Sub-Saharan regional growth under threat
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