African growth no mirage

2012-11-07 18:48

Johannesburg - Africa's recent robust growth is sustainable and the continent can attract even more investors if it plays its cards well, an influential group representing the world's top financial institutions said on Wednesday.

The Institute of International Finance said that the world's second fastest growing region could maintain 4.7% annual growth seen since 2007, according to its maiden report on sub-Saharan Africa.

The powerful institute represents leading banks and financial institutions around the world, notably those who hold large amounts of government bonds.

"After emerging Asia, Africa is the fastest-growing region in today's world," said George Abed, head of the IIF's Africa and Middle East department.

"Many countries on the African continent have achieved great progress in stabilizing their economies and consolidating their rates of growth.

"What is remarkable about this outcome is that it has been achieved during a period of unprecedented global financial turbulence."

In a report covering seven of the region's leading economies, the IIF said a potent cocktail of lower debt, better economic management, political stability and an extended resource boom had proven to be an economic elixir for the long crisis-plagued region.

For six of the countries - Ivory Coast, Ghana, Kenya, Nigeria, Tanzania and Zambia - the report said total external debt declined from 62% of GDP in 2003 to 17% in 2011.

In South Africa, the picture has been muddier, but Africa's largest economy continues to receive the bulk of the continent's inward portfolio investments.

With attractive rates of return compared with those found in industrialised nations, investors have predominantly focused on buying sovereign bonds.

In another sign of the increased appetite for African government debt, Moody's on Wednesday launched its first sovereign ratings for Nigeria, Kenya and Zambia, which all handily beat troubled Greece in the creditworthiness stakes.

Predicting that African governments would increasingly turn to markets to fund public programmes, Moody's gave Nigeria the highest rating of the trio, at Ba3, just below investment grade.

The ratings judge how likely a country is to default on its debt and go a long way toward determining a government's cost of borrowing.

"Moody's believes the continent's growth will be characterized by increasing utilisation of international capital market finance," Jacques Els of Moody's South Africa said.

Such a trend might have been unthinkable just a decade ago, when debt relief and aid for African nations topped the headlines.

But the IIF also warned that African government must keep on their toes.

"We should keep in mind that Africa's recent strong performance has been materially aided by massive debt relief and a sustained commodity boom. The future global environment may not be so accommodating," said Abed.

Continued political stability will also be key, he argued.

  • terrylee.heuer - 2012-11-07 19:21

    Yet Africa is still so full of poverty millions are starving where is the money going to??!!! The West is helping where they can and still the AU is shocked at how much help is coming from the West!!! So is it suffice to say Africa doesn't need or want outside help?? I just read a blog today that Obama must put Africa at the front and centre since being elected again as it seemed he has forgotten Africa!!!

      marius.koen2 - 2012-11-07 19:47

      that's the whole problem with Africa, to dependent on help...

      Sim.MzantsiAfrika - 2012-11-07 20:21

      You are absolutely right. Corruption is the problem.

  • Brian Ntozini - 2012-11-07 20:25

    ag man such ignorance- As long as Africa is run on Western concepts,and its leaders puppets dancing to their masters music, Africa will never flourish. As soon as Africa realizes thats its still being robbed and that it should embrace an African world view contrary to the one in place currently-there will be hope - 2012-11-08 05:02

      In all fairness there really is no such thing as Africa (or Europe, Asia etc for that matter) there is only the world. Soceity has gone global, we just dont realize it yet.

  • boramk - 2012-11-07 21:09

    Time to shine.. I for one am excited for what Africa will be in 50 years. We have problems, but if comparing our present to our past is any indication, Africa has come a long way from violent dictatorships and coups. And I have hope for the future :)

  • Mike Peach Purchase - 2012-11-07 21:34

    If i was given handouts all my life i would also grow,if i steal i will also grow but you know what,it aint going to last long the world is watching.

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