By Helen Nyambura-Mwaura
JOHANNESBURG (Reuters) – Sub-Saharan Africa’s
economies will expand at a slower rate in 2012 than earlier projected, undermined by global financial
distress and a sluggish recovery in South Africa, the International Monetary Fund (IMF) said on
Monday.
African retailer Pick n Pay in Johannesburg, October 20, 2010. REUTERS/Siphiwe Sibeko
Africa’s growth has remained above 5 percent in the last eight years,
underpinned by strong prices for its natural resources, better governance and growing disposable
incomes.
In its latest Regional Economic Outlook, the IMF forecast 5.4 percent growth this year
from 5.1 percent in 2011. Its previous projections were 5.9 and 5.5 percent respectively.
“The
growth outlook for 2012 is somewhat less favourable than outlined in the October 2011 Regional Economic
Outlook, with the growth projection for 2012 now cut by almost one-half a percentage point, driven in
large part by the weaker economic outlook for South Africa,” the IMF said.
Growth in Africa’s
economic powerhouse was likely to be a relatively modest 2.7 percent this year and 3.4 percent in the
next, held back by its reliance on trade with Europe and close links with western financial markets,
the Fund said.
However, an upturn in drought-hit east Africa, fresh output in new natural
resource producers such as Niger and Sierra Leone and recovery in post-conflict nations such as Ivory
Coast should help boost the continent’s economic activity in 2012.
Sierra Leone and Niger could
post outstanding growth of 35.9 and 14 percent respectively. Big oil-producers Nigeria and Angola will
also be major drivers of the expansion.
Economies reliant on non-renewable resources are
experiencing faster growth but are also suffering the worst volatility in exports, revenues and GDP
expansion, the IMF said.
FEAR OF CONTAGION
The fund also said the rapid expansion of
pan-African banks may be cause for concern in countries with poor regulation.
Banks such as
South Africa’s Standard Bank, Togo-based Ecobank and Kenya’s KCB have been widening their reach,
increasing competition in their new markets while improving technology and expertise.
“But rapid
expansion of these groups may, in some cases, have outpaced supervisory capacity. Under adverse
economic conditions across the region, these banking grounds could become a channel for cross-border
contagion,” the IMF said.
Countries with fast-expanding loan books should prioritise
strengthening the resilience of their financial sectors, the IMF said, pushing for cross-border
supervision in the region.
“Effective mechanisms for limiting cross-border contagion, such as
ring-fencing arrangements aimed at preserving subsidiaries’ resources could be added to a review of
existing banking-resolution frameworks,” the IMF said.
Other than Nigeria, most African banking
systems have remained resilient in the face of global financial stress due to their limited exposure to
the global financial system, although they have suffered because of a drop in trade
levels.
However, the IMF also cited Zambia as an example of an open frontier economy that can
suffer a commercial credit crunch when foreign interest in sovereign bonds dries up and local banks
switch to being solely financiers for the government.
