LIVE FROM SECURITIES AFRICA/CITIBANK 5TH ANNUAL AFRICAN INVESTMENT CONFERENCE, LONDON
Experts launching the 5th Annual Africa Investment Conference, organized by Securities Africa and Citigroup, said they could see more growth coming in the 2nd biggest continent.
David Cowan, Africa Economist with Citigroup Global Markets, says that African countries had survived the global downturn, firstly because their financial systems were not so leveraged. However, impacts through the real sector are starting to show, where private sector credit growth has slowed dramatically in the second half of 2009 and banks are using surplus funds to buy government securities, collapsing yields.
He notes that the agricultural and informal sectors have held up well and “still account for a large, and growing, percentage of GDP”. Commodity prices are rebounding, either short term or part of a long-term “super cycle”, and the decision is not yet in, whether this brings more blessings or curses, especially as many countries are oil importers.
The slowdown in remittances and aid has not been as bad as expected, with multilaterals such as African Development Bank, World Bank and International Monetary Fund, stepping up funding. African countries are largely in strong fiscal positions, and this has not changed much despite efforts to help their economies through the crisis. Although many central banks eased rates, in many cases the commercial banks did not follow! Some countries missed the chance to introduce structural reforms. Inflation is likely to be low in the first half of 2010, but could pick up depending on food prices.
He says “growth should continue to pick up” for 2010-11, and this could be fast in some countries although constraints such as power shortages will continue to hold it back. There could be more spending, especially as many countries face elections in coming months, and political uncertainty could restrain some foreign investment, particularly portfolio inflows. Africa is not likely to be competitive in manufacturing, but could have advantages in food as the Northern hemisphere switches to healthier eating more fruit and vegetables, and Africa could also add value and benefits to food products.
Commodity prices are likely to be drivers of growth and Africa could benefit from a period of high and stable commodity prices, depending on governments making necessary structural changes to get the best benefits. There is also a rebalancing from external to internal growth drivers.
Securities Africa’s Dexter Mahachi sees better government, increased accountability and more democracy as a major driver of African growth. “They are managing their finances better” he says, adding this provides a good platform for sustained and better economic growth rates. “Consumer stocks across Africa have attracted investor interest, consumer stocks in Ghana, Kenya, Nigeria. There has been quite a boom in growth and urbanization in all these countries.
“For 2010-2011 we expect the bullish outlook to continue improving. The fundamental picture is not economic growth from more resources, but also economic growth from better policies”.