Thursday, April 19, 2012

Africa is Poised for Accelerated Growth Despite the Volatility of Global Economy

Africa and the MDGs from World Bank on Vimeo.

Africa is poised to accelerate its growth despite the volatility of the global economy, says a new report from the World Bank / The region remains vulnerable, with droughts in the Sahel and fuel subsidies that represent 1.4% of GDP and mainly benefit the rich

WASHINGTON, April 18 2012/African Press Organization (APO) / - Economic growth in sub-Saharan Africa remains strong and is expected to accelerate to 4.9% in 2011, slightly below its average growth of 5% before the crisis. Outside South Africa, which accounts for more than a third of gross domestic product (GDP) in the region, growth in the rest of the region was 5.9%, making it one of the regions developing the fastest growing, according to a new World Bank report on Africa's economy.

Over a third of countries in the region have achieved growth rates of at least 6%, while 40% of them grew between 4% and 6%. Among countries with rapid growth in 2011 include resource-rich countries such as Ghana, Mozambique, Nigeria and Angola, as well as other economies such as Rwanda and Ethiopia, which display all rates growth of at least 7% for 2011.

"Given the turbulence that characterized the world economy over the past five years, many people would rather believe that the prospects for Africa are really bad. However, as shown in this issue of Africa's Pulse, African economies continue to prove their resilience and some savings to the fastest growing in the world are now in Africa. The most pressing issue in the agenda remains the pursuit of macroeconomic reforms in parallel with the acceleration of structural reforms that will have a good growth, creating jobs and increase revenues on the continent " said Obiageli Ezekwesili, Vice President of the World Bank for the Africa region and former Minister of Mineral Resources of Nigeria.

However, the new report published in Africa's Pulse, a twice-yearly analysis of issues affecting the economic prospects of Africa, also contends that the debt crisis of the euro area and internal policies stricter in some large developing countries have decrease African exports in 2011. Exporters of metals and minerals (eg. Zambia, Niger and Mozambique) and cotton exporters (eg. Benin and Burkina Faso) were among the hardest hit during the period three months ending in November 2011. Given the recent firming of prices of other commodities in 2012, it is also possible that the value of exports from the exporting countries of agricultural products and metals and minerals has already begun to rise.

Slowdown in tourism, but more private investment

The latest issue of Africa's Pulse reports that the global economic downturn during the second half of 2011 has affected tourist arrivals. For the full year 2011, tourist arrivals in sub-Saharan Africa were up 6.2%, a performance better than the world average is 4.4%, but below the growth of 9, 6% recorded in the region in 2010 when she hosted the World Cup soccer. Tourist arrivals from Europe to key destinations such as Mauritius have declined.

Moreover, an important development took place at the level of investment. The World Bank states that the flow of capital to sub-Saharan Africa increased by $ 8 billion to $ 48.2 billion in 2011. Foreign direct investment, which represent approximately 77% of all capital flows in the region, contributed to about 83% of this increase.

Recent foreign direct investment in the region were boosted by increased competition for natural resources worldwide, an increase of commodity prices, robust economic growth and the rapid emergence of a middle class on the continent. The region is increasingly recognized as a destination for investment, including private equity investors.

Food insecurity remains a concern

Africa's Pulse reported that the Sahel region of West Africa is still facing serious food insecurity. Rainfall below average, poor food distribution and displacement of families due to the conflict have left between 13 and 15 million vulnerable people divided between Niger, Mali, Burkina Faso, Chad and Mauritania.

Rainfall below average and erratic in 2011 have resulted in reduced grain harvests for the 2011-2012 season and grain production across the Sahel, especially in Mauritania, Chad, Niger and Gambia . Total production of cereals in the Sahel is at least 25% lower than the previous season (2010-2011), Chad and Mauritania even showing declines of 50% over the previous year . Some fear that the food crisis from spreading to Senegal and northern Nigeria and Cameroon.

The return of some emigrants who had left North Africa and lower remittances from migrant workers living in neighboring countries have amplified the effects of the crisis. The current conflict in Mali has also forced thousands to flee their homes and seek refuge in Burkina Faso and Mauritania, putting pressure on food markets and weighting constraints in already vulnerable communities.

"Famine in the Horn of Africa last year and drought in the Sahel this year we are stark reminders that Africa, the continent that has contributed least to greenhouse gas emissions, will probably be the most affected by climate change, "said Ms. Ezekwesili of the World Bank.

Fuel subsidies benefit the rich more than poor

The new issue of Africa's Pulse a special section devoted to subsidies in fuel prices in Africa, noting that in 2010-2011, more than half of African countries had established a subsidy for petroleum products, and that these subsidies funded from revenue cost on average 1.4% of GDP. Of the 25 countries with fuel subsidies, the budgetary cost of these subsidies in six countries (mostly oil exporters) was 2% or more of GDP in 2011. The budgetary cost of these subsidies in oil-exporting countries was almost two and a half times the levels observed in oil-importing countries. These costs have increased sharply in some countries in recent years.

However, fuel subsidies benefit mostly the wealthiest families. Indeed, the results of surveys conducted in 12 countries around the world show that households in the 20% of the top six times took advantage of these subsidies the households in the 20% of the slice lower.

Oil prices remain high throughout the world, a number of African countries increased fuel prices on their domestic market. For example, Ghana increased fuel prices by 30% in January 2011. In a similar vein, Mozambique has increased fuel prices in 2011 (10% in April and 8% in July) and Guinea has adopted measures to reduce its fuel subsidy. On 1 January 2012, the Nigerian government has eliminated the subsidy for diesel fuel. Following protests that lasted for weeks, a portion of this grant was replaced.

"That poor showing against the removal of fuel subsidies that benefit the rich shows how governance issues are serious in the continent. They simply do not trust the government to spend the savings to help them, "says Shanta Devarajan, Chief Economist of the World Bank for the African region and author of Africa's Pulse.

As noted Africa's Pulse, phase out fuel subsidies is a sensitive issue in terms of policy. The elimination of subsidies and price increases should be managed wisely. On the one hand, the social assistance programs must be strengthened to help poor and vulnerable households to cope with this drastic price increase. On the other hand, it is necessary to raise public awareness subsidy reform and get support through a transparent discussion and fact-based and scrutiny of subsidies in question: the real cost this grant, the distribution of the grant and its real beneficiaries, and the consequences of this expense on other public spending in priority areas.

Source: The World Bank

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