000 to 37 in

2001. This had positive implications for poverty reduction.

Raising per capita income remained the biggest challenge. Africa's

average per capita income growth of an estimated 1.9 percent in 2001 was

better, but not enough to achieve the Millennium Development Goal of

cutting poverty in half by 2015.

In 2001, 30 African countries achieved per capita income growth above 1.5

percent, this number was expected to increase to 32 in 2002.

The main themes of African economic policy included creating an enabling

environment for producers, investors, and employers, and improving

governance and public finances.

In many countries, fiscal policy was focused on minimising domestic debt

and making government spending more transparent, while monetary policy

looked at lowering inflation and exchange rate realignment.

Though the outlook for African economies in 2002 was shaded by the global

slowdown, the report said, South Africa's outlook was positive.

International investors were also now judging developing countries on

their own merits.

The three large North African economies - Egypt, Morocco and Tunisia -

which account for 25 percent of Africa's GDP, provided the greatest

potential benefits for Africa in 2002 with their low inflation, adequate

external resources, debt reduction and structural reforms.

Booming oil revenues saw Equitorial Guinea's GDP rise by 65 percent in

2001. With oil prices likely to stay below US $20 a barrel this year,

African countries were expected to grow by an average of 3.4 percent in

2002, the report said.

UNECA also compared the economies of South Africa and Zimbabwe. It said

the economic outlook was encouraging for South Africa - with low external

borrowing, sound financial sector supervising and stronger export

competitiveness improving its external accounts.

The government had met its fiscal and monetary policy targets and

inflation remained within the target band.

However, GDP had stalled below 3 percent for the past several years, too

slow for robust job creation. But fiscal stability was opening the door

to large increases in social spending - particularly in education and

health - that should boost the economy's long-term growth potential

By contrast, the report said Zimbabwe's situation was dire. It is

estimated that 75 percent of the population lives in poverty.

The economy contracted by an estimated 7.3 percent in 2001 and was

expected to shrink a further 5 percent in 2002. The budget left little

room for optimism and gave no indication that the authorities would allow

market forces to determine interest rates and the value of the local

currency. It also provided no timetable for lifting price controls.

"Instead, the government appears to be persisting with the strategies

that have contributed to the economic crisis," the report said.

It noted that though poor weather conditions contributed to the serious

decline in agricultural production, land invasions were "the straw that

broke the camel's back". They also sparked "distress calls" in

manufacturing and the financial sector as international investor

confidence waned, export receipts slumped and capital inflows tapered

off. Zimbabwe was also the only African country to record a decline in

international visitors in 2000.

Looking forward, the report said a key to fostering economic well-being

in African countries was having credible mechanisms to reduce the risk of

policy reversals and implementation failures. It hoped NEPAD'S proposed

African Peer Review mechanism would "build on the concepts of African

ownership and mutual accountability".

The report was to appear on the UNECA website on Thursday: www.uneca.org