Stronger growth, lower inflation, higher commodity prices and falling interest rates will characterise many African economies this year, Standard Chartered Bank said yesterday.

Over the next two years, the G7 group of nations and the European Union would adopt trade-dominated economic policies.

To take advantage of this, Africa's commodity-based economies had to diversify and regional economies integrate, the multinational British banking group said.

Regionally, economist Razia Khan did not see a further devaluation of the Botswana pula and argued that the government there should rather pursue alternative policies to encourage economic diversification.

In South Africa, rand strength could also be the trigger for longer-term structural change leading to faster growth, less unemployment and greater foreign direct investment, Khan believed.

Writing in StanChart's first quarter Africa Review, Khan said if Africa could sustain economic growth, it would help reduce financial market volatility, address underlying poverty and attract future inward investment.

"Africa is enjoying an improved economic performance as the world economy picks up and economic management across the continent improves," she added.

She attributed this in part to trade with China, a weaker dollar and West African oil.

"For industrialised Africa, Asia and China are becoming more important: China in terms of its increased demand, Asia both as a new growth market and a source for increased investment, albeit from a low level," she explained.

Noting the heavy reliance on commodities, she said there was still a need for economic reform and diversification.

"Sometimes the reliance is on only one commodity, which leaves the producing country economically vulnerable. There is a need to move away from primary commodities," she said.

"With the UK becoming president nation of both the G7 group and the EU in the second half of 2005, Africa could expect a pro-business approach. Increased trade will be the key. Africa must encourage regional co-operation and development and speak with one voice". – Sapa.