African Unification Front
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ECONOMIC GROWTH
For every year since 1991, the rate of return on Africa FDI was between 5% and 15% better than the next best region of the world. Half the world's ten fastest growing economies are in Africa, albeit growing off very low bases. This growth slowed at the end of the 1990s due to the war several states, but picked has picked up again since the resolution of these conflicts in 2003.
All of the regions of the African Union are experiencing solid economic growth, except for Darfur, in western Sudan, and the Ivory Coast. Per capita incomes of Africans are rising quickly, by over 2 percent of GDP in 2004/2005, marking the fastest growth in a decade. Inflation in Africa is falling and fiscal and internal imbalances are narrowing. The gains are particularly large in oil-producing states, but non-oil producers are also experiencing solid rates of economic growth.
For example, the city of Goma in eastern Congo, so recently in the heart of a war zone, is now a bustling hub of trade and construction. Most cities in Africa are experiencing a construction boom, and interstate trade is also growing rapidly. Africa had a growth rate of 4.7% in 2004 (higher than previous years), and the IMF and other economic forecasters are projecting a 5.7% growth of GDP for 2005 for the whole continent.
Growth industries include:
-oil and gas;
-mining;
-privatisation;
-international trade;
-infrastructure (pipelines, roads, telecommunications);
-securities and stock exchanges
-ecotourism
The biggest challenge to doing business in the African Union is the lack of quality information about Africa. Issues of concern with regard to economic growth include:
-lack of interstate trade
-fluctuating currencies
-bureaucratic red tape
-graft and corruption
-wars and unrest
-lack of local capital
-human rights violations by foreign multinational corporations
-price gauging by state owned monopolies
-foreign exchange restrictions,
-concentration on a limited range of commodities
-lack of infrastructure
Informative Links
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AUF ASSESSMENT OF AFRICAN ECONOMIC GROWTH
FROM ECONOMIC PREDATION TO COMMUNITY PRODUCTION
Predation is the hallmark of neocolonial economics. Barriers to trade, as well as the reliance on insensitive accounting practices (destructive wastage of enviromental assets reflects as economic growth on a balance sheet), are key methods used to deny African communities access to wealth production and consolidation.
It is imperative that the African economic regime take into account the disruptive effects that transfer activity has on the market process as a necessary requirement of managing economic growth in African communities. It is also imperative that a government of unity not use government subsidies and favorable regulations, as a means of redistribution of wealth to the predatory economic sectors and activities.
It is important to ensure that African time, effort, and resources are not devoted to seeking transfers from abroad (aid). This is a form of economic predation that is prevalent in neocolonial and supposedly developed countries, and generally favours those with more potential to gather government transfers (and not necessarily the best suited to receive transfers).
Rent-seeking is extremely selective and favours international elites over Africans in all spheres of economic activities. It also generally skews international trade to the disadvantage of Africans. Market redistribution and government intervention must not make predators out of producers. Community resources devoted to rent-seeking and predation take away from the production of real economic and social value.
CONCERNS OVER GROWTH FAILURE
All across Africa, leaders have expressed concerns over the lack of growth. For example: At the Oil and Gas Africa '99 Conference and Exhibition, Ghana's former vice-president, John Atta Mills, told delegates;
"Some of us find it a striking paradox that the natural resources of our continent, which have been the basis for tremendous wealth for companies and individuals on other continents, have not secured for us in Africa better living conditions."
"Demand growth on our continent could provide a stimulus to oil prices, but that will only happen if the oil and gas industry is willing to invest in the infrastructure required for distribution," he said.
FACTORS FOR GROWTH
An integrated economy in Africa will be dependent on information on trade flows, financial transfers and migration, degrees of convergence of macro-economic policies for the local, provincial, and regions.
Domestic economic growth in the AU will only improve with integration. In the early 1990s growth in production accelerated in all the major sectors, with agriculture and manufacturing in particular performing well. Agricultural output was pushed to higher levels by the strong harvests of grain crop, and strong internal and external demand has bolstered manufacturing production. All those gains are being lost due to failing weather in Southern Africa, and increases in oil prices.
African Union to gain US$11 billion per year because of integrational
Removing trade barriers between African states will create at least US$11 billion per year in ADDITIONAL trade revenues. In the event that the trade barriers are lifted, the states will lose revenues in customs duties, but an exponentially larger amount of money will then be recovered in taxes on general sales. Moreover, the public will then have the billions of dollars to investment in their communities.
In its 1998 study of World Competitiveness for 1998, the International Institute for Management Development pointed out that the emerging economies which have been successful over the past 25 years have one key element in common: they all have large populations. Taken together, 7 countries (Indonesia, the Philippines, Thailand, Vietnam, Korea, India, and China) account for over half of the world's population. The Institute concludes that "Globalization clearly thrives on large markets, where volume can drive costs down and where low margins are compensated by quantity."
Larger markets are clearly a larger magnet for investment funds. While Africa has historically been a continent of small markets, linked to former colonial powers and shielded behind walls of protectionism, this situation is changing. The African Union is a means to the larger markets which Africa states individually lack. The African Union offers a ready counter to the small market phenomenon, linking regional neighbors together and offering the prospect of a single and much more attractive market for both investment and trading opportunities.
Africa's small markets have also led to far higher import barriers than in other developing countries where growth has come more quickly. Interstate protectionist policies have cost Sub-Saharan Africa as much as $11 billion per year, or the equivalent to the total foreign assistance to Africa in 1991. African governments have tended to depend on taxes from international trade, both for administrative reasons and to protect domestic producers.
While many states rely on trade taxes in the early phases of their development, it is the taxes on general sales (or value added taxes) that can yield substantial revenue and reinforce economic growth while reducing a critical barrier to growing trade. Regional integration offers a partial answer to the problem, but reforming the tax policies as well as reducing high tariff barriers remain the best solution to impediments to Africa's entry into, and dominance in the global marketplace.
Africa continues to attract a declining share of foreign direct investment, down to 3.3% of all developing country inflows during the mid-1990's and still hovering around $3 billion per year. Nor is this investment evenly distributed. Approximately 70% of that investment is going to only 4 African states - Ghana, South Africa, Angola, and Nigeria - most of it targeted on petroleum and mining activities.
Moreover, the benefits of large foreign investments are often oversold. No single investment decision has ever been so critical as to set the scene for an African state's "development". In the end we cannot rely on foreign investment as the only means to make Africa and economic power, but instead must take down the trade and investment barriers between African communities.
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