Business News of 2013-12-05

Fix structural economic issues - UNECA boss

The Executive Secretary of the United Nation’s Economic Commission of Africa (UNECA), Carlos Lopes, has asked African governments to take advantage of the positive global sentiments about the continent to fix the structural problems in their economies to kick-start the economic transformation agenda.

He said African governments must admit that their economic policies have not succeeded, despite the rapid economic growth in recent times. He said they must fix them to give GDP growth rates real meaning to the poor, especially at a time that economies are experiencing growth while critical sectors such as manufacturing and agricultural sectors have stagnated.

“I think we should look into growth as we are witnessing in Africa. We have a lot to be happy with. But look at the manufacturing contribution to GDP, it is going down. What that tells you is that modernisation and the structural transformation of the economy are not taking place yet.

“Look at the productivity of the agric sector; it continues to be ridiculously low at a time when scientific knowledge is there for productivity to be multiplying and make incredible impact on poverty reduction; it is not happening,” he said.

Mr. Lopes, who leads the United Nations arm mandated to among other things encourage cooperation among Africa countries by promoting regional integration, said African governments must solve structural problems in their economies and begin the post-Structural Adjustment Programme era by investing their cherished reserve assets profitably to benefit indigenous people.

“Seventy percent of Africa’s poor are in the rural areas and look at the way we are dealing with our reserves, which is one of our assets. We are putting this money into paper, which basically gives us a return of 0.4% to 1% and it is not being invested in Africa.

“So these are structural issues and I think that we have the wings in our favour to tackle the structural issues, because you don’t tackle them when you are under structural adjustment programmes and under pressure from depressing economic situations and so on.

“When you have good news, that is when you can transform -- and I think this is the time,” he added.

For the first decade of this century growth in Africa has been robust, averaging about 4.7 percent compared with growth of 2.5 percent for the rest of the global economy.

Since 2004, Africa has grown faster than all other regions of the world, with the exception of South East Asia, and is forecast to keep growing at a robust rate while the developed world moves along in global economic uncertainty.

At a time that European countries and the US are struggling with a deficit upward of 5%, the IMF has forecasted a deficit for the region below 1% for 2012 and 2013.

Yet this has not significantly helped to equalise incomes or redistribute wealth. Nearly 50% of the population in sub-Saharan Africa lives on less than US$1 a day today -- the world’s highest rate of extreme poverty.

More so, accelerated per capita growth has failed to create enough job opportunities for the young who comprise the majority of the poor, of whom young women and rural youth are the poorest.

Recently, Nigeria’s Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala and South African National Planning Commission Minister Dr. Trevor Manuel have both said that African economies have been short-changed in contracts that have not been meaningful to the people.

Mr. Lopes said increasing discussions on the benefits of natural resources exploration and production should set the stage for African governments to renegotiate contracts.

“The fact that everybody is having this narrative is excellent, but it is recent. This is a post-structural adjustment narrative, because until the end of the 90’s very few people were talking about the fact that Africa has been short-changed when it comes to natural resources. Only a few people spoke about it courageously.

“But this narrative today is good because it tells a story of Africans not being content and becoming more assertive at a time that everybody is thinking Africa is doing ok. Africans themselves are saying we are not doing ok because it is still not ok. We are still being short-changed and therefore there is an impetus, politically speaking, for further transformation,” he said.