African Economy to Grow 4.5% in 2010, World Cup to help export growth in South Africa.

The African continent will have robust economic growth this year.

ABIDJAN, Ivory Coast—Economic growth in Africa will rebound with growth of 4.5% in 2010 and 5.2% in 2011, according to forecasts in a report published Monday.

The African Economic Outlook 2010 report predicts the recovery will remain uneven, with southern Africa—the region hardest hit in 2009—recovering more slowly than the rest of the continent. The report by the African Development Bank, the Organization for Economic Co-operation and Development and the United Nations Economic Commission for Africa said East Africa is predicted to lead the way higher, with growth averaging more than 6% in 2010 and 2011.

"The prospect of only a moderate recovery in a number of African countries makes it even more pressing to address the structural problems, which existed even before the global crisis," said Leonce Ndikumana, Director of the Development Research Department at the African Development Bank.

The report's authors say the world financial crisis slashed growth levels on the continent from an average of 6% in 2006 to 2008 to 2.5% in 2009.

"The good news is that the continent has proved resilient to the crisis," said Henri-Bernard Solignac-Lecomte, Head of the Europe, Africa and Middle East Desk at the OECD Development Center in a press release. Mr. Solignac-Lecomte added that the bad news was that the downturn could make it more difficult for countries to meet their targets of reducing poverty.

The study also studied taxation revenue and found large differences in the performance of individual countries, with some collecting only half the expected revenue given living standards and incomes.

The report was published at the start of the annual meetings of the Board of Governors of the African Development Bank Group.

The economic benefits of hosting a large scale international festival like a World Cup is paying off for South Africa.

South Africa's economy grew at its fastest pace in more than 1 1/2 years as exports grew amid strengthened global demand and the country geared up to host the soccer World Cup, government data for the first quarter showed Tuesday.

The economy should continue to benefit from the World Cup and a slow recovery in domestic consumer spending following last year's recession.

This comes after news showing that African economies have passed the "stress test".

African economies have shown resilience in the face of global financial adversities, have passed the stress test and can be expected to achieve economic growth this year, says Donald Kaberuka, president of the African Development Bank (AfDB).

Addressing African finance ministers April 26 in Washington, Kaberuka acknowledged that the global financial crisis has done some damage, but said African economies are expected to average 5 percent economic growth in 2010 and 6 percent growth in 2011, with some countries forecast to achieve an even higher rate.

In many African countries, he said, the crisis has “only been a setback.”

The entire continent has been subjected to a “stress test and has passed,” he told the ministers, diplomats and finance experts, many of whom were in Washington for World Bank and International Monetary Fund meetings.

For sub-Saharan Africa, Kaberuka said, capital inflows to the region swelled from $10 billion in 2001 to $53 billion just before the economic crisis in 2007. He acknowledged however, that much of the inflow has been concentrated in a few countries and dependent on factors such as the size of the market, the level of political stability, the depth of financial markets and the availability of natural resources.

The AfDB president said while the region’s four largest countries accounted for about 88 percent of those capital inflows, there was a “broadening out” of the recipient base just before the crisis.

As conditions improve and investors see more of the changes they like to see — political stability, accountability and economic transparency — Kaberuka predicted, “I think we will see a change.” He added that Africa is changing right now, but acknowledged that many people are not yet seeing it.

As an example, he pointed to Cape Verde, calling it a “miracle” country in Africa. Cape Verde has gone from being very poor to being a middle-income country. It is no longer receiving soft or concessional loans from the AfDB, he said, but is now borrowing money at market rates. Even though it is still in need of foreign aid, investment and tourism, he said, Cape Verde has made great strides through remittances from its expatriate community and by making good choices.

The African Development Bank has worked hard to stimulate development in Africa, he said. Financing activities by the AfDB have increased from a modest $300 million in 2005 to $1.6 billion in 2008 through direct lending and equity participation.

The global financial crisis presented the AfDB with challenges but also the opportunity to innovate, he said, adding that the goal of the AfDB is to make every dollar it puts into the African economy count for five dollars in real terms to help stimulate economic growth and development.

Kaberuka told his audience that he is convinced that “the macroeconomic reforms that took place in Africa in the 1980s — mainly in the areas of public finance and exchange rates — have provided a very firm foundation [on which to build]. Now what we need are reforms in the microeconomic areas and the efficiencies of institutions.”

Questions are often raised about how much more aid can be given to Africa, he said.

“There is another way to look at this problem,” he said, and he identified lack of infrastructure as the biggest hindrance to Africa’s development and a factor “beyond any country or firm” to confront singlehandedly.

He said the explosive growth of telecom markets in Africa has stepped up demand for fiber optics and satellite communication facilities to meet a substantial need. “At the same time,” he added, “growing businesses large and small are hampered by power outages, poorly maintained roads and dilapidated railways.”

Africa — a continent with 1 billion people, 40 percent of whom live in urban areas and are in need of housing, telephones and services of all types — needs infrastructure. And this need for infrastructure is transforming Africa. In response to these needs, he said, 60 percent of AfDB’s financing in Africa goes to infrastructure — roads, rails, water, broadband, etc.

Lat years economic crisis was an opportunity to pass through reform measures and stay on the economic development front tempted to change course that many countries were on. Africa should stay on course, its going in the right direction.

Africa weathers global economic crisis

More good news about the prospects of economic growth in Africa. Africa weathered the storm better than in the past and previously thought.

Sub-Saharan Africa is weathering the global financial crisis well and its recovery is expected to be stronger than after previous global downturns, the International Monetary Fund (IMF) said Wednesday.

While some oil-exporting countries and middle-income nations had been hit hard by falling demand for their exports, the continent's low level of integration into world markets meant that it had been relatively sheltered from the crisis, the IMF said in its semi-annual World Economic Outlook report.

Furthermore, while Africa had feared a sharp fall-off in foreign aid and remittances from expatriate Africans as a result of the crisis, the decline had not been as severe as anticipated, the IMF found.

That aid, twinned with improved government policies in many countries meant the downturn had a limited effect on some of the poorest countries.

'Growth in a number of the more fragile economies even accelerated last year,' the IMF noted.

By contrast, middle-income economies that conduct a lot of trade with the rest of the world were among the hardest hit.

South Africa's Gross Domestic Product contracted by 1.8 per cent in 2009. The IMF has predicted 2 per cent growth for the continental powerhouse in 2010.

Growth also slowed in oil-producing countries on the back of shrunken demand and prices for fuel, coming in at around 4 per cent. But the rebound in oil prices meant countries like Nigeria and Angola, Africa's biggest producers, were headed for growth of about 6 per cent this year, the IMF said.

One of the biggest threats to Africa was the tightening of foreign purse strings for development projects, the IMF warned.

The IMF also cautioned that stronger oil prices, while benefiting producer countries, could cause inflation to spiral in others, and that donor aid might be further tightened as leading economies come under pressure to cut public spending.

Political uncertainty also posed a threat to growth in some parts of Africa, particularly West Africa.

After growing by 2 per cent in 2009, the continent as a whole will grow by 4 per cent in 2010, the IMF predicted, a forecast unchanged since last October. That compares with average growth rates for the region of about 6 per cent between 2004 and 2008.

In 2011, the IMF expects the region to grow by 6 per cent.

Bright days ahead for African agriculture?

Africa joins Asia and the U.S. in passing the worst of the global economic crisis. The winds of economic dynamism seem to be blowing at the back of the African continent as a whole. That is  according to William A. Masters, a professor of Agricultural Economics at Purdue University.

After decades of bad news, at least three major trends are turning Africa's way: agricultural policies, rural demography, and farm productivity all promise improved opportunities for farm families across the continent. These trends move too slowly to make headlines, but cumulatively they offer a whole new world of bigger payoffs from public and private investment in agriculture and rural development.
Each country in every year faces a unique set of circumstances. Novelties get the most attention, like the possibility that outside investors might control large areas of farmland. Spatial diversity is also important, because it ensures that each place differs from the aggregate average. For Africa as a whole, however, at least three slow trends have recent turning points that offer game-changing new incentives for entrepreneurs and governments.
The first turning point is political. New data from a World Bank study that compares farm policies around the world since 1955 shows for the first time just how far today's African governments have gone to reduce the cost to farmers of the export taxes, marketing boards, and other interventions imposed by previous regimes (www.worldbank.org/agdistortions). Africa's policy-induced price distortions peaked in the late 1970's, and reforms since then have removed about two-thirds of that burden, greatly facilitating productivity growth and poverty alleviation. Further reforms could yield additional benefits, but much of the handicap imposed on African farmers by post-colonial governments has now been removed.

The second transition is demographic. Census data compiled in recent revisions of United Nations population projections reveal the slowly unfolding implications of African history. African households obtained access to modern medicine much later and more suddenly than people in other regions. The resulting improvement in child survival rates and population growth during the 1970's and 1980's were faster than those seen earlier in Asia or Latin America.

Africa's towns and cities have been growing at some of the world's fastest rates, but their absolute size is so small that they can absorb only a fraction of all new workers. Consequently, Africa's rural population has been growing faster and for longer than any other in human history, with a correspondingly rapid and prolonged decline in per-capita endowments of land and other natural resources. Moreover, post-independence improvements in child survival triggered a rise in child dependency rates, which also reached historically unprecedented levels in the 1970's and 1980's.

Africa's demographic burdens began to lighten in the 1990's, thanks to gradual reduction in fertility rates and continued urbanization. As seen earlier in Asia, the slowdown in rural population growth and the reduced burden of childcare creates a window of opportunity for new investment to bring larger year-on-year increases in output per capita.

The third turning point in this sequence is technological: national estimates of cereal crop productivity show how, after decades of stagnation during the Asian green revolution, African yields have grown steadily over the past decade, so that estimated cereal grain output per capita now equals that of South Asia.
The start of this turnaround could be associated with the other two trends, as the cumulative result of more favorable policies and increased labor per hectare, but it could also reflect the gradual spread of improved crop varieties that resulted from earlier investment in agricultural technology. The inflow of foreign aid to boost agricultural production did not rise until after the world food crisis of the 1970's, and it peaked in the late 1980's, yielding payoffs some years later.

Masters does sound a cautious tone even with the good news. The reason is that African agriculture still has some hurdles and challenges. For the farmers there:

• Depleted soil nutrients.


• Falling soil moisture.


• Rising temperatures .


• Worsening disease pressures.

These challenges can be dealt with effectively with improvement in farm policy due to importation and implementation of technology. Land reform that has property rights as the main foundation to ownership and the rule of law, which is backed up with an independent and competent judiciary. Again this is no easy task, especially in places that might be war torn, but these policies will be the main driver of improvement in Africa's agriculture.