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Africa’s 2015/16 growth projections will be difficult to meet

6th May 2016

By: David Oliveira

Creamer Media Staff Writer

  

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Following the drop in commodity prices and China’s demand for Africa’s resources, African economies were slumping and gross domestic product growth was stagnating in most of the continent’s emerging markets, said New Partnership for Africa’s Development, or Nepad, Business Foundation (NBF) CEO Lynnette Chen last month.

At a business breakfast hosted by the Export Credit Insurance Corporation of South Africa (ECIC) and the NBF’s Africa Investment Desk (Avid) in Johannesburg, she added that, owing to the tough economic climate, South African corporates would be hard-pressed to stimulate economic activity in line with 2015/16 growth projections.

“The key to stimulating economic growth in Africa, following the end of the resource super- cycle, will hinge on how well African countries can quickly diversify their export portfolios and move away from heavy reliance on single- resource exports to underpin economic growth.”

Statistics show that Africa’s natural resources account for nearly 80% of total exports and about 42% of government revenues. As such, the slowing of China’s economy and the country’s increased focus on services was affecting most African countries negatively, as economic growth was supported by revenue generated from the extraction and export of resources.

Chen stated that “although Africa’s ‘Look East’ policy is still a viable economic strategy, with a particular focus on South-East Asian countries, Africa also needs to improve its levels of intra- African trade. This is why the NBF is working with the ECIC to encourage investment in and exports to African countries by working with investors to mitigate their risks in the current unstable economic climate.”

According to the World Bank, trade facilitation could provide important opportunities for Africa; however, most countries on the continent faced considerable challenges to achieve more open trade, as the costs of trading remained high, preventing potential African exporters from competing in global and regional markets.

In his remarks during a panel discussion at the business breakfast, ECIC COO Mandisi Nkuhlu said “the ECIC is pursuing a strategic collaboration with Afreximbank . . . to facilitate more intra-Africa trade and export trade from South Africa. It is through such strategic partnerships that we can enhance the impact of our activities on the continent.”

Avid head Andre Kruger noted that Avid was established to support economic development and regional integration in Africa by facilitating and arranging finance for companies, government institutions and/or their projects.

This facilitation role includes assistance in structuring financial solutions, as well as integrating risk mitigation products and services available from ECIC, along with other types of blended finance options, which will ensure that bankable projects are successfully funded for implementation, he added.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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