Sub-Saharan nations warned about financial shocks

Johannesburg - Rapidly growing economies in sub-Saharan Africa needed to do more to protect themselves against financial shocks, the International Monetary Fund (IMF) warned yesterday.

It urged governments to mitigate the impact of cash rapidly flowing in and out of their economies.

Lamido Sanusi, governor of Nigeria's central bank, speaks during the 9th World Islamic Economic Forum in London on Wednesday. Islamic financial assets are growing 17 percent a year and are set to reach $2.67 trillion by 2017, up from $1.21 trillion now, PricewaterhouseCoopers said in a July report. The International Monetary Fund says in 2012 alone, portfolio and cross border bank flows to the fastest growing markets in the region passed $17bn, with Ghana, Nigeria and Zambia the main beneficiaries. Photo: Bloomberg. Credit: Bloomberg

According to IMF data, net private flows to sub-Saharan Africa between 2010 and 2012 were double the levels seen in 2000 to 2007.

In 2012 alone, portfolio and cross-border bank flows to the region’s fastest-growing markets passed $17 billion (R168bn), with Ghana, Nigeria and Zambia the main beneficiaries.

But a possible economic slowdown in China and an end to US Federal Reserve stimulus is starting to make investors more cautious. In South Africa, the effect has been a large depreciation in the rand.

More broadly, the IMF said the impact of the trend had so far been “muted” but it warned: “If the global turmoil persists, risks of contagion and possible reversals may increase.”

It added: “As frontier economies in the region become more integrated with global financial markets, they will also become increasingly vulnerable to global financial shocks.”

It recommended better monitoring of capital flows and the development of tools to limit the impact of surges or reversals in investment.

The IMF also warned that a slowdown in major markets such as China could hit commodity prices, with a devastating impact on revenue for many African nations. – Sapa-AFP