The Southern Africa region has continued on a positive
economic growth path with significant differences in growth rates among
countries in the region.
Mozambique, Zambia and Angola registered the fastest growth
rates, exceeding the 7 percent growth rate target of the Southern African
Development Community (SADC), supported by positive performance of the mining
sectors and strong public expenditure, according to a recent African
Development Bank (AfDB) report.
The report titled “Southern Africa Review Quarterly and
Analysis” says that officials in Zimbabwe also predict a significant
acceleration of growth (from 3.7 percent in 2013 to 6.1 percent in 2014)
premised on the successful implementation of its Zimbabwe Agenda for
Sustainable Socio-Economic Transformation (ZIM-ASSET) and the completion of
on-going institutional and structural reforms encompassing the mining sector.
“However, there are significant negative pressures to growth
in Zimbabwe arising from liquidity constraints, weak aggregate demand and
infrastructure bottlenecks,” states the report.
In Malawi, the report says, growth is expected to accelerate
to 6 percent in 2014, up from an estimated 5 percent in 2013, benefiting from a
good tobacco harvest.
However, the continued suspension of budget support
following the exposure of government officials’ misuse of public funds and the
suspension of uranium mining activities due to low global ore prices present
downward risks for Malawi.
AfDF says the Namibian economy is growing at 5.3 percent,
reflecting a mild acceleration of growth relative to the fourth quarter of
2013, driven by increased mining and construction activities.
In Lesotho, the report says the 2014 first quarter growth is
expected to be as high as that observed in the last quarter of 2013 (about 5
percent), given accelerated growth in the diamond mining, telecommunications
and trade sectors.
Growth in Mauritius is accelerating but remains moderate
(3.7 percent in 2014) in tandem with the recovery trend in its major economic
partner, Europe.
Growth is decelerating in South Africa, where persistent
structural constraints to growth, including the labour unrest and the interest
rate hike implemented to ease exchange rate pressures, have dampened growth.
Developments in South Africa, AfDB noted, are expected to
negatively affect Swaziland’s growth outlook. Inflation was moderate across the
board in the first quarter of 2014, supported by easing exchange rate
pressures, moderate external prices and weak domestic demand.
All countries except Malawi reported single-digit inflation,
four meeting the SADC convergence target of less than 5 percent and one
(Zimbabwe) registering a deflation rate of -0.91 percent in March 2014.
There were price pressures arising from rising fuel prices,
increasing public wages and seasonal food shortages in a number of countries
including Mauritius and Zambia.
Not all countries have reported first-quarter data on
external balance, fiscal balance and debt.
The report says early indications suggest that most
countries met the SADC convergence targets in the first quarter of 2014.
“However, a deterioration of the external position was
observed in about half of the countries due to large imports of capital
equipment and manufactured goods (Mozambique and South Africa), slow growth in
the economies of major trading partners and sources of capital (Mauritius) and
lower export revenues from mining (Angola, Zambia and Malawi),” says the
report.
In Malawi, notes the report, the suspension of budget
support also weighed in. Fiscal deficits widened in the majority of countries
due to expansionary fiscal policies in Angola, Mauritius, Mozambique and
Swaziland, revenue constraints arising from decelerating economic activity in
Zimbabwe; and from the suspension of budget support in Malawi.
Nevertheless, the report says, the fiscal position of the
Southern African Customs Union (SACU) countries is generally improving as the
countries pursue fiscal consolidation (Botswana, Lesotho, and Namibia) and
improve domestic resource mobilisation (Swaziland and Namibia) while also
benefiting from SACU revenue inflows in the first quarter of 2014.
“Countries stayed within the SADC convergence target on
debt, although debt levels are increasing in a number of countries including
Angola, Mozambique and Zambia, to fund fiscal deficits.
“This performance has affected the level of international
reserves, which decreased in Angola, Mozambique, and Zambia though for Angola
stayed within the SADC convergence target of six months of import cover,” say
the report.
The report says the region’s 2014 outlook is positive
overall. Average growth is expected to rebound to 4.9 percent in 2014, up from
the 4.3 percent average growth rate estimated for 2013. Average inflation should
drop to about 6 percent, following significant disinflation in Malawi.
At least four countries expect to post a positive current
account balance in 2014, compared to only one country at the end of 2013. Seven
countries are expected to have increased their international reserves to at
least four months of import cover by the end of 2014, compared to four
countries in 2013, although the majority will still fall short of the SADC
convergence target.
However, the AFDB report says, growth is partially driven by
expansionary fiscal policy measures that will negatively affect the fiscal
balance and debt levels in a number of countries.
The region’s economic landscape for 2014 will be affected by
a number of factors, including on-going institutional and structural reforms,
as well as national elections, in some countries. Elections are expected to
worsen the fiscal positions of Mozambique and Malawi, increase inflation risk
in Malawi and increase uncertainty with respect to capital and investment
inflow in Malawi.
Mozambique holds its elections in October while Malawi held
its polls in May.
That said, the reports observe, important institutional and
structural reforms are on-going in line with the development aspirations of
member countries.
In the first quarter of 2014, Angola launched its ambitious
electricity sector reform programme.
Malawi registered significant progress in the implementation
of the public finance management reforms embedded in the Extraordinary
Performance Assessment Framework.
Zambia reformed legislation in an attempt to improve the
business climate; while in Zimbabwe, new foreign currencies were added to the
multicurrency basket to facilitate trade and investment.
The report says in order to strengthen and sustain the
positive growth trend, SADC member countries should pay particular attention to
the issues including sustainable management of revenues from extractive
industries and economic diversification in resource-rich countries; building
resilience to external economic shocks in globally integrated economies,
through economic diversification and diversification of target markets.
They further need to enhance capital budget absorption
capacities to maximise benefits from expansionary fiscal policies; and public
finance management reforms to reduce imbalances in budget allocations, improve
domestic resource mobilisation and enhance safeguards.
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