Johannesburg - Political and social unrest in some African nations is tainting investors’ views of risk on the entire continent, undermining the region’s economic growth prospects, the African Development Bank said.
“Political risks complicate bridging the perception gap that remains a barrier to foreign investment to Africa, in particular from investors that do not yet have a presence on the continent,” the lender said in a report released today at its annual meetings in Kigali, the capital of Rwanda.
Lingering tensions and political instability “could affect investors’ willingness to undertake planned projects,” according to the African Economic Outlook 2014, co-written by the Organization for Economic Co-operation and Development and United Nations.
Civil uprisings that started in north Africa in 2010 have toppled regimes in countries such as Tunisia, Libya and Egypt.
Conflicts in Central African Republic and South Sudan have left thousands of people dead and at least 1 million others displaced in both countries since last year.
Somalia, Kenya, Mali and Nigeria are among nations that have been hit by bomb attacks and kidnapping by Islamist insurgents.
Africa’s economy, excluding Libya, will probably expand 4.8 percent this year compared with 4.2 percent in 2013, according to the report.
Western, eastern and central Africa will be the fastest growing regions, with expansion of 6 percent or more.
In southern Africa, growth of 4 percent is forecast.
North Africa will expand at the slowest pace at 3.1 percent as economies recover from the Arab spring, Mario Pezzini, director of the OECD’s Development Center, said in a phone interview from Paris on May 16.
Foreign inflows into Africa are projected to reach more than $200 billion this year, compared with an estimated $186 billion in 2013.
Inflows may be undermined by lagged economic recovery in the euro area, the effect of potential changes in US monetary policy and a possible slowdown in emerging economies, which emphasises the need for diversification in African economies, Pezzini said.
“We have been dealing with a window of opportunity in previous years, and in part, this window is now getting smaller and it’s closing down, which means the urgency to deal with a series of structural issues is increasing,” he said.
“When you are an economy that is too much dependent on natural resources, then obviously you risk to lose out on the possibility of sustainable growth.” - Bloomberg News