The IMF’s Africa Conflict Tear
The IMF upped this year’s Africa GDP growth projection to 5.5 percent despite “shifting global forces” on the heels of “marked acceleration” in fragile states like the Democratic Republic of Congo and Mali and infrastructure and mining investment elsewhere, as it roundly criticized “unsustainable spending” in Ghana and Zambia preparing international bond repeats. The Seychelles which completed commercial bond restructuring was also singled out for high debt and neighbors to the Central African Republic and South Sudan are at risk of security spillovers. Currency depreciation in Malawi and South Africa should be met with tighter money, and portfolio flow reversal could prompt capital controls as another line of defense, according to the report. Regional integration as in the East African Community’s recent 10-year protocol is a long-term proposition and viewed with mixed feelings in view of the Eurozone experience, but members could opt for immediate observance of debt, inflation and reserve criteria. The existing CFA Franc zones must also adapt their rationale at a time when local interests are critical of Paris’ mandatory deposits imposed for decades and current public finance profligacy affecting ties. Current account deficits will not improve on FDI-related import demand and commodity export slowdown especially to the BRICs now taking one-third the non-oil total. Petroleum producers have boosted growth despite lower volume in Chad and Equatorial Guinea and widespread theft in Nigeria. Fuel prices should rise 3 percent, at metals moderate and cocoa and coffee increase as well. Natural resource “greenfield” projects could be postponed, as sovereign debt spreads also worsen on ratings downgrades and higher borrowing costs at home and abroad. As it marked 20 years since the genocide, Rwanda’s franc has joined the group most vulnerable to devaluation with its big current account gap covered by donor infusions. Regional CPI will rise 6 percent but salary hikes in Tanzania and rapid credit expansion in Mozambique will aggravate their levels. Debt-GDP ratios spiked in 30 countries but they are mostly benign with exceptions like Angola, where revenue has dropped. In Zambia wage and subsidy outlays alone jumped 45 percent last year with “adverse” sustainability implications although its latest bond placement was snapped up, the Fund cautioned.
South Africa after raising benchmark rates on 6 percent inflation at the top of the target range is now the keen investor focus with President Zuma confident of another outsize ANC win despite months of mining and power strikes and the central bank’s own financial stability warning due to the chronic balance of payments deficit. Bills introduced that would give the government a 20 percent stake in future oil ventures and mandate majority local ownership in private security outfits have upset the business community but may be pre-poll posturing designed to outflank in particular the new Economic Freedom Fighters party led by firebrand Malema. The opposition too may be split after a unification effort sputtered along with the seasonal electricity supply.
