Growth in Africa’s economy not transformed to social development, report -Africa’s external debt remains high and unchanged

By Simegnish Yekoye

ADDIS ABABA, Ethiopia - Though African economies are forecasted to grow by an average of 6.2% in 2008, economic growth recovery in Africa has not yet translated into meaningful social development and inclusion of vulnerable groups, said the 2008 edition of the economic report on Africa (ERA)
According to the report co-published with the African Union Commission (AUC), in 2007 Africa recorded a high growth rate of 5.8%, slightly higher than 2006 which was 5.7%. The growth is said to be due to factors including high commodity demand and prices and increased output in key sectors such as agriculture and services.

However, the report says, the growth in Africa has not yet led to substantial employment generation, particularly in the formal sector.
"What the report found out is African countries need some strategies to increase the benefits of growth towards socially marginalized groups like youth, elderly and people with disability," said Leonce Ndikumane , author of the report.

According to Leonce, the reason for the higher growth not to have impact on poverty reduction is due to the low level, not sustainable and capitalist intensive industries that don’t recall a large number of labor driven growth.
The report states high oil prices pose a major threat to Africa regarding the control of inflation in both oil-exporting and oil-importing countries and adds Africa seems to be more exposed to this threat than other developing regions.

The report also points out the key challenges to Africa’s growth in 2008 include the risk of sharper slowdown in the US economy and a fall in global commodity demand and prices. In addition political instability in some countries, inefficient public infrastructure and unreliable energy supply at the national level as well as poor integration of transportation and energy networks at the regional level continue to pose important constraints to Africa’s growth.

"African governments and partners need to establish strategies to ensure that economic growth benefits socially excluded groups, including women, youth the aged, and people with disabilities."
In addition, the report poses the need to reduce external debt and increase non-debt generating resources. It says to alleviate financing constrains; Africa needs to reduce external debt and mobilize more domestic and external non-debt-generating resources.

According to the findings of the report, despite debt relief initiatives, Africa’s external debt remains high and unchanged, at about $255 billion in 2006 and 2007. Accordingly, while official debt decline considerably with the debt relief initiatives, from 205.7 billion USD in 1999 to $144.5 billion in 2007, the debt owed to banks and other private creditors rose from $205.7 billion in 1999 to $110.2 billion in 2007.

"One of the reasons for having high debt is because countries still have to pay large amount in terms of interest payment and even though public debt has declined, private debt is still rising. So that explains the high levels of debt," Leonce explains.

In other hands, prices of commodities such as coffee, cocoa, cotton and tropical logs have remained stable, the report says and add however, the recent promotion of the use of bio-fuels has already led to a price increase for agricultural commodities such as maize and sugar. "Political support for bio-fuels in the European Union and the USA is mainly driven by concerns about future energy supply and the environment."

These price increases for agricultural products have the potential to increase the income of the rural population in many African countries.