Although relatively high growth rates in the past five years have confirmed that African economies are recovering, threats still remain, a United Nations report has found.
”In all, several major threats to African recovery remain, including the possibility of a worsening Aids epidemic, or an avian influenza pandemic, or a new civil conflict,” according to the World Economic Situation and Prospects report released on Wednesday.
The report projects a growth rate of 5,4% in Africa for 2006, up from 5% in 2004/05.
Strong performance in agriculture and a general increase in commodity prices, demand for which is driven by China and India, has supported growth over the past two years.
Elections in Liberia and Burundi, a peace agreement in Sudan and the signing up by 23 countries to the African Peer Review Mechanism also augur well for stability and improved economic performance in 2006, the report said.
Manufacturing
The lacklustre performance of the manufacturing sector is another challenge for the region.
From January to September 2005, the value of sub-Saharan textile and clothing exports to the United States dropped by 11%.
”The losses exacerbated already very high unemployment in the region, while growth of capital-intensive commodity sectors did little to create new jobs,” the report said.
One of the biggest challenges facing South Africa is the economy’s inability to absorb semi-skilled and unskilled labour.
It is difficult to see how the government’s Accelerated and Shared Growth Initiative (ASGI) will be different from past initiatives that merely helped to increase the wealth of the middle class, said Industrial Development Corporation chief economist and vice-president Lumkile Mondi.
”If government wants to have shared growth, they need to be bold in terms of policy … followed by huge amounts of money,” he said.
The government has to come up with innovative public-works programmes in rural areas, said Professor Charlotte du Toit, of the University of Pretoria.
”ASGI falls short because it can’t enable and mobilise a labour force that is stuck in rural areas, an inheritance of apartheid,” she said. ”Business must move away from corporate social responsibility to corporate social investment.”
Neighbours
Du Toit said the so-called ”neighbouring effect”, where crises in Zimbabwe and Côte d’Ivoire negatively affected foreign direct investment (FDI) to other countries in their regions, is another challenge.
Despite this, FDI in Africa increased to $30-billion (about R180-billion) in 2005, up from $18-billion in both 2003 and 2004.
The challenge for the world’s leaders is to live up to the aid commitments that they made to poor countries at the 2005 summit of the Group of Eight developed countries at Gleneagles, Scotland.
On the outlook for the world economy, the report indicates that it is expected to grow at a ”moderate pace” of 3% during 2006, which is the average of the past decade.
The employment situation worldwide remains unsatisfactory, with job creation unable to keep up with an increase in the labour supply in the majority of countries.
Oil prices are forecast to remain high in the near future, and are expected to hover around $60 per barrel for 2006.
The market is nearing supply constraints, the result of underinvestment in production capacity over the past decade. In addition, the market is highly vulnerable to shocks, such as natural disasters or terrorist attacks. — Sapa