As the sovereign debt crisis is unfolding, many are wondering what could be its effects on the economies of the CFA franc zone, a part of Africa with close relations with Europe, especially France. In the case of Cameroon, the Euro zone still represents the main market for the country’s exports and hosts the largest community of Cameroonians abroad.
The year 2011 ended on a high note for the reformers in Sierra Leone. There were two significant reforms which the government saw through – reforms that had been long overdue, but which now hold the potential of unleashing new investments and economic growth in the country. Can Sierra Leone’s use these reforms to beat the potential effects of a global economic downturn? One hopes so.
The energy sector in Sierra Leone has long faced under-investments. Not very long ago Freetown had the dubious distinction of being the darkest capital in the world and the Bumbuna dam remained elusive.
Sub-Saharan African countries bucked the slowdown in the global economy and grew at a robust pace in 2011 (see Africia's Pulse, February 2012 Update).
The region’s output expanded by an estimated 4.9 percent, faster than in 2010 and just shy of the pre-crisis (average of 2003-08) level of 5 percent. Excluding South Africa, the regional growth rate was 5.9 percent. Particularly notable is the fact that this growth was widespread: over a third of countries posted 6 percent or higher growth; another 40 percent grew at between 4-6 percent. Equally important is the fact that several countries saw sustained growth rates of over 6 percent a year in both 2010 and 2011.
So what can Sub-Saharan Africa expect in 2012? Barring a serious deterioration in the global economy, the outlook for the region seems bright, with a pickup in GDP growth to 5.3 percent in 2012 and 5.6 percent in 2013. High commodity prices and strong domestic demand, especially buoyant private consumption, are expected to sustain the expansion.
But these factors also point to Africa’s vulnerability.
A luxury liner, out on a peaceful vacation trip, encounters a small rock causing the huge vessel to sink. Chaos erupt and the captains abandon the ship, failing to manage the unfolding crisis and resulting in unnecessary deaths of passengers. One cannot help but compare this sad incident with the state of European economic affairs. As the ship sank on the coast of Italy’s shores, the credit rating of several EU-countries was being downgraded.
The events in Europe come as a reminder of the tremendous changes that have taken place worldwide over the past decade. Economic power is shifting from West to East, and from North to South. The big loser has been Europe, while emerging markets, especially in Asia, have reaped the lion’s share of the benefits. A decade ago, the possibility that China would come to the rescue of a bankrupt EU-country would have sounded outlandish-- no less inconceivable than saying that Nigeria could bail out China 20 years from today!
Some African countries may feel a sense of Schadenfreude as they witness the challenges faced by former colonial powers. European policy makers are no longer in any position to lecture their African counterparts. In fact, if you look at the quality of macroeconomic management over past years, many European countries could learn a lot from Africa, especially on how to handle fiscal deficits and debts. If Kenya was a member of the EU, its debt levels would be among the lowest in the union.
In reality though, Europe’s economic woes will create additional challenges for Kenya’s economy in 2012, a defining year for both this country and the Euro-zone.
We are used to thinking of landlocked countries as victims of geography. We worry that Ethiopia, Mali, Rwanda and Zimbabwe, among others, cannot benefit fully from flows of trade, tourism and knowledge. But do these countries use policies to improve connectivity and offset the handicap of location?
A new services policy database shows a perverse pattern. Landlocked countries tend to restrict trade in key “linking” services like transport and telecommunications more than other countries.
Zambia, for example, bravely liquidated its national airline in 1994, but it still denies “fifth freedom rights” to Ethiopia to fly the Addis Ababa-Lusaka-Johannesburg route, and to Kenya to fly the Nairobi-Lusaka-Harare route. In fact, the restrictive policies of many African countries make a mockery of the decade- old Yamoussoukro Decision (and a subsequent COMESA agreement) to liberalize air transport.
Like others, I have been skeptical about industrial policy in Africa, where the government selects certain industries for support in order to trigger a process of structural transformation. It’s been tried before—with disastrous results.
The selected industries were captured by political elites who continued to receive subsidies without generating anything close to labor-intensive growth (the Morogoro shoe factory in Tanzania never exported a single pair of shoes). Furthermore, most of the constraints to industrial growth in Africa are man-made: policies or regulations that stand in the way of poor workers’ employment prospects.
When you are overtaken by yet-another reckless Matatu driver you may have sympathy for Lee Kuan Yew, Singapore’s long-time autocrat, who is credited with Singapore’s transformation from third world to first world. He once famously claimed: “Developing countries need discipline more than democracy.”
African Head of States and Governments will convene in Addis Ababa, Ethiopia later this month to launch a continent-wide free trade agreement (CFTA). The summit will focus on solutions to the numerous impediments that hinder intra-African trade: inefficient transit regimes and border crossings procedures for goods, services and people; poor implementation of regional integration commitments.
"How was school today and please don’t forget to bring milk on your way back home". This simple conversation between Halima, a 36–year-old woman from Dodoma and her young daughter on their mobile phones was almost impossible 15 years ago: only 2 percent of Tanzanians had a phone and only one of two children attended a primary school (Figures). Today those figures reach 50 and almost 100 percent respectively. Daily life has evolved in Tanzania with technology and education as the main drivers.