TRADE-SOUTHERN AFRICA: Pinning Hopes on Investors, World Economy

By James Hall Reprint | | Print |

James Hall

MBABANE, Swaziland, Mar 27 2002 (IPS) - By all accounts, what is heard from regional politicians and economists is that the 14 nations of the African sub-continent who formed an alliance modelled after the European Union had a good idea, and still do.

The goal is to create an institution to cement cultural and economic bonds that recognises there is strength in numbers.

With such a union in place, an ambitious programme like South African President Thabo Mbeki’s proposed New Economic Partnership for Africa’s Development (NEPAD) can find a grounding necessary for its realisation.

Hopes for economic benefits from this union – the Southern African Development Community (SADC) – depend on the performance of the world economy and SADC’s ability to bring world investor attention to the region.

“The poor global economic performance since September 11 (terrorist attacks on the United States) has stalled several plans, but has not extinguished hope,” says Swaziland’s finance minister Majozi Sithole.

Asserts Alec Erwin, trade minister of South Africa, “You cannot speak of improved economic performance for South Africa or any single country unless it is in the context of better regional performance.”

But regional performance depends on global economic action. From a growth rate of 3.9 percent achieved by the world’s most advanced economies in 2000, last year saw economic growth plunge to 1.1 percent, according to the International Monetary Fund (IMF).

As for growth in world trade, for which SADC countries are pinning their hopes, the IMF says it grew one percent in 2001, a discouraging drop from the 12.4 percent global expansion in trade achieved in 2000.

Next to expanding world trade, which allows African exports to find new markets, providing jobs and revenue for developing economies, foreign direct investment is the second goal sought. But last year foreign direct investments throughout the world stood at 760 billion U.S. dollars, down from 1.27 billion U.S. dollars in 2000.

Specific to the 45 nations of sub-Saharan Africa, foreign direct investment that reached 30 U.S. dollars per capita in 1990 dropped to 18 U.S. dollars ten years later.

Accordingly, the World Bank describes Africa as potentially “the worst economic casualty” as global recession takes hold.

1996 saw a peak economic growth rate of 5.5 percent in sub-Saharan Africa. Five years later, growth had been halved, to 2.7 percent. The biggest annual drop occurred from the year before, 2000, when growth had been 3 percent.

“The good news is that growth continues to be positive, although marginal, rather than negative,” says Swazi investment broker Samuel Mdiniso.

“In SADC, only two countries experienced negative growth last year, Zimbabwe and the Democratic Republic of Congo, and that was due to their unusual circumstances, the conflicts going on in both those countries. Peaceful and stable countries did fair to good, and in some cases quite well in the face of a global economic downturn,” he says.

Economists, like Mdiniso, say the 14 nations of SADC (Angola, Botswana, DRC, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe) are doing well to advance economic integration. A common currency modelled after the Euro is in the works, while a SADC drivers’ licence good in all countries will soon be available.

“The U.S. economy is already recovering from September 11, and as the engine that drives the global economy, much as South Africa drives the SADC region, this should lead to an upswing worldwide. And if SADC institutions are solidified our region will be in a good position to benefit,” says Mdiniso.

SADC countries comprises only 28 percent of sub-Saharan Africa’s population, but the region is home to 65 percent of sub-Saharan Africa’s industry, and accounts for 71 percent of imports. An impressive 78 ults for all member states. The most common refrain heard from area economists and policymakers is that a rising tide lifts all ships.