More evidence of Mounting Risks to Keep Africa Growing

Still largely a very poor region, Africa faces economic hurdles is its hopes for growth

A Bloomberg report on 2 June shows evidence that African nations are facing mounting risks as they seek to extend two decades of stellar economic growth.

Stellar but uneven.

To read the entire Bloomberg report, go to http://bloom.bg/1RHYdJ

 

Here are some important points for my associates in the African rail industry.

In May The International Monetary Fund lowered its 2015 growth outlook for sub-Saharan Africa by 1.25 percentage points to 4.5%

Based on multiple sources of evidence, economic growth in both Nigeria and South Africa is clearly slowing. “Sustaining Africa’s growth is going to prove increasingly challenging,” says Peter Attard Montalto (an economist at Nomura International Plc in London) in a conversation with Bloomberg reporters. Montalto points out that “competition for trade and investment within the continent is increasing. All countries will need to step up their game.”

THE NEED TO STEP UP THEIR GAME

Are the key government leaders, policy makers and company executives from companies meeting at this week’s World Economic Forum in Cape Town paying attention?

The forum will discuss growth in the context of a continent where 72% of the Sub Saharan population still lives in or at the brink of poverty (UN data). In numbers, that is a staggering 585,000,000 estimated souls.

IF (actually very likely) global commodity prices remain low or worse even decline further — then the African governments will have to go increasingly to a Plan B government budget cut approach. Most are not use to that tactic.

On the positive side, There is still selective growth in Africa.

Ernst & Young released a report to the public this week that shows Africa attracted $128 billion in foreign direct investment during 2014. That marked an increase year over year. However, the number of projects dropped by 8.4%.

On the negative side, a large number of mine and rail and port projects are on hold. Many indefinitely. My readers and clients have discussed this pattern before. Tonight’s report is just another confirmation of the pattern.

Where and on What?

E&Y found that 44% of the investment went to projects in the real estate, hospitality and construction industries 25% went for oil, natural gas and coal 9 of the world’s 15 fastest-growing economies are in Africa

SLOWING INVESTOR CONFIDENCE

EY surveyed more than 500 business executives in 30 countries Growth could slow they felt because of a combination of factors

Those identified include: 1) Africa’s political instability, 2) Corruption 3) Poor security 4) Lack of infrastructure including transport and electricity These plus a scarcity of skilled labor are the biggest deterrents to investors.

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What will come out of this week’s forum?

What leaders will leave with a sense of urgency and change?

Stay tuned and we can discuss later when more facts emerge.

Sent from Jim’s iPad

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