Sub-Saharan Africa can maintain 6% growth

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African Development Bank president Donald Kaberuka said the African growth story is only partly a commodity story — it’s also about FDI (foreign direct investment), private equity, remittances and urbanisation. African Development Bank president Donald Kaberuka said the African growth story is only partly a commodity story — it’s also about FDI (foreign direct investment), private equity, remittances and urbanisation.

Sub-Saharan Africa can meet growth expectations of more than 6% this year, despite a slowdown in China, but the outlook for North Africa is more uncertain, the president of the African Development Bank said on Friday.

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The bank forecasts growth of 5.3% across Africa this year and 6.2% in sub-Saharan Africa.

Slower growth in China has hit prices of commodities, sub-Saharan Africa’s key export. But the region’s economy has diversified, Donald Kaberuka told Reuters news agency in interviews.

"The African growth story is only partly a commodity story — it’s also about FDI (foreign direct investment), private equity, remittances, urbanisation," Mr Kaberuka said. "The commodity story only explains maybe a third of what is happening."

Growth expectations in North Africa were less clear, he said. The Arab Spring uprisings of 2011 continue to take a toll on political stability in several countries, leading to overall growth levels of about 3.2%-3.5%. "Algeria and Morocco are holding up quite well," he said.

"Those countries could do anything in the region of 5.5% growth. Tunisia is beginning to stabilise — our numbers are around 2.5%-3%. Egypt is much more complicated, around 2%, and as for Libya, I couldn’t tell you."

South Africa’s sluggish growth is holding back overall growth for sub-Saharan Africa, Mr Kaberuka added. Some countries could see double-digit growth gains this year, he said.

Emerging markets have seen a heavy sell-off since the US Federal Reserve began to wind down its bond-buying programme, which had depressed US bond yields and fuelled demand for high-yielding risky assets. The move out of emerging markets has been accelerating in recent weeks.

That has particularly hurt countries such as South Africa.

Other African countries have been better insulated from the investor flight.

"South Africa and Mauritius are different economies," Mr Kaberuka said. "These are open economies that are attracting a lot of portfolio flows."

South Africa is one of the so-called "Fragile Five" economies heavily dependent on investor flows. Strikes by South African miners are also deterring investment, Mr Kaberuka said.

"If they could address the issues around the political economy of the mining sector, labour relations, that would be a huge contribution to providing clarity to investors," he said.

South African President Jacob Zuma told mining companies on Thursday to improve worker housing this year to meet a government deadline, saying Africa’s largest economy could not afford more social unrest in the sector.

Other countries are seeing contagion from the emerging-market crisis as well. Ghana’s currency, the cedi, has been hitting record lows. Nigeria, an investor darling last year, is now seeing currency and stock market outflows.

Ghana and Nigeria are among several African countries that have issued Eurobonds in the past two years, often to huge demand.

"The countries which have been doing debut bonds will see perhaps a change in the costs of borrowing," Mr Kaberuka said. "That was expected."

Those countries with the strongest economies would weather the emerging-market storm best, he said.

"What matters most is the fundamentals — the budget, balance of payments. These are weaker than they were before Lehman Brothers — levels of debt have increased, reserves have come down — but they are in green territory."

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