Sub-Sa­ha­ran re­gional growth un­der threat

Weekend Argus (Saturday Edition) - - LIFE -

LONDON: Pri­vate credit growth across sub- Sa­ha­ran Africa has more than halved over the past two years and ground to a halt in oil-ex­port­ing coun­tries fol­low­ing low oil prices and the eco­nomic slow­down in China, weigh­ing heav­ily on re­gional growth prospects.

With in­ter­na­tional fi­nance hav­ing be­come ever scarcer and costlier, pri­vate credit in sub-Sa­ha­ran Africa in­creased by just 7 per­cent in the first six months of this year, down from a 15 per­cent peak in 2014, ac­cord­ing to es­ti­mates in a work­ing pa­per from the Over­seas Devel­op­ment In­sti­tute (ODI) re­leased yes­ter­day.

Across African oil ex­port­ing coun­tries the credit growth rate was 0.5 per­cent, mean­ing ef­fec­tively no new pri­vate lend- ing was tak­ing place, added the ODI, a London- based think tank fo­cused on devel­op­ment and hu­man­i­tar­ian is­sues.

In April the In­ter­na­tional Mon­e­tary Fund cut its eco­nomic growth fore­cast for sub­Sa­ha­ran Africa to three per­cent – the low­est rate since 1999 – from 3.4 per­cent last year, cit­ing a slump in com­mod­ity prices, drought and the af­ter­ef­fects of the Ebola out­break.

The ODI re­port said much of the scarce fi­nanc­ing avail­able is be­ing used in sec­tors that have lit­tle or no trans­for­ma­tional ef­fect, such as ex­trac­tive in­dus­tries or mid­dle-class con­sumer fi­nance.

This came at the ex­pense of other sec­tors such as trade, man­u­fac­tur­ing and the pro­cess­ing of agri­cul­tural goods, which could help di­ver­sify economies and cre­ate jobs, it added. The sit­u­a­tion had been made worse by gov­er­nance prob­lems, such as Mozam­bique’s undis­closed gov­ern­ment bor­row­ing and the di­ver­sion of funds ear­marked for a tuna fish­ing fleet.

Other ex­am­ples cited by the re­port in­clude the Kenyan cen­tral bank’s takeover of three lenders in a nine-month pe­riod over con­cerns flagged by au­di­tors, and in­ves­ti­ga­tions into il­le­gal trans­ac­tions at some of Nige­ria’s big­gest lenders.

“Sub- Sa­ha­ran Africa has made re­mark­able and un­prece­dented progress in eco­nomic growth and poverty alle­vi­a­tion in the last decade,” Tyson said.

“Tack­ling these is­sues in the fi­nan­cial sys­tem is needed if this progress is to be main­tained.” – Reuters

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