- The growing role of the private sector in Africa has been credited by a top International (IMF) official for sustaining foreign investment during the recent global slump. Future prospects for Africa were now positive.
The head of the IMF's African department, Antoinette Sayeh, in an interview with agency's in-house magazine 'IMF Survey', said Africa had demonstrated a new openness to the private sector in recent years, stating that this, together with a more attractive climate for investors had helped to maintain investment from abroad.
"Africa has seen a significant increase in foreign investment that predates the crisis, and during the course of the crisis, those investments also fared reasonably well," she said.
In the interview, ahead of a three-country trip to Africa by the Fund's Managing Director, Dominique Strauss-Kahn, Ms Sayeh said Africa had demonstrated considerable resilience during the recession, and she was now hopeful about the future prospects for the continent.
Ms Sayeh said one of the key factors has been the considerable progress made by African countries beginning in the late 1990s and in the first decade of this century, in addressing their fiscal problems and reducing their fiscal deficits, such that when the crisis hit, despite the fact that many countries suffered from lower revenues as a result of the reduced demand for African exports, countries were able to sustain spending on key priorities.
She also said some countries made space for additional expenditure, in some cases to protect the poor from the impact of the crisis and that was possible because previous efforts at reform had borne fruit in more sustainable fiscal positions.
"Another factor was that inflation had come under control so they were also able to use interest rate policy and reduce interest rates as another means of mitigating the impact of the crisis. Where exchange rates were flexible, countries let them adjust and this helped them deal with the shocks. I would say finally that African countries did not begin to put up barriers and look inwards. Instead they continued to pursue policies broadly encouraging foreign investment and trade," she said.
Ms Sayeh further added that all those factors, taken together, meant this time around Africa was able to better withstand the impact of the crisis. This was creating optimism about that, as the global economy recovers, the recovery in Africa would keep pace.
Speaking on the country specifics, Ms Sayeh said the recession in South Africa was, by and large, a reflection of the reduced demand for South African exports as the global crisis deepened.
She however noted that South Africa was now starting to recover in line with the global recovery and was beginning to grow again, though she said the impact of the crisis has been devastating for many South Africans, and significant structural challenges remained.
"South Africa lost almost a million jobs in the course of this very deep recession, many of those jobs in low wage manufacturing. It is not clear that workers who lost those jobs will be able to find jobs in that sector which has been on a long term structural decline. So there are big challenges around job creation and job growth in South Africa that are structural in nature. But the recession itself had its origins in the global crisis," she said.
On Kenya, she said the country was emerging from a deep political crisis when the global recession hit. In addition to the impact of the recession and the impact on demand for Kenya's exports, she also said Kenya was also faced with a drought that has meant significantly reduced availability of food, with some ten million people facing the prospect of hunger.
"And so Kenya was hit by several shocks all at once: having to adjust to both the global crisis and the impact of the drought, at the same time dealing with significant political challenges," said the IMF official.
Ms Sayeh believed that the main challenge was to accelerate and deepen economic growth as a basis for reducing poverty in Kenya, which should be done around a number of issues that would be elements of a comprehensive reform programme.
"These include more transparent management of budgetary resources, increased mobilisation of domestic revenues, improved spending priorities - protecting higher priority spending and addressing emerging issues in the financial sector," she added.
She concluded by some that while a lot of progress has been achieved across the continent, there was still a lot of work to be done and in consolidating the relationship between the IMF and its African member countries for Africa's development.
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