Africa – UN Economic Development Report

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Report highlights the potential for the service sector to catalyse growth but the Greek crisis harks back to African IMF-imposed structural reforms and the continents’ continued indebtedness. 

The United Nations (UN) Conference on Trade and Development (UNCTAD) report, ‘The Economic Development in Africa Report 2015: Unlocking the Potential of Africa´s Services Trade for Growth and Development’ (available here), launched on July 8th,  provides extensive analysis of different policy issues facing Africa’s service sector and recommendations to enhance regional integration and inclusive development on the continent.

Starting with the basis that the services sector is a “critical source of income and employment…and the most dominant sector” in 30 out of 53 African countries, contributing almost half of the country’s economic output and around a third of formal employment between 2009-2012.  The reports, however, also comments that such “dynamism…has failed to translate into structural transformation” necessary for developmental needs and is delivered at a high cost.

The report claims that the services sector has the “potential to become a significant driver of sustained economic growth and structural transformation” but that this would require policies to build bridges between the “services sector and other sectors of the economy, especially manufacturing”.

The report highlights some examples where African economies are tapping into opportunities in the services sector; examples of “emerging regional services” are financial and banking services industries in Mauritius and Nigeria, the commercial and cargo air transport industries in Ethiopia and South Africa, educational services industries in Uganda and Ghana, telecommunications services in Egypt and port service industries in Djibouti and Kenya.

However opportunities aside, many African countries are feeling serious economic and social strain; the Ebola-affected countries of West Africa, tourism-reliant countries such as Egypt and Tunisia suffering from recent terrorist attacks and mineral heavy economies affected by global price drops, alongside the many regional conflicts that are hampering economic and social development.

In Ghana, the Premium Times on July 3rd reported that sources were suggesting that public debt in the country could reach 70% of GDP by the end of this year, with the Ghana Cedi loosing 99% of its value against the US dollar and increasingly high inflation. Ghana has borrowed from the International Monetary Fund (IMF) 26 times since 1966, leading to the imposition of more and more conditions for the repayment of loans. The article concludes that the IMF and World Bank with extensive privatisation, foreign direct investments (FDI) and deregulations, have led to debt traps that have further encumbered and disregarded the poorest. Recently on July 7th, Ghana gave signs that it may  consider renegotiating its bailout terms with the IMF, viewed by some economists as unrealistic.

A recent commentary by Radio France Internationale draws parallels between the recent Greek economic crisis in Europe and similar actions by the IMF during the 1980-1990s in Africa. Greece, defaulting on its 1.5bn loan repayment, has felt the imposition of strict capital controls and the country is heading towards an exit from the Eurozone.

François Ndengwe from the African Advisory Board explained that “what is happening to Greece, happened to Africa for over three decades”. Dr Samuel Nyambi, Executive director of CAPDEV, a development company commented that “for myself and many other Africans, we feel a lot of sympathy with the Greeks and the reforms they’re having to swallow, because we went through the same thing with the IMF’s structural adjustment programs.”

During the 1980s-90s the IMF and the World Bank imposed a stringent set of structural reforms to repay debts owed; these reforms have been critiqued by many economists as seriously hindering economic and social development on the continent. According to GlobalInsolvency, reforms centred on the repayment of loans led to lay-offs, privatisation, salary cuts and reduced spending, that made the pursuit of long-term development agendas impossible, resulting in further indebtedness and increased poverty in almost every African country where the IMF structural reforms were implemented.

Find out more in the Africa Research Bulletin

Africa-IMF: Mission Visits and New Funding
Economic, Financial & Technical Series
Vol.52, Issue.5, Pp.20852B-20855A

Africa: Competitiveness Report
Economic, Financial & Technical Series
Vol.52, Issue.5, Pp.20841A-20842B

Africa -IMF/World Bank: Growth Remains Solid, but Slows
Economic, Financial & Technical Series
Vol.52, Issue.4, Pp.20815C-20818A

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