Post date: Dec 31, 2013 2:22:7 PM
With an economic growth of five percent this year, Africa's economy didn't do as well as expected due to weaker global economic conditions among other challenges. We look at the economic difficulties that stood out this year and what measures governments took to counter tough times and boost revenue.
PALOUGE OIL FIELD, SOUTH SUDAN (REUTERS) - 2013 started with promise for Africa's newest country, South Sudan as it sought to mend ties with its neighour, Sudan to keep oil flowing.
A feud over pipeline fees with Sudan saw the country effect a 16 month shut down that hurt a vital source of revenue for both countries. The taps were turned on again in April. The land-locked south depends on a pipeline that runs north to a Sudanese terminal in Port Sudan its only access to markets.The shutdown sparked inflation and a sharp depreciation of the local currency in the oil-rich but impoverished country, which later regained ground after the agreement.
South Sudan has made over 1.3 billion dollars in oil sales since restarting production and is working on plans to auction licences for new petroleum exploration blocks once mapping is complete.
"I came back from Northern Bahr el Ghazal state last week and I saw there that trucks have started coming into the states bordering Sudan so the dollar on the market here in Juba, the price of the dollar against South Sudanese Pounds, has gone down. Whether that is due to speculation... if it is due to lack of sufficient local currency on the local market, we don't know," said Zacharia Deng Akol from Sudd Institute, a South Sudanese think-tank.
However, the political situation remains on the brink. An attempted coup in mid December will cast a heavy shadow over the economic prospects for one of Africa's top oil producers.
In Africa's top oil producer, Nigeria, the central bank Governor, Lamido Sanusi raised the alarm after noting a surge in dollar demand at forex bureaux in July.
Tens of billions of naira had been irregularly traded for dollars in cash, more than what is needed by importers to buy goods or by investors to repatriate funds.
The political elite were said to be behind the dollarization of the economy, ahead of the 2015 elections, as they push for votes before official campaigns begin. But some economists disputed this theory.
"I think it's interesting, we have seen recently, in the last few years a move towards dollarisation especially because it is easier to carry large amounts of money in dollars than in local currency. The elections are not for two years so it'll be a bit early for politicians to be moving those kind of sums of money around unless, we have some elections in Anambra, some of the states coming up in the next few months, unless it's for that but I think in terms of the general elections in 2015, it's a bit early."
Oil theft in Africa's top crude exporter Nigeria also hurt growth, dragging official output to a four-year low, nearly a fifth below its 2.5 million barrels per day (bpd) capacity.
Down in South Africa, the county's economy had a challenging year having experienced its weakest growth since a 2009 recession.
A labour crisis hit its manufacturing output, caused by weeks of strikes in the automotive sector.
Industrial strikes, slowed private investment and disposable income growth and also ended up weakening consumer confidence, according to the IMF.
Analysts said President Zuma had failed to improve the economy and boost investor confidence.
Africa's top economy is expected to grow 2 percent this year and 2.9 percent in the next, as it lags the broader region due to the relative maturity of its industrial, extractive and services sectors.
David Shapiro is an economist based in Johannesburg.
"We are a kind of economy that can't grow at those numbers we need much higher growth, some of our problems are on export side, mining side we have labor issues there, so put all these together foreigners starting to stand back and re-look at the South African economy."
In West Africa, the IMF reported that unemployment and poverty was on the rise in Gabon, despite the country's vast mineral wealth which includes oil, gold and manganese.
In a country with a population of just 1.5 million people, youth unemployment stands at more than 30 percent.
Analysts blame the high unemployment levels on years of economic mismanagement, where the country's oil money was wasted away by corrupt leaders.
A decline in oil and manganese could also undermine the country, these two products account for about 90 percent of its exports of goods and 45 percent of its gross domestic product, according to the IMF.
Thirty eight-year-old Cedric Wanjda, a trader at Mont Bouet market in Libreville once dreamt of an office job but was unable to pursue a university education due to lack of fees.
He now runs his own business selling shoes.
"Today, many young Gabonese understand that through entrepreneurship, they can feed their families, and maybe one day, they will become influential business men," said Cedric.
On its part, Malawi's central bank was busy circulating newly rebased Kwacha bank notes and coins hoping to restore confidence to the local currency after issuing high value notes for almost two decades.
The country wants to reduce challenges faced especially by accountants abroad in handling trillions of Kwacha, so it removed three zeros from denominations which were to run alongside old bank notes until June.
The zeroes were a legacy of disastrous experiments in the 1970's and 80's with command-style economics.
Andrew Sinyangwe an economist in Lilongwe warned though that rebasing the currency could also bring some challenges if not well checked.
"There are some negativity which are associated with this re-basing of the currency. One of them is that these retail shops, mostly these guys that normally deal directly with consumers themselves will be rounding off figures in the re-based currency meaning that when they round of figures, these figures will be ballooned, they become large amounts of money for a consumer to buy a product and if that happens there will be an increase in inflation and when inflation is increasing it means that the consumer will be able to buy less with their money," he said.
This year, Ethiopia's government was being encouraged to change its policy and attract a more strong and vibrant private sector.
Analysts said to prevent growth rates from falling further; the economy would need to be restructured.
Growth in the country has been propelled so far by huge public spending on infrastructure, while an expansion in services and agriculture has also boosted the economy. Ethiopia's exports include coffee, horticultural products and livestock.
Economic output was expected to grow 7.5 percent in each of the next two fiscal years, to July 2014 and 2015, down slightly from the 8.5 percent in 2011/12.
Lars Christian Moller, is a lead economist, at the World bank.
"If you facilitate public investment and you give credit to public investment projects, that obviously is great for public investment but that credit can then not be unlent to other, for instance, private investment projects. And that's an area where a deliberate choice is being made and what we are saying is, maybe there are really good private investment projects out there that could deserve to get that credit and that could actually make the economy grow," he said.
As China's economy was headed for its weakest growth in more than two decades, analysts projected its 2013 growth would be as low as 7 percent, as weak overseas demand weighed on output and investment.
It was not good news for Africa, China's growing trading partner.
Analysts said the economic hurdles in the east were bound to affect one of China's biggest business beneficiaries, especially the ones that rely heavily on exports of commodities like oil and minerals.
China is largely seen as a valuable counterbalance to the West's influence. But there is mounting discomfort that Africa is exporting raw materials while spending heavily to import finished products fromChina.
China's slow down was seen as an opportunity for Africa to flex its growth muscles with rates which are expected to reach 5.3 in 2014.
Aly-Khan Satchu, an economic analyst based in Nairobi said, "I think the slowdown is going to happen and I think it is going to be worse than people are expecting. It is going to hit Africa quite hard in particular those countries that have got a very deep trade relationship with China and they are not difficult to spot... like Angola, Zambia with the copper and a number of others," he said.
Sub-Saharan Africa's economic growth should increase to 5.3 percent next year, with strong private and public investment underpinning the region's robust performance, according to the World Bank.
African economies are being encouraged to capitalize on their wealth of resources to promote economic growth as well as provide employment and cut down on poverty.
Despite the challenges, experts are giving a positive outlook for Africa's top oil producers, which are expected to soon benefit from strong economic growth.