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Southern African economies likely to underperform relative to African peers

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Southern African economies likely to underperform relative to African peers

8th June 2010

By: Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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African economies are rebounding strongly from the global economic crisis, with the continent's gross domestic product (GDP) expected to expand by 4,5% this year and by 5,2% in 2011. 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 soon return to the pre-crisis levels of 2007 and early 2008.

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


This was in comparison with: Central Africa, which was forecast to grow at 4,4% in both 2010 and 2011; Eastern Africa, which was expected to grow by 6,2% in 2010 and by 6,4% in 2011; Northern Africa, which was expected to see growth of 4,8% and 5,4%; and Western Africa, where the GDP was forecast to expand by 4,5% this year and by 5,2% next year.

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Walkenhorst also cautioned that there were risks to Africa's growth and recovery prospects, 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 expandtheir 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 that 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, due 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.

 

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