AFRICA: Economic growth lags behind MDG target, new ECA report says

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IRIN

AFRICA: Economic growth lags behind MDG target, new ECA report says NAIROBI, 30 Jul 2003 (IRIN) - Africa’s economies grew more slowly in 2002 than in the previous year and few countries achieved the growth rate needed to meet a set of targets agreed by the world’s nations for improving the welfare of millions of people worldwide, says a report released on Wednesday by the UN Economic Commission for Africa (ECA).

For Africa to achieve the Millenium Development Goals (MDG), which include reducing by half the proportion of people living on less than US $1 a day and halving the proportion of those who suffer from hunger by 2015, its economies need to grow on average by 7 percent.

Five countries topped the 7-percent mark in 2002, but continent’s overall economic growth averaged just 3.2 percent, down from 4.3 percent in 2001, according to the Economic Report on Africa 2003. Five countries registered negative growth, according to the report, titled 'Accelerating the Pace of Development'.

The report examines ways in which Africa could achieve growth rates necessary to attain the MDG. It ranks countries based on the performance of macroeconomic, poverty-reduction, and institution-building policies.

Botswana, South Africa, Mauritius, Namibia, and Tunisia rank highest, while the bottom five are Republic of Congo, Zimbabwe, Chad, Guinea and Nigeria. The top performers have lower foreign debt, lower budget deficits, and lower interest rates. Market liberalization is more advanced in these countries, legal systems are more effective, infrastructure is better and anti-poverty policies more effective.

Factors range from weak global rebound to drought, conflict and diseases

The continent’s modest overall performance in 2002 reflects a weaker global economy and the fact that an expected rebound in world trade was slower than anticipated. Factors that weakened economic growth also included political strife and armed conflicts.

Commodity prices also played a role. Some export goods fared better in 2002, including crude oil and cocoa, but the prices of others stagnated or declined, especially coffee, tea and cotton.

The report notes that agriculture in many countries suffered from adverse climatic conditions, including floods in Kenya and Senegal and droughts elsewhere. Food production was affected, and food insecurity is becoming a serious challenge in the Sahel and parts of eastern and southern Africa. A quarter of Ethiopia’s population and nearly half of Zimbabwe’s need emergency food aid. The same goes for 30 percent of people in Lesotho, 29 percent of Malawi’s population, 26 percent of Zambians and 24 percent of Swazis, the report says.

The ECA notes that there have been encouraging trends in poverty reduction: a number of countries, which together account for more than half the population of sub-Saharan Africa, recorded successes in reducing poverty in 2002. However, poverty is being perpetuated by HIV/AIDS and the resurgence of malaria and tuberculosis, which are major causes of death and devastation, undermining productive capacity, overloading health services and increasing social distress.

Caught between malaria and farm subsidies

The report states that HIV/AIDS reduced annual GDP growth in Africa by 0.5 to 2.6 percent on average, while productivity losses in countries with high TB rates were estimated at 4-7% of GDP. It cites estimates which suggest that Africa’s GDP would have been as much as $100 billion greater if malaria had been eliminated years ago.

Other areas on which the report focuses include foreign direct investment which, it says, continues to be hampered by weak governance, poor infrastructure, weak institutions, and conflicts in many countries. It also highlights the roles played by official development aid (ODA) and trade.

In the area of trade, farm subsidies affect Africa’s agriculture sector by making it more difficult for small countries to compete, according to the report. It notes that a US decision in May 2002 to introduce a six-year $51.7-billion farm bill, which increases crop and dairy subsidies, would hurt Africa’s agriculture exports.

On the other hand, donor countries pledged last year to increase ODA. If honoured, the pledges would generate an additional $12 billion a year for developing countries - much of it for Africa. This, the report notes, is "a welcome improvement", though short of the extra $50 million a year required globally to reach the MDGs.

More ODA promised, but less earmarked for productive sectors

However, the report cautions that ODA flows to Africa are usually analysed as a whole, with little attention given to sectors, thus "masking a worrying trend": ODA to production sectors - agriculture, manufacturing, trade, banking and tourism - declined from 17 percent of total ODA in 1975-1980 to 11 percent in 1995-2000.

Turning to another key performance indicator, the report notes that overall fiscal discipline had improved, but fiscal extravagance remained a problem in some countries.

If Africa’s countries are to reduce their dependence on aid and improve their fiscal position, government will need to implement policies and use resources to promote growth with a view to expanding public revenue, the report points out, noting that "a strong private sector is critical to achieving this goal".

"Only through a strong private sector that contributes to the state’s coffers will the abysmally poor fiscal position of African countries be improved," it added.

[For the full report go to www.uneca.org]