Africa Grew Fastest in Developing World in 2001-STUDY

Source: Inter Press Service

UNITED NATIONS, May 29, 2002 (Inter Press Service via COMTEX) -- Africa's economic growth rate was the fastest in the developing world last year, the United Nations said in a report released today.

      The overall gross domestic product (GDP) of the perpetually crisis-stricken continent increased from 3.5 percent in 2000 to 4.3 percent in 2001.

      "These gains were made amid the turbulence created by the global economic slowdown and the September 11 attacks on the United States," the 18-page report said.

      The relatively strong growth rate was attributed to several factors: strong agricultural production in Morocco, Tunisia and East Africa; higher than expected exports to the United States; currency depreciation in South Africa; cessation of conflicts in Burundi, Eritrea, Ethiopia, Sierra Leone and the Democratic Republic of the Congo; and better macro-economic management.

      In contrast, the growth rate in Asia plunged from 7.0 percent in 2000 to 3.1 percent in 2001; in Latin America and the Caribbean, it declined from 4.1 percent to 0.4 percent.

      The study, however, admits that Africa's rate "masks wide disparities" -- growth ranges from 65 percent in oil-rich Equatorial Guinea to minus 7.0 percent in Zimbabwe.

      In 2001, just 16 African countries experienced GDP growth of less than 3.0 percent, down from 27 in 2000. The number of countries with growth rates exceeding the "traditional" 3.0 percent increased from 26 in 2000 to 37 in 2001, and included Mozambique, with a robust 9.2 percent, Ethiopia (8.7 percent) and Uganda (5.4 percent).

      Despite these achievements, economic growth in Africa remains fragile, and at current rates the continent will not achieve any of the development goals set by the U.N. Millennium Summit in 1990, the report warned.

      These goals include reducing by half the proportion of Africans living on less than a dollar a day; cutting in half the proportion of people who suffer from hunger; ensuring that all boys and girls complete a full course of primary schooling; and reducing by three quarters the maternal mortality ratio.

      Still, the study said, there are many reasons for cautious optimism about Africa's medium-term prospects.

      The value of U.S. imports from Africa has grown considerably in recent years, from about $1.5 billion a month in 1999 to $2.3 billion in 2000.

      Africa's exports received a further boost with the implementation in January 2001 of the African Growth and Opportunity Act, which eliminated U.S. duties on textile imports from eligible sub-Saharan countries.

      The primary exporters under the Act were Nigeria (accounting for 56 percent of the total), South Africa (22 percent) and Gabon (12 percent).

      Among the exporters, South Africa provided the most varied mix of products, from transportation equipment and minerals to metals, textiles and apparel.

      Additionally, foreign investments have risen sharply in Madagascar and 12 other sub-Saharan countries that have qualified for trade benefits under the U.S. legislation.

      Lesotho has plans for over $120 million in new investments, while the new act will also help Kenya create some 50,000 jobs directly and another 150,000 indirectly, according to the U.N. study.

      Foreign Direct Investment (FDI) is described as the most important source of external finance for developing countries -- more important than commercial loans, portfolio investment and official development assistance (ODA).

      Although traditional investors in Africa have come mainly from France, Britain and the United States, the pattern changed during the 1990s, with increased investments from Canada, Italy, the Netherlands, Norway, Portugal and Spain.

      Furthermore, FDI from developing Asian economies has also increased, led by South Korea, China, India, Malaysia and Taiwan.

      The study singled out South Africa as by far the continent's most important source of direct investment.

      Since 1994, South African direct investment in other African countries has averaged about $1 billion annually. South Africa is also home to three of the world's largest transnational corporations -- Sappi Limited (with $4.6 billion in foreign assets), Barlow Limited ($1.8 billion) and South African Breweries ($700 million).

      Additionally, prospects for tourism in sub-Saharan Africa remain strong despite the Sep. 11 attacks on the United States.

      Tourism now accounts for over 11 percent of the region's GDP and is expected to grow by more than 5.0 percent annually in real terms through 2010.

      "With sub-Saharan Africa's tropical weather, exotic wildlife, pristine coastal areas, proximity to Europe, and low wages, tourism has enormous growth potential," the report noted.

      Kenya's recent efforts to address problems in the tourism industry seem to have paid off: international arrivals increased by 10 percent between the first eight months of 2000 and the same period in 2001, from 309,000 to about 340,000.