Business News of 2014-07-05

Africa records low investment — Economic report

Africa’s investment rate is low compared to the average for developing countries and relative to what is considered necessary to achieve development goals, the 2014 Economic Development in Africa report has established.

According to the report, based on an annual average, the investment rate for Africa was about 18 per cent over the period 1990–1999 as compared to an average of 24 per cent for developing economies as a whole.? ?The report said similarly, in the period 2000–2011, the average investment rate for Africa was about 19 per cent as compared to 26 per cent for developing economies generally.

“Over the past two decades, only a small set of African countries have sustained investment rates of 25 per cent and above. These countries include Algeria, Botswana, Cape Verde, the Congo, Equatorial Guinea, Guinea, Lesotho and Sao Tome,” it added.

The report was released by the United Nations Conference on Trade and Development (UNCTAD) and launched by the United Nations Information Centre (UNIC)) in Accra on Thursday.

The report is titled “catalysing investment for transformative growth in Africa”.

According to the report, simply increasing the quantity of investment in Africa would not be sufficient to achieve transformational growth.

It said increasing the productivity or quality of investment and ensuring that it’s extended to strategic and priority sectors of an economy such as infrastructure, agriculture and manufacturing was crucial towards achieving transformational growth.

The report stated that Africa could not achieve sustained economic growth and transformation without diversifying the sources of its economic growth both on the demand and supply sides of its economies.

“Africa has experienced relatively high growth during the past decade but the nature and pattern of this growth has not resulted in more jobs and poverty reduction because consumption has been the dominant driver,” it added.

Information from the report indicated that a consumption-based growth strategy must go hand-in-hand with an increase in investment, particularly that which increased the capacity to produce tradable goods, to reduce the likelihood of current account imbalances in the future.

On the demand side, the report recommended balancing the relative contributions of consumption and investment to the growth process since it is evident that a consumption-based growth strategy cannot be sustained in the medium to long term.

It explained that consumption-based growth strategy often resulted in economic challenges such as overdependence on imports that in turn affected the development and survival of local industries, the building of productive capacities and job creation.

It also recommended that the role of investment in the growth process needed to be enhanced, particularly given the very low investment rates observed in Africa relative to investment requirements.

Launching the report, the Director of External Resource Mobilisation Division of the Ministry of Finance, Mr Michael Ayensu, confirmed that most issues raised by the report were topical issues on the economy.? ?He said even though Ghana had experienced some infrastructural development, it was not at the desired level.

Source: graphic.com.gh
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