Africa ‘can become trading Mecca’

CAPE TOWN – Over the next decade Africa could become a global trading Mecca and demand hub, but a discussion is first needed on how sustainable economic growth can take place.

What is more, the international perception of the so-called ‘dark continent’ needs to change, requiring paradigm shifts.The continent could offer the solution to the world’s problems, said Pravin Gordhan, Minister of Finance and chairperson of the Committee of Ten – consisting of African finance ministers and heads of central banks – at the committee’s meeting in Cape Town on Sunday.Progress by the committee, which was created to shape the continent’s response to the financial crisis, was assessed at the meeting.The biggest global challenge is the primary imbalance between China’s overproduction and the excess consumption by the United States.Gordhan asked how sustainable, balanced economies could bring about growth to benefit Africa’s more than a billion population.Dr Maxwell Mkwezalamba, a commissioner at the African Union, emphasised that the continent should maintain a strong macroeconomic policy, start reducing public expenditure, maintain strict monetary and fiscal policies and ensure that investment in infrastructure continues unchecked.Development Bank of South Africa president Dr Donald Kaberuka commented that Africa’s economic recovery has been modest so far.He doubted whether economic growth was sustainable without the bailouts from developed countries to stimulate economies. Because of the British electorate’s fears about the effect of these packages, that country’s politicians are now suggesting the possible earlier withdrawal of the packages. The premature withdrawal of the stimulus packages will be bad news for Africa, because wealthy countries could go back into recession.But Kaberuka said that most of the 53 African countries could escape the worst effects of the recession.It is expected that the continent’s real gross domestic product (GDP) will grow be between 3,5 per cent and five per cent.Before the recession this was six per cent, dropping to about one per cent during the downturn. In 2011 it could rise 1,5 percentage points or so, says Kaberuka.Everything depends on the bigger emerging economies, whose growth benefits Africa’s commodities. Currently the situation looks promising, but the future is uncertain.Kaberuka warned that the aid extended to Africa by the International Monetary Fund (IMF) is mostly used to make up the balance-of-trade deficit, rather than for building schools and roads, for instance.African regional banks have reached their limits in terms of advancing money for infrastructural projects like schools and roads. In future the Development Bank will have to ask the IMF to advance money to meet the balance-of-trade deficit, but specifically also to fund infrastructure.A core objective of the committee is to strengthen the African vote, particularly at the IMF, the Group of 20 industrial countries and the World Bank.South Africa is the only African country with representation in the G20. – fin24.com