Poverty is the main hindrance to emerging markets in African countries, says IMF

Having demonstrated resilience during the global financial crisis, Africa’s emerging market countries have good prospects for 2011, according to the International Monetary Fund.Its report, Regional Economic Outlook for sub-Saharan Africa, says that direct foreign investment, particularly from new trading partners in Asia, is expected to strengthen the demand for African bonds.

It means that these countries need to set up financing sources for much-needed public investment and create a coherent macroeconomic policy and foreign exchange regime to cope with capital flow surges, especially if they have historically been prone to debt problems.

Historically low yields and, in some cases, significant increases in public debt, coupled with strong growth prospects in many emerging markets have led investors to look further afield.

Economic analysts, investors, and the media are increasingly able to single out countries in sub-Saharan Africa with good track records and prospects that inspire investor confidence, it adds.

African trade is already shifting toward the dynamic emerging markets, notably China. Trade between China and Africa has been expanding rapidly, growing by an average of 30% a year over the past decade and is likely exceeded $100 billion in 2010.

The IMF says these new partners will continue to show strong demand for goods that Africa can supply and will be alert for opportunities to invest directly. For Africa, the key priorities will be negotiating fair and durable deals with big multinational firms and making the best use of the revenue windfalls, especially when the resources are non-renewable.

Figures from the European Union’s statistics office, Eurostat, and the statistics unit of the African Union (AU) Commission show that African GDP has progressed at a faster pace than in the EU, but this has been offset by a comparatively high increase in consumer prices.

Since 2004, the value of extra EU trade in goods with Africa has risen substantially, with imports, mainly energy products, consistently higher than exports, especially machinery and transport equipment. However, the economic crisis abruptly ended this trend and by 2009, the value of EU imports from Africa decreased by 33% and EU exports to Africa fell by nearly 10%, resulting in a near trade balance.

The report says that in 2009, Libya was the foremost African exporter of goods to the EU and South Africa was the main destination for EU exports to Africa. The EU’s small trade surplus observed in the trade of services in 2007 increased to €3.7 billion in 2008.

Between 2000 and 2008, nominal GDP growth in Africa as a whole increased at a faster pace than that of the EU. In 2008, total GDP in the EU stood 36 index points above its base year value (2000), while that of Africa progressed by 67 index points over the same period.

Then due to the global economic crisis, GDP in the EU fell by 8 index points in 2009. The corresponding 2009 figure for Africa as a whole is not yet available.

The report says obviously, aggregate data masks large disparities with regard to the ‘weight’ of the individual countries. The largest contributors to Africa’s GDP are South Africa, Nigeria, Egypt, Algeria, Morocco and Libya. However, the picture changes considerably when considering GDP per capita.

The IMF report also says that notwithstanding the rapid gains of the last decade, often extreme poverty remains pervasive in sub-Saharan Africa. In far too many places, more rapid growth has not yet translated into local employment opportunities, a better social safety net, or a higher quality of life. In addition, weak governance, limited administrative capacity, or political instability (and even outright conflict) have suppressed or reversed per-capita-GDP gains.