IMF expressed LaGarded view of Africian growth

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From ‘Africa rising’ to ‘Africa watching’
May 30, 2014 11:57am by beyondbrics
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By Javier Blas and Andrew England

Africa attracts monikers from international policymakers – and the odd journalist.

It was the “Hopeless continent” in the late 1990s when economic growth was anaemic and poverty rife. After two decades of lacklustre development, a virtuous circle of economic growth and improved governance – supported by high commodities prices – heralded a new chapter in the mid-2000s, which many have called “Africa Rising”.

The International Monetary Fund (IMF) has now introduced a new concept: “Africa watching”. Christine Lagarde, the IMF managing director, is by no means ditching the “Africa rising” narrative of strong growth. She says that compared with 10-15 years ago, the continent has clearly taken off, with growth on the rise and inflation falling.

“There has been a solid phase of growth,” she told reporters at an IMF-sponsored “Africa Rising” conference in Maputo, Mozambique. But she is cautioning that there are “big issues to be addressed”. Hence the new concept: “Africa watching”.

“Africa rising is the good news part of the message; Africa watching is the second part of the message”, she told beyondbrics in an interview in Maputo, explaining that countries need to implement policies to avoid spoiling off the good narrative.

The nuanced new message comes as Africa continues to attract billions of dollars in portfolio flows and foreign direct investments. Sovereign wealth funds such as CIC of China, large institutional investors including Goldman Sachs and multinationals like Nestlé and Unilever are pouring money into the continent.

The Carlyle Group recently said it had closed itsmaiden private equity fund for Africa at $700m – 40 per cent above target – highlighting the growing appeal of investing on the continent. And Temasek, the state-backed fund of Singapore, announced a maiden investment in Nigeria, the continent’s largest economy.

What has prompted the IMF to fine-tune its message and alert that in parallel to an “Africa rising” narrative there was a need for an “Africa watching” one?

The multilateral body is worried about rising fiscal spending – and increased borrowing in the international capital markets. Without naming anyone, Lagarde said that some countries “have got ahead of themselves”. She will not point fingers, but Ghana and Zambia, both battling large fiscal holes, come immediately to mind.

It is also worried about inequality. Africa maybe rising, but many African citizens do not feel that way. As an international policymaker puts it, “in some African countries there are too many private jets in the airports and too few books in the classrooms”. Job creating has been paltry too, particularly among the young.

By 2040, Africa will boast the largest working-age population of any region in the world, at about 1bn people, or more than the working-age populations of India and China combined. Unless Africa creates more jobs, it will not benefit from the demographic dividend.

For investors dazzled by the “Africa rising” narrative, the IMF’s warning to watch out should be a strong warning about the challenges still gripping the continent.


http://blogs.ft.com/beyond-brics/201...rica-watching/


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