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Growing concern over sustainable growth in Africa

Mar 05 2015 06:00
Carin Smith

Cape Town - There is a growing unease about whether growth in Africa is sustainable and whether inclusive growth is being created on the continent, according to Nema Ramkhelawan-Bhana, Africa analyst of Rand Merchant Bank.

She moderated a panel discussion on Africa rising versus Afro-realism in a complex global economic environment at the 4th Trading Africa Summit hosted by Thomson Reuters and Barclays Africa in Cape Town this week.

She pointed out that the average mean of school years completed in Africa is five years. In more southern parts of the continent it is nine years.

"It is also not just about obtaining qualifications as there remain many questions about the standards of these. There is a lack of skills development for different generations. It should not only be about capital investments, " she cautioned.

In her view there is actually a "dislocation" between the financial economy and the real economy in Africa.

For Mohammed Nalla, head of strategic research on global markets at Nedbank Capital, international investors are fickle and there currently are very volatile capital flows into Africa.

"Of course it is said that every crisis brings an opportunity, but currently we are in unchartered territory globally," he said.

"I believe there is a much greater need for introspection in Africa - for Africa to integrate on the continent. To have Africa rising a lot more must be done by ourselves for ourselves instead of merely relying on outside help."

In Nalla's view a deepening of financial markets instruments and more "market makers" are needed in Africa.

“Africa has a unique opportunity as the global economy faces serious challenges. Currently, Africa is competing with global markets and attracting international investment. The African infrastructure was built to serve the world, not only Africa. Intra African integration has a long way to go,” said Nalla.

For Christopher Becker of African Alliance the low and middle income consumers in Africa are actually "going backwards" at the moment.

He is also worried about what he regards as a lack of reform in Africa and the viability of the so-called youth dividend of the continent.

"Productivity gains in Africa have been just about zero, while in Asia it has been about 10%," he pointed out.

“We have seen strong growth rates. That said, the performance of banks does not reflect these rates,” said Becker.

He pointed out that decreasing oil prices have only impacted the high income segments, while the low income segment was not really affected.

“Africa can benefit from the liberalisation and reform experience of South East Asia. People need to have the right tools and business environment to achieve the right productivity potential,” he said.

READ: Africa continent of the young and the new

Central banks

In Nalla's view way too much is expected of central banks in Africa, while Becker said they can stimulate some sectors of the economy, but not the real economy.

"In Africa central banks would typically just inflate and destroy their currencies instead of letting the free market determine these," said Becker.

Role of corruption

During question time an observer said to him the big elephant in the room is the impact corruption makes in Africa.

"I think the money is and was there, but why have the populations not benefited in general?" he asked.

To this Ramkhelawan-Bhana replied that ratings agencies look closely at corruption for credit ratings.

"Let us be Afro-realists," she concluded.

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barclays  |  reuters  |  africa  |  africa economy  |  investments


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