14 October 2012

African Economies to Grow Despite Slow Down

Dar es Salaam, Tanzania — The World Bank has said economies in the Sub-Saharan Africa is expected to grow at 4.8% in 2012, broadly unchanged from the 4.9% growth rate in 2011 and largely on track despite setbacks in the global economy.

The World Bank's new Africa's Pulse, a twice-yearly analysis of the issues shaping Africa's economic prospects, being availed to East African Business Week in Dar es Salaam last week said that the African economies growing strongly, due to this it urged countries to spend their new oil, gas, and mineral wealth wisely.

Excluding South Africa, the continent's largest economy, the World Bank said the growth in Sub-Saharan Africa is forecast to rise to 6%. African exports rebounded notably in the first quarter of 2012, growing at an annualized pace of 32%, up from the -11% pace recorded in the last quarter of 2011.

African countries have not been immune to the recent bout of market volatility stemming from the Euro Area crisis, as well as the growth slowdown that is occurring in some of the largest developing economies, in particular China, which remains an important market for Africa's mineral exporters.

However, consistently high commodity prices and strong export growth in those countries which have made mineral discoveries in recent years, have fuelled economic activity and are expected to underpin Africa's economic growth for the rest of 2012, it said.

"A third of African countries will grow at or above 6% with some of the fastest growing ones buoyed by new mineral exports such as iron ore in Sierra Leone and uranium and oil in Niger, and by factors such as the return to peace in Cote d'Ivoire, as well as strong growth in countries such as Ethiopia," the World Bank's Vice-President for Africa, Makhtar Diop said.

Diop added; "An important indicator of how Africa is on the move is that investor interest in the region remains strong, with $31 billion in foreign direct investment flows expected this year, despite difficult global conditions."

With the global economy still in fragile condition, Africa's Pulse warns that Africa's strong growth rates could yet be vulnerable to deteriorating market conditions in the Euro-zone. In addition, recent spikes in food and grain prices are a cause for concern.

Diop stressed an unprecedented hot and dry summer in the United States, Russia and Eastern Europe led to reduced yields on both maize and wheat production worldwide. Africa's Sahel region is already suffering from higher food prices, high rates of malnutrition and recurring crisis and insecurity.

Furthermore, he added swarms of desert locusts and the ongoing conflict in The Sahel also undermine the region's food security.

He said countries like Mali and Niger are already suffering from locust invasions with a possibility that the swarm could move to neighboring countries such as Mauritania and Chad.

According to the latest Africa's Pulse, new discoveries of oil, gas, and other minerals in African countries will generate a wave of significant mineral wealth in the region, and that the economic importance of natural resources is likely to continue in the medium term in several established oil and mineral producers, thanks to the sizeable stock of resource wealth and the prospects of continued, high commodity prices.

The region's established oil producers represent less than 10% of the share of global reserves as well as annual production. Nigeria, the largest regional producer, can keep supplying at 2011 levels for another 41 years, while Angola, the second largest producer in the region, has about 21 years remaining at current production levels before its known reserves are depleted.

Given the size of these reserves, it is likely that the dependence on oil resources in these countries is likely to continue in the near to medium term. Production in new mineral countries such as Ghana, Mozambique, Sierra Leone and Uganda could last for a substantial number of years as well, has said.

African countries share in global reserves and annual production of some minerals is sizeable. In 2010, Guinea alone represented over 8% of total world bauxite production; Zambia and the DRCongo have a combined share of 6.7% of the total world copper production; and Ghana and Mali together account for 5.8% of the total world gold production.

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