LOW commodity prices will continue to hurt economic activity in Sub-Saharan Africa, including South Africa, this year, with growth subdued at 3.3%, says a World Bank report released yesterday.
Growth in the region slowed in 2015, with GDP growth averaging 3%, down from 4.5% in 2014. “This means the pace of expansion decelerated to the lows last seen in 2009,” the report said.
This is outlined in Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and data for the region.
The 2016 growth forecast remains subdued at 3.3%, way below the robust 6.8% growth in GDP that the region sustained in 2003-08.
The report said the severe drought in Botswana, South Africa and Zambia curtailed agricultural production and hydroelectricity generation.
“In South Africa, the real value added by the electricity, gas, and water sector declined sharply, constraining activity in the manufacturing and mining sectors. In addition, a political crisis kept business confidence low and put pressure on the currency. At 1.3% the pace of economic activity remained sub-par in South Africa, and per capita GDP declined for the second consecutive year,” Makhtar Diop, World Bank VP for Africa said.
Overall, the report said growth in the region is projected to pick up in 2017-18 to 4.5%. Diop said the plunge in commodity prices – particularly oil, which fell 67% from June 2014 to December last year – especially in emerging market economies are behind the region’s lacklustre performance.
“With the trend of falling commodity prices, particularly oil and gas, it is time to accelerate all reforms that will unleash the growth potential of Africa and provide affordable electricity for the African people,” Diop said.
Punam Chuhan-Pole, acting chief economist at World Bank Africa and the report’s author, said to ensure solid growth, cities need to become less costly for firms and more appealing to investors.
“The reality is that commodity price drops have lowered Africa’s terms of trade this year by an estimated 16%, with commodity exporters seeing large terms of trade losses. “Across the region in 2016, the impact of this shock is expected to lower economic activity by 0.5% from the baseline, and to weaken the current account and fiscal balance by about 4 and 2 percentage points below the baseline respectively,” Chuahan-Pole said.
“Governments must take steps to adjust to a new lower level of commodity prices, address economic vulnerabilities and develop new sources of sustainable inclusive growth,” Chuahan-Pole said.-Bernard Sathekge