Boost in cap­i­tal in­flows

Finweek English Edition - - Economic Trends & Analysis - HOWARD PREECE howardp@fin­week.co.za

PRI­VATE CAP­I­TAL IN­FLOWS to sub­Sa­ha­ran Africa soared by more than 600% be­tween 2000 and 2007. That’s the find­ing of a new re­search re­port pub­lished by the In­ter­na­tional Mon­e­tary Fund.

The re­port says: “In the pe­riod from 2000 to the re­cently ended boom on global fi­nan­cial mar­kets, in­flows of pri­vate cap­i­tal be­came the most im­por­tant source of ex­ter­nal fi­nanc­ing for (the re­gion). On av­er­age, be­tween 2001 and 2007 to­tal gross in­flows to the re­gion in­creased by 32% an­nu­ally – the rate ac­cel­er­at­ing to 44% af­ter 2005.”

The IMF notes: “Pri­vate cap­i­tal in­flows to sub-Sa­ha­ran Africa rose from about US$15bn in 2000 to about $84bn in 2007. Recorded pri­vate cap­i­tal out­flows on the whole were much smaller than in­flows, so that in 2007 net in­flows to… amounted to around $76bn.”

The IMF re­ports, crit­i­cally: “As of 2007 pri­vate cap­i­tal flows rep­re­sented 10% of the re­gion’s gross do­mes­tic prod­uct and about twice the vol­ume of of­fi­cial de­vel­op­ment as­sis­tance ($40bn).” Of­fi­cial as­sis­tance is fi­nance pro­vided di­rectly by gov­ern­ments of rich de­vel­oped na­tions or – ul­ti­mately the same story – by global or­gan­i­sa­tions over­whelm­ingly sup­ported by wealthy in­dus­trial coun­tries.

The mas­sive surge in pri­vate cap­i­tal in­flows to the re­gion – at least un­til the ma­jor in­ter­na­tional eco­nomic set­back – in part re­flected the great progress made over­all (Zim­babwe and some oth­ers aside) in the re­gion. But the in­flows were nat­u­rally es­sen­tially re­lated to self-in­ter­est, not char­ity.

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