Documents menu

Africa Registers The Fastest growing Economy ..., but

By Lewis Machipisa, IPS, 5 May 1999

ADDIS ABABA, May 5 (IPS) - Africa remains deeply entrenched in poverty, although it registered the fastest growing economy than any other region last year, according to a new report by the UN Economic Commission for Africa (ECA).

The report, titled the 'Economic Report on Africa for 1999', says the continent posted its fourth consecutive year of growth at 3.3 percent, despite the global financial and currency turmoil, exceeding the 2.9 percent rate in 1997 and population growth rate of 2.8 percent per annum.

The world economy slumped to two percent growth in 1998 from four percent in 1997.

Despite the good news, the report warns that Africa's economic growth rate is not high enough, nor sufficiently broad- based, or sustained long enough to make a real dent on poverty.

The highest scoring countries were, in ascending order, Egypt, Gabon, Morocco, Cameroon, Botswana, Swaziland, Algeria, Cape Verde, Tunisia, Libya, South Africa, Mauritius and Seychelles. The bottom 11, in ascending order, are Sierra Leone, Mali, Burundi, Mozambique, Malawi, Ethiopia, Niger, Chad, Guinea- Bissau, Burkina Faso and Uganda.

Despite the encouraging trend, the prospects for African economies continue to be shaped by the outturn of its most important determinants, the weather and the external economic environment.

"African countries need to redouble their efforts to attain and sustain the required growth rate to reduce poverty levels," notes K. Y. Amoako, executive secretary of the ECA. "African economies remain vulnerable to exogenous economic and non- economic shocks, such as movements in international commodity prices, erratic weather conditions and civil conflicts."

Unfortunately, the global and external shocks are not changing in Africa's favour. Overseas development aid (oda) is stagnant or declining, little has been done in reducing debt burden while protectionistic tendencies continue in Africa's major markets.

Given the global shaky financial sector and the possibility of competing demands from the more important emerging markets that may be threatened by instability, external resource inflows to Africa, especially from the private sector, are likely to remain low, the report notes.

External resource flows into Africa declined to three billion U.S dollars from 4.5 billion in 1997 as a result of reduced private inflows and bilateral credit. For sub-saharan countries, net transfers declined by nearly 40 percent. Both domestic investment and foreign direct investment (fdi) are relatively low.

In 1997, fdi flow worldwide rose by 19 percent to reach 400 billion dollars U.S. dollars. Of this amount, developing countries attracted 149 billion U.S. dollars. Fdi inflows to Africa are estimated at 6.4 billion dollars, according to the Geneva-based UN Conference on Trade and Development (UNCTAD).

"This is not the time to be reducing ODA," says Amoako.

FDI is needed as a non-debt creating form of resource inflow. Yet FDI seems to be caught in a vicious circle since it requires a hospitable economic environment and sustained high growth. At the same time FDI is needed to help create that environment and achieve that growth.

The ECA report has a new feature. Countries are ranked according to annual performance, economic stability and economic policy stance indices. Unlike in the past, performance over the previous year and challenges facing African policy makers are evaluated from the perspective of reducing poverty by half over the next 15 years. Four out of 10 Africans live in absolute poverty and recent evidence suggest that poverty is on the increase.

Despite recent progress in economic policy reforms, most of the countries on the continent lack the fundamentals for sustained future growth.

Not surprisingly, the lowest scoring countries on all the indices were those significantly impacted by civil conflict.

"Understanding the dimensions of poverty is essential for constructing policies and programmes to reduce it," says Amoako. "That is why measuring performance and sustainability becomes vital."

"By understanding the depth and extent of poverty fully is only a first step, a step necessary but not sufficient step, to achieving poverty alleviation," he notes.

The Least Developed Countries (LDCs), 33 of them, increased their GDP growth rate from 2.4 percent in 1997 to 4.1 percent. Only two economies, the conflict engulfed Democratic Republic of Congo (DRC) and Comoros had negative GDP growth in 1998 compared to with four the previous year. But only three, Botswana, Republic of Congo, Equatorial Guinea grew at seven percent or more in 1998.

The report notes that while macroeconomic policies are important and necessary for economic growth, and have spurred the recent good performance across an impressive array of African countries, they are by themselves inadequate to sustain it.

The report concludes that as Africa enters the 21st century, the long-term sustainability of economic and social progress of many countries is best fraught with uncertainty. If Africa wants to reduce poverty by half over the next decade and half, it needs to attain and sustain an average growth rate of seven percent per annum, an enormous task.

But even as the region basks in the limelight of being the fastest growing economy, not all countries share the glory. Only North and Central African sub-regions grew in 1998. There were declines in the eastern, western sub-regions. Southern Africa was basically unchanged.

"The two sub-regions in Africa where economic growth, stability and prospects for development look very encouraging is southern Africa and Northern Africa. Other sub-regions have a lot more difficulties," Amoako told IPS.(END/IPS/lm/MN/99)