Feedback Form
Home Features Mastermind Forums About Advertise Blog Network Contact Be An Author

2.1 Growth performance VI: Economic Report on Africa 2007

2.1 Growth performance VI: Economic Report on Africa 2007

For the third consecutive year, Africa achieved a positive and increasing current
account surplus (from 2.3 per cent of GDP in 2005 to 3.6 per cent in 2006 – from
$18.4 billion to $33.1 billion), thanks to higher commodity export revenue, especially
from oil. Africa’s average balance of payments position largely reflects developments
in resource-rich countries. With the exception of Sudan, all oil-exporting
countries had current account surpluses, while only two non-oil economies (Morocco
and Namibia) had current account surpluses. Namibia is a mineral-rich country and
Morocco has a more diversified export sector as well as significant mineral wealth.

Also, workers’ remittances and tourism receipts are important in explaining current
account surpluses in Morocco in recent years (Bank Al-Maghrib 2005). Eighteen of
the 39 non-oil economies with adequate data experienced deterioration in the current
account position in 2006, up from 11 economies in 2005.

Oil-exporting countries have recorded increasing trade surpluses, while their oilimporting
counterparts experienced deepening trade deficits (figure 2.6). The trade
surplus for oil exporters as a group more than doubled from 2002 to 2006 (from 16
per cent of GDP to 37 per cent) while oil importers as a group saw their trade deficit
deteriorate from -4 per cent of GDP to -11 per cent of GDP. Deterioration of the
trade deficit was even more pronounced for land-locked countries. The continuing
rise in oil prices raises serious concerns about current account sustainability among
oil importers and the associated effects on overall economic performance and macroeconomic
stability.

Exchange rates and the impact of commodity booms

In 2006, 35 African currencies appreciated against the US dollar, although the rates
of appreciation remained moderate (less than 5 per cent). The Zambian kwacha continued
to record the highest rate of appreciation (23 per cent) for the second year in
a row because of the high copper price, and growing investor confidence, especially
after the country’s qualification for debt relief (UNECA 2006b). Large volumes of speculative capital inflows targeting government securities have also played a significant
role in the appreciation of the Zambian kwacha.

Exchange rate appreciation was also notable for the Sudanese dinar (12.5 per cent)
and the Angolan kwanza (8.5 per cent) owing to higher oil revenue and FDI flows.
On the other side, the Zimbabwean dollar had the largest depreciation (87 per cent)
followed by the Malawian kwacha (13 per cent). Zimbabwe and Malawi experienced
a decline in exports and increased food imports because of slow recovery from the
drought of 2005.

While exchange rates have been stable for most countries, high commodity dependence
exposes African economies to terms-of-trade fluctuations and to extreme
exchange rate volatility. The majority of African counties are dependent on oil and
minerals and on a limited range of agricultural commodities such as tea, coffee and
cocoa. Thus, fluctuations in commodity markets have a significant impact on the
exchange rates in these countries.

The case of South Africa provides a clear illustration of the close relationship between
commodity (gold) price and the real effective exchange rate (REER) (figure 2.7).
Indeed, evidence confirms that variations in the gold price are a major determinant
of changes in the REER of the rand (Stokke 2006). The effects of gold price fluctuation
have compounded the effects of other factors, namely trade policy, short-and
long-term capital flows, and productivity growth (Aron et al. 2000).

Many African countries have accumulated substantial foreign currency reserves in
recent years, mostly from higher oil revenues and aid inflows. For example, Algeria
had total reserves, excluding gold, of $66.1 billion (the equivalent of 32 months
of imports) in 2006 compared to $56.3 billion (34.5 months of imports) in 2005,
while Morocco had $17.7 billion (10.1 months of imports) in 2006 and $16.2 billion
(10.3 months of imports) in 2005.

Accumulation of reserves is motivated by the desire to hedge against external shocks.
However, excessive foreign exchange reserve hoarding takes away resources that
would otherwise be used to boost domestic economic activity. A better approach is
to adopt a comprehensive strategy for prudential regulation and capital controls that
can minimize exchange risks while allowing the country to benefit from increased
export revenue and FDI inflows. The types of controls to implement should be
country-specific (Pollin et al. 2006). Interventions will have to rely on a set of indicators
for early warning signals that monitor movements in foreign exchange, the
exchange rate, the structure of external debt, and other financial risk indicators. The
ultimate goal is to allow African countries to utilize these resources to increase private
and public investment so as to accelerate growth.

External debt remains high and private capital flows insufficient

The hope that Africa’s external debt would be significantly reduced under the HIPC
Initiative and that economic reforms would stimulate private capital inflows has
been very slow to materialize. Africa’s total external debt stock stood at $244 billion
in 2006 compared with $289 billion in 2005 (IMF 2006b). Although the debt stock
declined considerably relative to GDP (from 35.9 per cent in 2005 to 26.2 per cent
in 2006), total debt service obligations remained almost unchanged (4.2 per cent of
GDP in 2005 and 4.1 per cent in 2006) because of higher interest rates. The debt
burden seriously constrains spending on public investment and ultimately retards
growth and employment generation.

The continent has benefited from substantial inflows of external financing in the
form of ODA (including debt relief ), which should boost economic growth in the
coming years. The MDRI announced at the G-8 summit in Gleneagles in 2005
provided much needed relief for 13 SSA countries. However, it is clear that this
debt-relief package is not enough and that more external funding will be needed to
help African countries increase growth rates and achieve meaningful reduction in
poverty.

Increased external flows are particularly important in view of the fact that both gross
domestic savings (GDS) and gross domestic investment (GDI) rates in Africa are
still low (table 2.4). In fact they were lower in 1998-2006 (19.7 and 20.2 per cent of
GDP, respectively) than in the 1974-1985 pre-reform era, (24.5 and 25.4 per cent of
GDP, respectively). Most importantly, actual GDI remains far below the level (34.2
per cent of GDP) considered necessary for Africa to half poverty by 2015 (UNECA
1999). The low level and poor quality of investment contribute to the inability of
most African countries to achieve and sustain high growth rates over the medium
term (Berthelemy and Soderling 2001).





21 Growth performance VI Economic Report on Africa 2007 - To learn more about this author, visit United Nations Economic Commission for Africa's Website.

Like this article? Share it with your friends

Article Feedback
 Article Feedback No article feedback found.
  Leave Your Feedback
article feedback

Article Feedback
George Ludwig
George Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website

Linda Richardson
Linda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website

Jeff Foster
WebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas.  We specialize in internet consulting & internet marketing
- Visit Jeff Foster's Website


To learn more about the Evan Elite Author Program please contact us.

About The Author


United Nations Economic Commission for Africa
(Visit United Nations's Website) The United Nations Economic Commission for Africa (ECA) is the regional arm of the United Nations, mandated to support the economic and social development of its member States, foster intra-regional integration, and promote international cooperation for Africa's development.

United Nations Economic Commission for Africa is a Platinum author on EvanCarmichael.com
About The Author

View Author Blog
View Author Blog

View Author Video
View Author Video

Free Downloads


United Nations Economic Commission for Africa's

Complete
List Of
African-Accounts
Articles

Name
Email
If you enjoyed this article, get United Nations Economic Commission for Africa's Complete List of African-Accounts Articles For FREE!

More United Nations Economic Commission for Africa
51 Insufficient investments in Africa have hindered the deepening of diversification Economic Report on Africa 2007
51 Faster economic growth could assist in diversification efforts Economic Report on Africa 2007
30 Global Development Challenges for Africa in 2006 Economic Report on Africa 2007
21 Growth performance VI Economic Report on Africa 2007
IV Principle I Prioritize Group Formation and Networking
31 Developments in trade negotiations Economic Report on Africa 2007
33 Conclusion Economic Report on Africa 2007
IV Module I Key Principles for an African Model of Microfinance
54 References Economic Report on Africa 2007
22 Sectoral performance III Economic Report on Africa 2007
Free Downloads


 
 
 


Evan Elite Authors
Dave Kurlan  
Staging Diva  
Casey Gollan  
Evan Elite Authors

Become An Author
Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details.
Become An Author

Evan's Latest Video
Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media
Evan's Latest Video

Business Opportunities
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"

How to Start An Online Business

Click Here To Learn More
Business Opportunities



Evan's Newsletter
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
Name:
Email:
Evan`s Newsletter

Free Downloads
Increase Performance Leadership Icon Increase Performance Leadership
Business Emotional Intelligence Icon Business Emotional Intelligence
Strategic Plan Icon Strategic Plan
Winning Sales Letter Icon Winning Sales Letter
Article Syndication Icon Article Syndication
Free Downloads - Complete List

Entrepreneur Tools and Guides
Top 50 Marketing Blogs
Top 50 Marketing Blogs
Top Marketing Blogs of 2010
 
Top 50 HR Blogs 2009
Top 50 HR Blogs 2009
Top 50 HR Blogs 2009
 
Entrepreneur Tools and Guides

SEO For Africa
SEO For Africa
Hekima_A Group Dar es Salaam, Tanzania,
Hekima_A Group
Dar es Salaam, Tanzania
SEO For Africa

If I Were A Startup...
Erez Zevulunov, $150k to $504k in 2 years
Erez Zevulunov
$150k to $504k in 2 years
Chris Nguyen, 30+ national clients on $0
Chris Nguyen
30+ national clients on $0
If I Were A Startup... - Complete List

Famous Entrepreneurs
Jim Sinegal, Costco
Bill Gates, Microsoft
Bill Gates
Microsoft
Famous Entrepreneurs - Complete List

Entrepreneur Advice
Timothy Ferriss, 4 Hour Work Week
Timothy Ferriss
4 Hour Work Week
Paul Kedrosky, Venture Capitalist
Paul Kedrosky
Venture Capitalist
Entrepreneur Advice - Complete List

Popular Articles
(Premium Authors)

     9 tips to increase ROI in PPC Campaigns by The Hits Doctor
By Brett Fisher

Have A Suggestion?
Toronto Salsa Classes / Toronto Salsa Lessons Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
Have A Suggestion?

More Evan Carmichael
More Information