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‘Growth in sub-Saharan countries not sustainable’

‘Growth in sub-Saharan countries not sustainable’
Written by Kabanda Chulu
Wednesday, November 19, 2008 5:41:21 PM

UNCTAD senior economic officer for commoditie Sam Gayi has said the growth in most sub-Saharan African countries is not sustainable because its rise in value is created by global demand for commodities.

And Gayi has observed that trade progress is lower than expected despite liberalisation in many Least Developed Countries (LDCs) in Africa.

Releasing the United Nations Conference on Trade and Development (UNCTAD) Economic Development in Africa 2008 report, Gayi stated that most sub-Saharan Africa’s growth resulted from the boom in commodity demand, warning that the value of export items would fall once prices decline.

Gayi stated that Africa’s ratio of export to the Gross Domestic Product (GDP) only delivered 11 per cent whereas non-African developing countries experienced a 50 per cent growth.

“Relative to other developing regions, the increase in Africa’s export value is driv en primarily by external factors, such as commodity prices, rather than an increase in volume. Between 1995 and 2006, Africa’s export volumes and prices grew at about six per cent a year but this growth is not sustainable as the rise in value is created by global demand for commodities and once prices fall, the value of export items will fall as well,” he stated.

He stated that an analysis of Africa’s export composition showed that most African countries had not diversified their export products and over 60 per cent registered higher export concentration indexes.

“This increased the countries’ vulnerability to price fluctuations and the African countries that increased their export revenue owed it mainly to the unexpected price hikes in fuel and commodities such as gold and copper and African countries that did not have these commodities to trade with remained stagnant with exports accounting only for five per cent of their GDP,” Gayi stated.

Gayi stated that although two decades of trade liberalisation had removed many of the barriers that limited trade, Africa’s trade progress had been less than expected, and that it was below the increases achieved by other developing regions.

He stated that a weak supply capacity was hindering Africa’s export performance, forcing the continent to lose its market share from six per cent of the world’s export in 1980 to only three per cent in 2007.

According to the UNCTAD report, which urged developing countries to continue to diversify economically and sustain industrialisation particularly with regard to value addition.

It noted that if Africa wished to increase its industrial output and exports, governments had to take steps to deal with several key issues such as poor infrastructure, high entry costs for businesses, low investor protection, and cumbersome tax systems.

The report also stated that many African manufacturers were too small to benefit from the efficiencies achieved by larger firms, and governments would have to enact measures to help expand these firms to international standards.

The report concluded that increased production and competitiveness would require increased productivity and the development of reliable infrastructure, including improvements in electricity generation, water supply, and telecommunications.

Labels: DEVELOPMENT, ECONOMY, SAM GAYI, UNCTAD

posted by MrK @ 5:43 PM