Sub-Saharan Africa’s economic recovery will progress slowly into next year, even as analysts sound alarms over the rate at which some countries are taking on debt. There was also public outcry in several nations as their governments went hunting for additional revenue to meet development goals.
KIGALI, RWANDA (REUTERS) –
The leaders of 44 African countries made history in March this year when they gathered in Rwanda’s capital Kigali and endorsed the African Continental Free Trade Agreement (AfCFTA) – a US$3 trillion continental free-trade zone that encompasses 1.2 billion people.
Economists point to Africa’s low level of intra-regional trade – which sits at just 15 percent of its total commerce – as one of the reasons for the continent’s enduring poverty and lack of a strong manufacturing base.
“If the Africa free trade area is to work, it’s important that we see more manufacturing and agro processing and processing generally in the continent. Otherwise there is very little production to trade with our neighbouring countries,” said Michael Kottoh, an analyst at Ghana’s Confidential Strategies.
And what relatively little output there is, might have been even less this year as Africa’s economic growth forecast was adjusted by the World Bank from 3.1 to 2.7 percent.
Nigeria and South Africa, the two economies that normally push the continent into faster growth, are struggling to reclaim their potential even though commodity prices have improved.
Lower oil production in Nigeria offset higher oil prices, and in South Africa, weak household consumption growth was compounded by a contraction in agriculture, the World Bank said.
And although capital inflows to Africa have grown exponentially in recent years, but there too risks exist, because much of the increase has come from debt. The IMF reported this year that liability inflows ballooned from $3 billion in 2000 to $60 billion in 2017.
“What we are concerned about is really the pace of increase rather than the level of debt, on average. But what is worrisome is that in countries, particularly oil exporters, other national commodity exporters, what we’ve seen is a pronounced increase in debt in the last couple of years and there of course it reflects the big hit to their economies following the commodity price crash, hits to revenue levels, the hits to the economies,” said Abebe Selassie, director of the IMF’s African Department, told Reuters.
In addition to taking on unprecedented levels of debt, some African governments like Kenya, Zimbabwe, and Somalia also hiked taxes in a bid, they all said, to fund a range of development goals.
But food and fuel prices spiked and there was outcry from the proverbial man on the street, business communities, and civil societies.
Analysts and charities urged governments to increase revenue instead, by cracking down on graft and by taxing the richest more.
“So taxing people more before you address these leakages which are through corruption, mismanagement will not help because they are still going to collect all the money and then there will be another headline, three months down the line – millions have disappeared,” said James Shikwati, an economic analyst based in Nairobi.
Sudan has also had to watch its fortunes disappear. The country’s economy has been struggling since the south seceded in 2011, taking with it three-quarters of previous oil output. The crisis deepened this year as a black market for U.S. dollars effectively replaced the formal banking system after the Sudanese pound was devalued, making it more difficult to import essential supplies.
“The living conditions in Sudan are deteriorating. We have queues everywhere, for fuel, and at ATMs. You can’t even pull your money out of the bank. You can’t get your salary. Everything has become very expensive and we don’t know what is happening. It feels like there’s a ticking bomb and we don’t when it will explode,” said Marwa Mageed, told Reuters in Khartoum shortly before protests over shortages of basic essentials began.
While the Sudanese government fights to prevent economic collapse and civil disorder at the close of the year, the IMF predicts that most other African countries will fare better, and could grow by about 3.8 percent in 2019.