PRESS BRIEFING ON ECONOMIC REPORT ON AFRICA

The performance of African economies fell short of expectations in 2002, according to the Economic Report on Africa 2003 -- Accelerating the Pace of Development, launched today at a Headquarters press briefing by Carl Gray and Adam Smith, both Economic Affairs Officers in the Department of Economic and Social Affairs (DESA).

The weaker global economy, states the reports, as well as the negative effects of low commodity prices in 2001, the drought that afflicted both east and southern Africa and armed conflict in several countries combined to frustrate the continent’s growth rate.

The growth rate declined from a rate of 4.3 per cent in 2001 to 3.2 per cent in 2002, mainly due to the sluggish growth in the global economy and a sharp downturn in international trade, thereby impacting severely on African economies, Mr. Gray said.  Drought affected agricultural output in several countries, mostly in southern and east Africa, which in turn affected the overall growth rate of their economies.  A few lingering pockets of political instability and armed conflicts further retarded economic growth in the affected countries.

That was significant, he said, because DESA had reported hardly any new outbreaks of significant armed conflicts on the continent in 2001.  That was, at the time, thought to be a welcome turning point for Africa.  Sadly, fresh outbreaks of conflict in 2002, especially in west Africa, affected economic development there. 

Also a factor was the continuing severe economic and social impact of the HIV/AIDS pandemic, again particularly in the southern and eastern parts of the continent, he said.

According to the report, HIV/AIDS had reached epidemic proportions in Africa.  At the end of 2001, Africa remained the most severely affected region by HIV/AIDS, with an estimated 28.5 million people living with the disease, including an estimated 2.6 million children under 15.  The worst affected countries were Botswana, Central African Republic, Kenya, Lesotho, Malawi, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe.  It continued to escalate in Cameroon and Côte d’Ivoire.  The report pointed out, however, that some African countries such as Senegal and Uganda had combated HIV/AIDS with interventions aimed at behavioural change.   

He said that the mixed economic performance highlighted Africa’s main challenge, namely the need to sustain economic growth over a long period of time in order to significantly reduce poverty and improve living conditions, which was one of the main messages of the report.  In that context, the report predicted a turning point for the present year with an increased growth rate of 4.2 per cent compared to 3.2 per cent in 2002.  “

The report also pointed to several factors that could pose risks for improved economic growth in the region.  They included the deteriorating situation in Côte d’Ivoire and Zimbabwe, the United States decision to increase agricultural subsidies, inflationary pressure in the major economies of South Africa and Nigeria, renewed incidents of flooding and drought in some parts of the continent, and the high probability of an El Niño phenomenon in 2003.

The report further pointed out that the decision by the United States in May 2002 to introduce a six-year $51.7 billion farm bill boosting crop and dairy subsidies by 67 per cent did not help the continent’s prospects.  That subsidy would reduce agricultural prices, making it difficult for small African countries to compete.  Further, in 2001, countries of the Organization for Economic Cooperation and Development (OECD) spent $311 billion on agricultural subsidies, more than sub-Saharan Africa’s $301 billion gross domestic product (GDP) for that year.

According to the report, failure to make significant inroads at the World Trade Organization (WTO) negotiations on farm trade, by far the most important issue for developing countries, further weakened Africa’s prospects.  The poor performance of four of the region’s five largest economies –- Algeria, Egypt, Morocco and Nigeria -- also reflected Africa’s lower growth rate.  South Africa, which accounted for 35 per cent of the GDP of the continent’s five largest economies, grew by three per cent in 2002 up from 2.5 per cent.  However, growth was hampered by sluggish performance in the euro area, an important market for that country, and by the appreciation of the rand against the dollar, reducing the competitiveness of the country’s exports.

Only five of the continent’s 53 countries achieved 7 per cent growth, the level needed to achieve the international community’s target for reducing poverty, as envisaged in the United Nations Millennium Development Goals.  Those five were Angola, Chad, Equatorial Guinea, Mozambique and Rwanda.  Another five, Gabon, Guinea-Bissau, Madagascar, Malawi and Zimbabwe recorded negative growth in 2002.

Answering correspondents’ questions, both Mr. Gray and Mr. Smith pointed out the report’s emphasis on political stability and “improved governance” for a brighter outlook for the continent.  Asked how the conflict in both Liberia and the Democratic Republic of the Congo had impacted those economies and also the goal to eliminate poverty by 2015, Mr. Smith responded,  “Obviously not very well”.  It was not just the situation in Liberia but the entire Manu River Union, and extending into Côte d’Ivoire, was very much in crisis.  Because of that, and especially because of the situation in Côte d’Ivoire, which was considered the nexus of investment in West Africa and the backbone for remittance flows for the region, the entire region had been impacted negatively.  He said the same applied to the situation in the Democratic Republic of the Congo.

They said it was true the continent was perhaps more vulnerable than other regions of the world partly due to its extensive reliance on the outside world for the extraction of its resources, and to selling it in most cases with very little value added.  Additionally, questions of good economic and political governance and accountability came into play.

The report was also launched simultaneously at the Economic Commission for Africa (ECA) headquarters in Addis Ababa, Ethiopia and in Geneva, Switzerland.

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