China’s slowdown unlikely to stem sub-Saharan Africa’s 6% growth

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London - Sub-Saharan Africa could meet growth expectations of more than 6 percent this year, despite a slowdown in China, but the outlook for north Africa was more uncertain, African Development Bank (AfDB) president Donald Kaberuka said on Friday.

The bank forecasts growth of 5.3 percent across Africa this year and 6.2 percent in sub-Saharan Africa. Slower growth in China has hit prices of commodities, sub-Saharan Africa’s key export. But the region’s economy had diversified, Kaberuka said.

“The African growth story is only partly a commodity story – it’s also about FDI [foreign direct investment], private equity, remittances, urbanisation,” Kaberuka said. “The commodity story only explains maybe a third of what is happening.”

He said growth expectations in North Africa were less clear. The Arab Spring uprisings of 2011 continue to take a toll on political stability in several countries, leading to overall growth levels of about 3.2 percent to 3.5 percent.

He said: “Algeria and Morocco are holding up quite well. Those countries could do anything in the region of 5.5 percent growth. Tunisia is beginning to stabilise – our numbers are around 2.5 percent to 3 percent. Egypt is much more complicated, around 2 percent, and as for Libya, I couldn’t tell you.”

South Africa’s sluggish growth was holding back overall growth for sub-Saharan Africa, he said, adding that some countries could see double-digit growth this year.

Emerging markets have seen a heavy sell-off since the US Federal Reserve began to wind down its bond-buying programme, which had depressed US bond yields and fuelled demand for high-yielding risky assets. The move out of emerging markets has been accelerating in recent weeks.

That has particularly hurt countries like South Africa. Other African countries have been better insulated from the investor flight.

“South Africa and Mauritius are different economies. These are open economies that were attracting a lot of portfolio flows.”

South Africa is one of the so-called fragile five economies heavily dependent on investor inflows. Strikes by South African mineworkers were also deterring investment, Kaberuka noted.

“If they could address the issues around the political economy of the mining sector, labour relations, that would be a huge contribution to providing clarity to investors.”

Other countries are seeing contagion from the emerging market crisis as well. Ghana’s currency, the cedi, has been hitting record lows. Nigeria, an investor darling last year, is now seeing currency and stock market outflows.

Kaberuka said the AfDB would work with customs authorities and government environmental agencies to help stamp out illegal wildlife trade in Africa and provide financing for sustainable projects.

He attended a conference in London last week on the trade, which was also attended by members of the British royal family, African presidents and representatives from China and Vietnam, both markets for illegal trade in elephant ivory and rhino horn. - Reuters


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