Africa's prospects look brighter

http://www.news24.com/News24/Finance/Economy/0,,2-8-25_1395353,00.html

New York - African economic growth fell more than 1% to 3.2% in 2002 because of the weaker global economy, the devastating effects of HIV/Aids and political and armed conflict in the world's poorest continent, a UN report said on Wednesday.

But the report forecast that African economies will bounce back this year, growing by an average of 4.2%. African economies expanded by 4.3% in 2001.

Higher growth is expected in 2003 as conflicts wind down in parts of Africa, more countries receive debt relief under an initiative of the World Bank and International Monetary Fund, commodity prices recover globally, and the global economic slow down bottoms out.

African economic performance is expected to improve as countries pursue economic reforms, improve political governance and economic management, said Adam Smith of the UN Department of Economic and Social Affairs.

Drought and severe flooding in parts of the continent hurt agriculture - the mainstay of African economies - and were one of the major reasons for the downturn in 2002.

Agricultural subsidies also make it difficult for small African countries to compete in Western markets, the report said.

In 2001, countries of the Paris-based Organisation for Economic Co-operation and Development spent US$311bn on agricultural subsidies.

That's more than the $301bn gross domestic product for countries in western, eastern, central and southern Africa for that year, said the Economic Report on Africa 2003.

"The US decision in May to introduce a six-year, $51.7bn farm bill boosting crop and dairy subsidies by 67% doesn't help Africa's prospects" to combat poverty by stimulating economic growth, said the review of African economic development and short-term prospects.

Foreign direct investment in Africa fell by 27% in 2002, the report said.

Investor perception

The decline is due to a negative investor perception of the continent, which does not reflect realities on large parts of Africa, UN officials said.

"I think foreign investors are making a serious mistake in their calculations on risks that are attached" to investments in Africa, Carl Gray, a UN economic affairs officer, told a news conference launching the report.

African economies did not grow fast enough to lift the continent out of poverty, the report said.

Only five of Africa's 53 countries registered 7% growth, the target required to reduce poverty under the goals adopted by world leaders at the UN Millennium Summit in September 2000 that call for reducing the number of people living on a dollar a day by half by 2015.

Five other countries recorded negative growth in 2002, the report said.

With 30 million adults and children living with HIV/Aids in Africa, its economy has been hard hit mainly because those killed are the most productive members of the society, Smith said.

The report is not all bad news.

Although 2001 was a tough year globally for tourism, Africa performed strongly.

The report said that although tourist arrivals fell by 0.6% worldwide, the continent saw an 8.1% increase during the first eight months of the year.

Tourism revenues rose by 8.8% in Africa as the sector continued a decade-long growth pattern, added the report.

African economic performance is expected to improve as countries pursue economic reforms, improve political governance and economic management, Smith said. - Sapa-AP