The current financial turmoil may have a mixed impact on Africa, reports Sherine Nasr The stigma associated in the past with poor integration into the world economy is nowadays understood to be a real blessing. Numerous African countries, for instance, were spared the heat of the current financial turmoil, simply because they are not substantially involved in trade relations with the US. On the short run at least, African countries will reap the fruits of an average growth that has been sustained for six consecutive years now, though a long-term impact on these economies is inevitable. According to Leonce Ndikumana, director of the development research department at the African Development Bank Group, it has been a long time since good news about Africa was heard. Now, however, the situation appears somewhat brighter, as indicated by the African Economic Outlook 2008 launched last week. For the sixth consecutive year, Africa's real GDP growth reached five per cent in 2007 and was forecast to reach 5.9 per cent in 2008. However, the effect of the repercussions of the present global crisis has yet to be evaluated. Nonetheless, the 2008 report showed that more African countries are joining the group of exceptional achievers as 31 countries this year registered a growth rate exceeding five per cent compared to 25 countries in 2007. "Had it not been for the current crisis, there were strong expectations that real GDP growth in 2009 would be sustained at 5.9 per cent. However, we have yet to evaluate the impact of the present circumstances on different economic areas in Africa," said Ndikumana. As a matter of fact, 2007-2008 was an exceptional year for African countries in many aspects. They experienced continuous, steady growth, an improved macroeconomic framework, progressively abated inflation rates as compared to previous years, a commodity boom of petroleum and non-petroleum products, in addition to an increase in machinery and transport imports from China and India, new propellers of African growth. Among the outstanding achievers of the oil-exporting countries stands Angola, with 11.8 per cent average growth from 2000 to 2007, and Algeria with four per cent average growth during the same period. Assets for an improving economy included a sustained and prolonged growth, upgrading macro- management and rising investment in non-oil sectors. Of the oil-importing countries, Tanzania, Ghana and Tunisia performed best, experiencing an average growth of 6.7 per cent, 5.2 per cent and 4.9 per cent respectively from 2000 to 2007, thanks to prudent macro-economic policies, good diversification and decreasing poverty. However, Ndikumana underlined that both oil-importing and exporting countries will likely be affected by the current crisis. "Recent drops in oil prices will have their toll on the African oil exporting countries' balance of payments, which is likely to affect the growth rate in these countries," he said. Of course the present crisis is not all bad for Africa. As a matter of fact, many experts believe shaky markets in the US will push capital inflows towards new markets, of which Africa is no exception. "The possibilities here are boundless. There is a need for capital-intensive infrastructure projects. Moreover, the availability of land, raw material and cheap labour are all indispensable factors to encourage more foreign direct investment (FDI) inflows into the continent," said Ndikumana. Be that as it may, experts believe the appropriate institutional framework to make foreign investors more confident in investing in Africa is lacking. "There is no way for Africa to duplicate the Asian model unless it provides the private sector with a safer business environment," said Heba Handoussa, professor of economics at the American University in Cairo. She added that the majority of African nations have to work hard on meeting international standards for transparency and predictability. "These are two major elements that will be consistently looked at by foreign capitals considering doing business in Africa. Unfortunately, most African nations have corruption problems and much has yet to be done regarding freedom and accountability," she added. According to the latest African Economic Outlook, agriculture is one sector with exceptional growth prospects. However, the latest statistics released by the Organisation for Economic Cooperation and Development (OECD), indicate that African cereal production dropped from 144.1 million tonnes in 2006 to 135.6 tonnes in 2007. The latest economic outlook underlined that sub-Saharan Africa is a net cereal importer. "Although vulnerability varies among countries, there is a need for long-term solutions to the problem," the outlook stated. Handoussa predicts the current drop in cereal prices worldwide will not be sustained and that the food shortage will persist. "African countries still depend on rain and age-old agricultural systems that have perished elsewhere. The would-be food basket of the world should adopt integrated policies that could enable it to improve agricultural productivity," she said. Another major poorly developed asset is the African labour force. The latest outlook reports that half of Africa's youth, estimated at 133 million young people, are illiterate, the majority has few or no skills, and over 20 per cent of people in sub-Saharan Africa are unemployed. "Africa's youth are in dire need of vocational training," said Jose Gijon Spalla, head of the Africa and Middle East Desk at the OECD's development centre, who underlined that technical and vocational skills development in Africa suffers from a shortage of qualified staff, obsolete equipment, ill-adapted programmes and weak links with the job market. "Very few countries emphasise skills development in the informal sector, the largest employer and source of training in Africa," stated the report.
