Africa needs to ‘step up its game’

Lesotho Times - - Business -

NEW YORK — While Africa has ben­e­fited from in­creas­ing in­vestor in­flows from abroad, it’s now con­tend­ing with a com­mod­ity down­turn, power short­ages, po­lit­i­cal in­sta­bil­ity, a slow­down in China and the prospect of higher US in­ter­est rates.

The In­ter­na­tional Mon­e­tary Fund last month low­ered its 2015 growth out­look for sub-sa­ha­ran Africa by 1.25 per­cent­age points to 4.5 per­cent. Ex­pan­sion in Nige­ria and South Africa, Africa’s two largest economies, is set to slow.

“Sus­tain­ing Africa’s growth is go­ing to prove in­creas­ingly chal­leng­ing,” Peter At­tard Mon­talto, an economist at No­mura In­ter­na­tional in Lon­don, said on Tues­day. “Ex­ter­nal de­mand is volatile, global growth po­ten­tial has fallen and com­pe­ti­tion for trade and in­vest­ment within the con­ti­nent is in­creas­ing. All coun­tries will need to step up their game.”

Gov­ern­ment lead­ers, pol­icy mak­ers and ex­ec­u­tives from com­pa­nies rang­ing from Bar­clays to BT Group are met at the World Eco­nomic Fo­rum in Cape Town on Wed­nes­day for three days of meet­ings on how to build on Africa’s progress.

The talks will also fo­cus on dis­tribut­ing wealth more evenly in a re­gion where 585-mil­lion peo­ple, or 72 per­centt of the pop­u­la­tion in sub-sa­ha­ran Africa, still live in or at the brink of poverty, ac­cord­ing to the United Na­tions.

Oil boom Surg­ing prices of oil and other com- modi­ties helped to more than triple the size of sub-sa­ha­ran Africa’s econ­omy since the start of 2000, ac­cord­ing to IMF data. With a halt to the re­sources boom — the price of Brent crude is down 40 per­cent over the past year and cop­per has fallen 13 per­cent — African na­tions are in­creas­ingly re­ly­ing on con­sumer spend­ing and in­fra­struc­ture ex­pen­di­ture to drive their economies.

“Do­mes­tic de­mand has con­tin­ued to boost growth in many coun­tries while ex­ter­nal de­mand has re­mained mostly sub­dued be­cause of flag­ging ex­port mar­kets,” the Abid­jan, Côte d’ivoire-based African De­vel­op­ment Bank said in a May 25 re­port.

“So far, African economies have been rel­a­tively re­silient to the sharp fall of in­ter­na­tional com­mod­ity prices,” the bank said. “But if com­mod­ity prices re­main low or de­cline fur­ther, growth in re­sourcerich coun­tries might slow down as gov­ern­ments need to cut spend­ing.”

Africa at­tracted $128-bil­lion in for­eign di­rect in­vest­ment last year, up from $52.6-bil­lion the year be­fore, even as the num­ber of projects fell by 8.4 per­cent, ac­count­ing firm Ernst & Young said in its an­nual Africa at­trac­tive­ness sur­vey re­leased in Cape Town on Tues­day.

Los­ing ap­peal Forty-four per­cent of the spend­ing was on projects in the prop­erty, hos­pi­tal­ity and con­struc­tion in­dus­tries, while oil, nat­u­ral gas and coal ac­counted for 25 per­cent, it said.

Nine of the world’s 15 fastest­grow­ing economies are in Africa and most in­vestors re­main pos­i­tive about the con­ti­nent’s prospects, EY Africa’s chief ex­ec­u­tive of­fi­cer Ajen Sita told re­porters in Cape Town. De­tract­ing from that are an Ebola virus out­break in West Africa, Is­lamist mil­i­tant in­sur­gen­cies in Nige­ria and Kenya and po­lit­i­cal up­heavals in coun­tries such as the Cen­tral African Re­pub­lic and South Su­dan, he said.

“Although tremen­dous progress has been made over the past 15 years, Africa and its lead­ers are poised at an in­flec­tion point,” Sita said. “De­lib­er­ate and ur­gent choices are re­quired to raise lev­els of pro­duc­tiv­ity and com­pet­i­tive­ness, ac­cel­er­ate struc­tural trans­for­ma­tion and make the shift to­ward an in­clu­sive, sus­tain­able growth path.”

An EY sur­vey of more than 500 busi­ness ex­ec­u­tives in 30 coun­tries iden­ti­fied Africa’s po­lit­i­cal in­sta­bil­ity, cor­rup­tion, poor se­cu­rity, lack of in­fra­struc­ture and a scarcity of skilled la­bor as the big­gest de­ter­rents to in­vestors.

For John Mackie, head of Johannesburg-based Stan­lib As­set Man­age­ment’s Pan African In­vest­ment port­fo­lios, in­vest­ing in the con­ti­nent is for the long haul.

“It’s a pa­tience game,” he said by phone from Johannesburg on Tues­day. “It’s go­ing to take time” for the con­ti­nent to re­alise its full po­ten­tial. — Bloomberg

NINE of the world's fastest grow­ing economies are from Africa and in­vestors re­main up­beat about the con­ti­nent's prospects.

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