September 3, 09

NEWS / Reforming African Economies Continue to Reap Benefits

By Charles W. Corey
Staff Writer

Washington — Although total U.S. trade with sub-Saharan Africa (exports plus imports) declined in the first four months of 2009 compared with the same period in 2008, largely as a result of the global economic crisis, many sub-Saharan African countries continue to reap benefits from changes to their economic policies, improved governance and investments in key social sectors undertaken during the past decade.

Holly Vineyard, deputy assistant secretary for Africa, the Middle East and South Asia in the Commerce Department’s International Trade Administration, discussed African economies in June 24 testimony to two House of Representatives subcommittees.

“There was a sharp drop-off in total [African] trade of 52 percent for the first four months of 2009 compared to the same period in 2008,” Vineyard told the lawmakers.

That trade fall-off tracked with the 28 percent decline in U.S. total trade with the world for this period, she added. “U.S. exports for January to April 2009 decreased by 6 percent to $5.0 billion, with decreases in exports in a variety of sectors including vehicles and parts, noncrude oil, and wheat and other grains outweighing growth in aircraft, machinery, electrical machinery, medical equipment and corn.”

But this decline, she said, was much less than the 23 percent drop in total U.S. exports to the world.

The economies of several African countries are still showing limited growth, she said, which may explain why U.S. exports to the region have not fallen as sharply as in other regions.

“Most of the decline in U.S. total trade for January to April 2009 was due to the 60 percent decline in imports to $11.8 billion, [and] this decline was mostly due to a 64 percent fall in crude oil imports with both price and quantity declining,” she said. Imports from almost all of the oil-producing countries in Africa decreased as well, she said, acknowledging that “this decline in oil imports was not unique to Africa and closely paralleled the decline in total U.S. crude oil imports from virtually all major trading partners worldwide.”

Some 88 percent of U.S.-Africa trade is in petroleum-based products, but the United States is working hard under the African Growth and Opportunity Act (AGOA) to greatly expand and diversify that trade. That was a major focus at the Eighth AGOA Forum, which took place in Nairobi, Kenya, August 4–6. AGOA, Vineyard said, stands as the “cornerstone” of the U.S.-Africa trade relationship.

Vineyard said many countries in sub-Saharan Africa continue to reap the benefits of sound changes undertaken during the past decade.

“With the continued growth of representative governments, and the recovery from several lengthy conflicts, much of sub-Saharan Africa is poised to see more robust economic growth and an improvement in living standards in the years ahead,” she said. “Many sub-Saharan African countries are becoming, or have the potential to become, key emerging markets for U.S. companies. While the current global economic situation has certainly had a negative effect on African economies, a significant number of African countries have still maintained positive [though lower] growth. This positive growth is in contrast to some other regions in the world that are experiencing an economic contraction.”

Vineyard said sub-Saharan Africa has recently demonstrated sustained economic growth and its countries increasingly are seen as a set of emerging markets. “Even with the worsening of the global economic situation, sub-Saharan Africa’s growth in 2008 of a little over 5 percent represents the first time in 45 years that Africa’s growth exceeded 5 percent for five straight years,” she said.

Citing a World Bank report, Vineyard said 2008 growth in Africa was broad-based, spread across regions and included both oil-exporting and oil-importing countries. The International Monetary Fund, she added, has emphasized that many of the sub-Saharan African countries that have sustained economic growth have followed consistently strong macroeconomic policies with a proactive role by the government.

As the global economy worsened at the end of 2008 and into 2009, sub-Saharan Africa’s economic growth outlook shifted downward for 2009, she told the lawmakers. “The effects of the global downturn on many African countries [with South Africa being a notable exception since it is more integrated into the global financial system than other African countries] have been more indirect than in other regions of the world,” she added.

OBSTACLES TO DOING BUSINESS

Addressing the topic of obstacles to doing business in Africa, Vineyard said many African countries will need to address a series of factors to increase the amount of international business being conducted within their borders.

She cited a World Bank report, Doing Business 2009, which ranks countries by the ease of doing business based on a series of factors. The 2009 report highlighted positive progress in doing business in many African countries.

The report shows that 28 sub-Saharan African countries enacted 58 positive reforms in 2008, more than in any other year since the Doing Business reports began in 2003. Three of the top 10 overall reformers in 2008 were African (Senegal, Burkina Faso and Botswana). African countries showed positive reforms in a range of categories, including the ease of starting a business, registering property, getting credit and trading across borders, she said.

But the overall rankings, she added, demonstrate how far much of sub-Saharan Africa still has to go: out of 181 countries on the list, 40 sub-Saharan countries ranked lower than 100 and 24 of those ranked lower than 150.

The report concludes that more improvements must be made across the continent to lessen or lift regulatory and administrative burdens to entrepreneurs, which remain higher in Africa than in any other region. By helping themselves, and increasing domestic investment, the report says, these countries make themselves more attractive for investors as well.

http://www.america.gov/st/business-english/2009/September/20090902150930wcyeroc0.153042.html?CP.rss=true

Tags: international business,