Sub-Saharan Africa set for faster economic growth, new World Bank report showsBy CHRISPINUS OMAR | Thursday, April 19 2012 at 13:14
Countries in Sub-Saharan Africa are expected to register faster economic growth despite existing challenges such as drought and fuel crisis, the World Bank said in a new report released Wednesday.
The Bank said that overall capital flows to Sub-Saharan Africa rose by $8 billion in 2011 to $48.2 billion.
The report, Africa's Pulse, a twice-yearly analysis of the issues shaping Africa's economic prospects, said foreign direct investment, which accounts for about 77 per cent of all capital flows to the region, contributed to about 83 per cent of the increase.
"Economic growth in Sub-Saharan Africa remains strong and is poised for lift-off after growing at 4.9 per cent in 2011, just shy of the pre-crisis average of 5 per cent," the report said.
Excluding South Africa, which accounts for over a third of the region's GDP, growth in the rest of region was 5.9 per cent, making it one of the fastest growing developing regions, according to the report.
The Bank's Vice President for Africa Obiageli Ezekwesili said many would be right to think that the prospects for Africa are terrible in view of the turbulence that has beset the global economy in the last five years.
But, she said, African economies continue to show resilience and some of the fastest-growing economies in the world are now in Africa.
"The urgent agenda remains sustaining the macroeconomic reforms while accelerating the structural reforms that will deliver the right quality of growth that creates jobs and raises incomes on the continent," Ms Ezekwesili said.
According to the report, over a third of countries in the region attained growth rates of at least 6 per cent, with another 40 per cent growing between 4 - 6 per cent.
Among fast-growing economies in 2011 were resource-rich countries such as Ghana, Mozambique, and Nigeria, as well as other economies such as Rwanda and Ethiopia, all posting growth rates of at least 7 per cent in 2011.
"The famine in the Horn of Africa last year and the drought in the Sahel this year are cruel reminders that Africa, the continent that contributed the least to greenhouse gas emissions, is likely to be the most hurt by climate change," Ezekwesili said.
The report said in 2010-11 over half of all African countries had some fuel subsidies in place for fuel products, and these in turn cost on average, 1.4 per cent of GDP in public revenues.
"Of the 25 countries with fuel subsidies, the fiscal cost of subsidies in six countries--primarily oil exporters--was at or above 2 per cent of GDP in 2011," it said.
The report said the fiscal cost in oil exporters was almost two- and-a-half times the levels observed for oil importers. These costs have grown sharply in some countries in recent years.
However, the report says fuel subsidies overwhelmingly benefit better-off families, with survey results for 12 countries worldwide showing that the top 20 per cent of households receive about 6 times more in subsidy benefits than the bottom 20 per cent.
According to the Bank, as world oil prices remain high, a number of African countries have raised domestic prices of fuel. For example, Ghana raised fuel prices by 30 per cent in January 2011. Similarly, Mozambique raised fuel prices in 2011 (10 per cent in April and 8 per cent in July) and Guinea also introduced measures to reduce the fuel subsidy.
The Nigerian government removed the fuel subsidy on gasoline on Jan. 1 and following week-long protests, a portion of the subsidy was reinstated.
"That poor people protest the removal of fuel subsidies that benefit the rich shows how deep the continent's governance problems are. They simply don't trust the government to spend the savings on them," said Shanta Devarajan, the Bank's Chief Economist for Africa and author of Africa's Pulse.
The report says that the Euro zone debt crisis and tighter domestic policies in some large developing countries pushed African exports lower in late 2011.
Metal and mineral exporters (Zambia, Niger, and Mozambique) and cotton exporters (for example Benin and Burkina Faso) were among the hardest hit in the three months ending in November 2011.
Given the recent strengthening of other commodity prices in 2012, export values for both agriculture and metal and mineral exporters may already have started expanding.
The report says that the weakening global economy in the second half of 2011 affected tourist arrivals.
For the year, tourist arrivals in Sub-Saharan Africa were up by 6.2 per cent, higher than the global average of 4.4 per cent, but lower than the 9.6 per cent recorded for the region in 2010, when it benefitted from hosting of the World Cup.
Tourism arrivals from Europe saw a decline in major destination markets such as Mauritius. Recent foreign direct investment to the region has been spurred by increased global competition for natural resources, higher commodity prices, robust economic growth and a fast rising middle class.
The region is increasingly being recognized as an investment destination, including from private equity investors. (Xinhua)
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