Southern African economies likely to underperform relative to African peers

| Friday June 11, 2010 00:00

However, some regions would expand at a slower rate, African Development Bank research divisional head Peter Walkenhorst warned on Tuesday.

Speaking at a summit on the 'African Economic Outlook 2010' report, in Pretoria, he also cautioned that the rate of economic expansion was also not likely to return soon to the pre-crisis levels of 2007 and early 2008.

Further, Southern Africa was also expected to record the slowest growth over the next two years, with the GDP forecast to expand by 3,4 percent this year and 4,3 percent in 2011.

This was in comparison with: Central Africa, which was forecast to grow at 4,4 percent in both 2010 and 2011; Eastern Africa, which was expected to grow by 6,2 percent in 2010 and by 6,4 percent in 2011; Northern Africa, which was expected to see growth of 4,8 percent and 5,4 percent; and Western Africa, where the GDP was forecast to expand by 4,5 percent this year and by 5,2 percent next year.Walkenhorst also cautioned that there were risks to Africa's growth and recovery prospects, the foremost being the impact of the slow economic recovery and the implementation of austerity measures in Eurozone countries.

Speaking from the same platform, Industrial Development Corporation research and information department head Jorge Maia agreed that exports from Africa to countries in the Eurozone were likely to decline, as spending is cut in countries such as Spain and Greece.

This was a threat, owing to the fact that Africa's near-term growth was still largely trade dependent.The further diversification of African economies, especially to reduce their dependence on income from the export of commodities, was, thus, a policy priority, Walkenhorst averred.

Maia agreed that countries should work to expand their manufacturing sectors, rather than being dependent on the export of raw materials.

He further highlighted that geographical diversification of exports was critical, with the recent crisis having highlighted the risks associated with Africa's heavy reliance on its traditional trade links with the advanced industrial economies of Europe and the US.

Therefore, it was important for African economies to also promote trade with other developing nations, such as Brazil, India, China and Russia.Further, Maia said that Africa was missing an opportunity by not tapping into the market created by the one-billion people living on the continent. He noted that the number of middle-class homes in Africa exceeded that of India.

Africa's middle class was being 'swamped' with goods from the West and from the East, but not enough products were produced locally to supply this middle class.He added that productivity levels in Africa were not necessarily poorer than those in Asian economies, but Africa's competitiveness was often destroyed as a result of transport and logistical issues.

The flow of goods and services in Africa was also difficult as a result of poor infrastructure and the fact that access to other countries was often made difficult, owing to the overlapping of some of the regional groupings. Maia noted that there were 14 regional groupings that overlapped some countries. This had to be simplified.-(Engineeeringnews)