SSA seeing growth as need for private investment emphasised

Increasing private investment is critical for Sub Saharan Africa to achieve sustainable strong growth in the medium term, with new opportunities emerging, risk managers have been told. The International Monetary Fund (IMF), reporting modest growth of about 3.4% in 2018, said private investment in Sub Saharan Africa remains low compared with other regions. The IMF said: “Raising private investment requires reforms, which include a sound business environment, well-developed infrastructure, trade openness and financial development. “As these reforms take time, countries are pursuing other avenues to jumpstart private investment, such as public-private partnerships, creating special economic zones and implementing mechanisms to target foreign direct investment.” The IMF explained that country experiences also showed that, while surges in private investment can follow commodity price booms or conflict resolutions, episodes of sustained private investment growth are typically associated with macroeconomic stability, including low public debt and inflation, and maintaining the momentum to upgrade institutions. “There is huge potential for boosting growth in the Sub Saharan [Africa] region, and the current global environment provides the opportune time to push forward these reforms,” it said. According to the IMF's Regional Economic Outlook for Sub-Saharan Africa, the growth pickup has been largely driven by improved policies in some countries and a more supportive external environment, including stronger global growth and higher commodity prices. These factors have supported high volumes of capital inflows. For example, sovereign bond issuances by the region’s frontier markets (Ivory Coast, Kenya, Senegal and Nigeria) have increased to record levels. Across countries, there is diversity in economic outcomes and prospects. Oil exporters are still dealing with the legacy of the largest real oil price decline since 1970, with growth well below past trends. Several other economies, both resource-intensive and non-resource-intensive, and some fragile states, continue to grow at 6% or more. Other countries are mired in internal conflicts, giving rise to large numbers of refugees and internally displaced people. The two largest economies in the region, Nigeria and South Africa, remain below trend growth, weighing heavily on prospects for the region. Rising non-performing loans and a broad-based slowdown in private sector credit growth raise additional concerns. The increase in non-performing loans was particularly large among resource-intensive countries, where weak economic activity has translated into a decline in credit quality and where government arrears continue to affect the banking sector. If current policies persist, average growth in the region could plateau below 4% in the medium term, falling far short of levels envisaged five years ago and below what is needed for countries to achieve their sustainable development goals, the IMF warned.

SSA seeing growth as need for private investment emphasised

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