Sub-Saharan Africa sees steady economic gains in 2014
18 December 2014, 08:43
Nairobi - The growth of Sub Saharan African economies has in the last year been characterized by fair commodity exports, good agricultural performance and the building of better infrastructure.
Among other things, the development of African economies has been driven by high prices of commodities, mostly primary agricultural products while others maintained their prices relative to last year. The exports to the traditional markets have largely been maintained. In most parts of the continent there was adequate rainfall which enabled most countries in the region to continue doing well economically.
Another aspect is the reforms that the African countries have undertaken in the last 10 years. These reforms have started to bear fruit. The continued building of infrastructure by African countries has also continued to inspire growth.
Lower oil prices affect growth prospect
"The prices of oil and petroleum have since October fallen by 40 percent which has caused some economic tightness in Nigeria. I know the same is going to happen to Angola, Gabon and other African oil exporters", said Kwame Owino, chief executive of the Nairobi-based Institute of Economic Affairs (IEA).
Owino argued if the oil prices are maintained at the prices of between 60 and 70 dollars range per barrel, some of these countries would be forced to make adjustments. What would suffer most in that case, are government receipts in terms of revenue, especially for countries such as Nigeria, which receives about 70 percent of its revenue from oil exports. Such a country would therefore be forced to adjust by cuttings its budget or seeking revenue from other sources.
Nigeria is biggest country in West Africa, and the major exporter of labor. If its economy is performing poorly, the ability of its smaller neighbors will suffer over time and the growth of the region might weaken. This could be worsened by the fact that Ghana, which has been growing, is now under growth pressure due to debts, partly because oil revenues were not as good as expected.
"It is in the early days, but I think the boom the African countries enjoyed on account of being oil exporters might be coming to an end", says the IEA official.
Insecurity, Ebola hit hard
Insecurity has also affected African economies in different ways as the insecurity challenges are not even.
In Kenya's case, tourism is a major exchange earner, but insecurity has caused a drop in the number of visitors coming into the country. Combined with the effects of poor rainfall and thus poor agricultural performance, these will negatively impact on the economy this year.
The insecurity occasioned by terrorist attacks has seriously affected the tourism with the hotel and related industries suffering, many workers being laid off and even some hotels closing. Insecurity will, however, not affect the whole of Africa as tourists who may not come to Kenya, may go to other countries in the region or elsewhere in the continent.
Also read: Inflation in Uganda blamed on poor economic policy
X.N. Iraki, lecturer at the University of Nairobi's business school, says insecurity in countries such as Nigeria and Mali have slowed down growth as did the Ebola breakout, a case in point being the plummeting of Kenya Airways profits as a result of cancellation of flights to West Africa.
Iraki adds that Africans will need to put their politics right, believe more in themselves and think intergenerational.
"What is needed is more open markets and enabling environments for the private sector and people who want to do business. The cumulative effect of those basics would lead the African countries to bigger productivity gain," argues Owino.
On the other hand, corruption is the standing issue that affects businesses. Corruption can be reduced by governments reducing rules and discretion as corruption emanates from excessive rules and the fact that public servants including police, immigration and customs officers among others have discretion which they use as leverage to get corrupt money, says Owino. "Rules must be designed in such a way that they do not allow the bureaucrats such discretion."
For the coming year, African economies are expected to maintain their growth momentum to a large extent, with oil exporters in West Africa making adjustments or using their reserves as they hope to recover. Countries of east Africa are expected to maintain growth at between four and six percent.
But Owino says for African countries to hit the 10 percent mark and above, they would have to put in place huge infrastructure investment, more competition and a better business environment.
Iraki calls on African economies to focus more on value addition, improve on governance, make more savings, deepen intra- Africa trade and "see the world as its playground."
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