| United Nations | E/1997/41 |
Economic and Social Council
Distr. GENERAL
16 April 1997
ORIGINAL: ENGLISH
Substantive session of 1997
Geneva, 30 June-25 July 1997
Item 10 of the provisional agenda*
* E/1997/100.
REGIONAL COOPERATION
Summary of the survey of economic and social conditions
in Africa, 1996
CONTENTS
Paragraphs Page
I. OVERVIEW ............................................. 1 - 5 2
II. SECTORAL PERFORMANCES ................................ 6 - 10 4
III. THE EXTERNAL SECTOR .................................. 11 - 13 6
IV. THE SOCIAL SECTOR .................................... 14 - 15 7
V. MAJOR POLICY ISSUES AND CHALLENGES ................... 16 - 20 8
VI. MEDIUM-TERM OUTLOOK AND PROSPECTS FOR 1997 ........... 21 - 25 9
I. OVERVIEW
1. Africa's economic performance in 1996 maintained the upward trend
started in 1994. Preliminary estimates indicate that the gross
domestic product (GDP) of the region recorded the highest growth rate
since the start of the decade, at 3.9 per cent in 1996, resulting in
the first turn-around in per capita income in almost a decade (table
1). This performance compares very favourably with the revised growth
rate of 2.7 per cent recorded in 1995 and with the population growth
rate of 2.8 per cent.
Table 1. African economic indicators, 1990-1996
(Percentage change)
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1990 1991 1992 1993
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GDP growth 0.7 1.5 0.22 -0.05
Agricultural production,
FAO index 1979-1981 = 100 27.9 135.9 134.0 139.9
Oil production (millions of tons) 321.4 336.4 345.46 338.11
Mining production index (1990 = 100) 1.0 -4.0 -7.6 -6.7
Consumer price index
(1990 = 100) 16.6 31.5 44.9 36.6
Oil prices, Brent crude
(US$ per barrel) 24.0 20.0 19.3 17.0
Export prices index
(1990 = 100) 12.4 -9.4 -0.2 -5.2
Import prices index (1990 = 100) 4.5 -0.1 3.4 -0.8
Terms of trade index (1990 = 100) 7.5 -9.3 -3.4 -4.5
Exports ($ billion) 99.2 95.0 92.9 87.3
Imports ($ billion) 91.6 90.1 93.6 92.7
Current account ($ billion) -0.1 -1.7 -5.4 -8.5
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1994 1995 1996
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GDP growth 2.02 2.74 3.96
Agricultural production,
FAO index 1979-1981 = 100 143.1 143.0 ..
Oil production (millions of tons) 335.35 353.33 368.58
Mining production index (1990 = 100) -1.2 0.1 0.1
Consumer price index (1990 = 100) 60.2 35.4 27.0
Oil prices, Brent crude
(US$ per barrel) 15.8 17.1 20.65
Export prices index (1990 = 100) 5.3 6.8 4.7
Import prices index (1990 = 100) 4.1 5.2 0.9
Terms of trade index (1990 = 100) 1.2 1.5 4.6
Exports ($ billion) 94.3 107.9 116.1
Imports ($ billion) 98.3 116.1 125.1
Current account ($ billion) -12.0 17.4 20.7
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Source: ECA secretariat.
2. The improved performance has been fairly spread among subregions
and countries (table 2). Subregionally, the highest growth was
recorded in central Africa, at 4.5 per cent, while the lowest was 3
per cent for southern Africa. The 33 least developed African
countries registered a growth rate of 4.5 per cent, which is slightly
above the regional average of 3.9 per cent. It is gratifying to note
that 11 countries either equalled the growth target of 6 per cent or
succeeded in surpassing it in 1996 and that performance was negative
in only two countries, which compares favourably to the six in 1995.
Table 2. Output share and growth rate by subregion and economic grouping
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Per capita GDP GDP percentage,
at 1990 $US regional share
---------------------------------------------
1995 1995
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Central Africa 444 8.5
East Africa 193 6.8
North Africa 1 237 39.8
Southern Africa 1 355 27.7
West Africa 362 17.2
Sub-Saharan Africa 511 62.5
Sub-Saharan Africa without
Nigeria and South Africa 363 ..
Sahel zone 374 6.0
Oil exporters 882 46.2
Non-oil exporters 538 53.8
Least developed countries 231 16.2
Franc zone 574 10.9
Mineral exporters 1 034 30.7
Beverage exporters 260 10.3
All Africa 657 100.0
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Growth rate (percentage at 1990 prices)
------------------------------------------------
1991 1992 1993 1994 1995 1996 1990-
1995
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Central Africa -4.4 -1.9 -9.2 -1.3 5.0 4.4 -2.5
East Africa -0.6 3.5 2.4 4.5 4.9 4.3 2.9
North Africa 2.6 0.8 0.5 1.8 1.8 4.4 1.5
Southern Africa 0.0 -2.1 1.5 2.5 2.5 3.0 2.4
West Africa 4.0 1.4 0.5 2.5 3.4 4.2 1.1
Sub-Saharan Africa 0.7 -0.3 -0.5 2.1 3.4 3.7 ..
Sub-Saharan Africa without
Nigeria and South Africa 7.4 8.2 -1.9 6.5 4.2 2.5 2.0
Sahel zone 3.0 3.7 -2.4 1.7 4.1 4.0 1.4
Oil exporters 2.1 0.6 -0.3 1.4 3.1 4.2 1.0
Non-oil exporters 0.4 -0.5 0.1 2.6 2.4 3.8 -0.1
Least developed countries -0.8 1.2 -4.0 -0.7 4.0 4.5 0.6
Franc zone -1.0 -0.4 -2.7 2.6 4.7 4.1 0.6
Mineral exporters -1.1 -1.8 -1.6 2.1 2.8 3.0 0.0
Beverage exporters 0.1 2.3 0.0 1.0 5.8 4.8 1.8
All Africa 1.2 0.0 0.0 2.0 2.7 4.0 1.2
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Source: ECA secretariat.
3. The factors explaining the relatively high performance this year include
the positive effects of economic reforms and the deepening of market-based,
private-sector-driven economic policies, favourable weather conditions in most
subregions, and a significant rise in export revenue, particularly in the oil-
exporting countries. Output in agriculture and the mining sectors increased
appreciably, while there was significant deceleration in the manufacturing
sector. Despite the upturn in overall economic performance in 1996, Africa's
position in international trade and output remains insignificant. Africa's
share of world output is about 2 per cent, and its trade share has fallen from
a high of 5 per cent in 1980 to 2.2 per cent in 1996.
4. The total debt stock of the African countries increased by 4 per cent in
1996, to US$ 340.5 billion. Total debt service payment declined from
$25.6 billion in 1995 to $24 billion in 1996. This reduction in debt-servicing
is most probably due to the further accumulation of arrears. Despite the many
reschedulings and arrangements to reduce the debt burden of the continent to a
more manageable level, the overhang has by now grown large enough to threaten
and impede the reform efforts aimed at the restoration of economic and
socio-political viability in many African countries. In particular, the
disproportionate increase in multilateral debt, which is usually more
difficult to service and cannot be rescheduled, has intensified the problem of
the debt overhang in the region and rendered the process of debt renegotiation
more intractable, despite the latest initiative for the "highly indebted poor
countries".
5. Despite the strong recovery, the human condition continued to be
daunting, and the region is still the poorest in the world, the only part of
the globe where poverty is projected to increase in the immediate future. The
number of refugees and displaced persons also continued to increase.
II. SECTORAL PERFORMANCES
6. Agriculture recorded its highest growth rate, 5.2 per cent, since the
beginning of the decade and was a strong factor behind the continued recovery
in the region in 1996. In addition to the ongoing reforms, which have had a
positive impact, the vigorous rebound was basically the result of the
conducive weather that prevailed throughout the region. There were notable
policy thrusts directed towards diversification and food self-sufficiency. An
improved supply of modern inputs, such as seeds and fertilizer, and the
privatization of state farms were measures enhancing agricultural output in
1996. Among the food groups, cereal production was the major contributor to
the recovery. It was most noticeable in North and eastern and southern Africa
where output increased considerably. In West Africa the results were positive
but less spectacular because of inadequate rainfall and the infestation of
locust and crickets in Mali and Niger. In central Africa cereal output
stagnated, rendering the food supply critical. The production of roots and
tubers, estimated at 135 million tons, was unchanged from the 1995 level.
Output of coffee and cocoa, the two major sources of foreign exchange for many
countries, was significantly higher than that of 1995. Cocoa production is
estimated at 1.6 million tons, an increase exceeding 6 per cent over the 1995
level. In Co^te d'Ivoire, the largest of the cocoa producers, a bumper crop
increased output to 0.86 million tons, from 0.81 million in 1995. Similar
trends were observed both in Ghana and Nigeria. The production of both tea
and tobacco remained relatively constant in 1996. The surge in the output of
coffee and cocoa seems to have been stimulated by the recovery in their
international prices in 1995. But such a reaction is bound to impose downward
pressure on prices, and producing countries need to de-emphasize their
reliance on these products and shift resources into non-traditional exports.
7. Value-added in the mineral sector increased substantially, from
-0.2 per cent in 1995 to 6.6 per cent in 1996. The main impetus for the
strong recovery emanated from the increase in prices for crude oil, gold, iron
ore and phosphates on the international markets. Although the improvements in
the world demand and prices provided the conditions for capacity and output
expansion, production volumes remained virtually stable in 1996 except for
crude oil, which enjoyed substantial recovery. In Ghana, South Africa and
Sierra Leone, the mining industry was beset by internal constraints,
decreasing the production of gold. In Ghana, the target of 1 million ounces
was not attained, although output was slightly higher than in 1995. In South
Africa gold output declined from 523 tons in 1995 to 505 tons in 1996, because
of problems related to increased costs, declining productivity and shortages
of working capital. In Sierra Leone production was disrupted because of the
civil war. By contrast, in Zaire the copper mining industry is making
progress in capacity utilization, despite the chronic economic and social
difficulties. Copper output increased by 40 per cent, to 50,000 tons in 1996.
8. Crude oil enjoyed a substantial recovery in terms of both production and
prices. Output increased from 353 million tons in 1995 to 369 million tons in
1996, reflecting expansion in new fields in the Congo, Algeria, Angola and
Nigeria. In Equatorial Guinea, the latest member of the African Petroleum
Producers Association (APPA), production jumped from 8,400 to 40,000 barrels
per day while in Nigeria the increase was modest, at 8 per cent. Overall the
OPEC African members increased their output by 5.3 per cent, to 245.2 million
tons in 1996, despite slight decreases in the Libyan Arab Jamahiriya and the
withdrawal of Gabon from membership. Low exploration and production costs,
due to technological developments and the favorable conditions under which
African countries offer concessions to oil companies, continue to encourage
activities in the sub-sector.
9. Growth in value-added in the manufacturing sector (MVA) declined from a
high of 4.6 per cent in 1995 to 2.5 per cent in 1996. Output of exportables
such as textiles were stymied by the slowdown in the economies of Western
Europe, the destination of 80 per cent of African exports and growing
competition from other producers. While in the majority of African countries
manufacturing output stagnated, strong performance was recorded for the
northern and eastern subregions, with growth rates of 4.2 per cent and 5.3 per
cent, respectively, sustained by strong domestic demand as well as buoyant
inflows of foreign direct investment (FDI). In contrast, in central Africa
growth declined by 6.4 per cent in 1995 to 1.6 per cent in 1996, owing to low
performance in Rwanda, Burundi and Zaire. Although performance was
unimpressive in the larger economies such as Cameroon, Egypt, Nigeria and
South Africa, exceptional growth was recorded for Co^te d'Ivoire (6.5 per
cent) Tunisia (6.1 per cent), Botswana (5.7 per cent), Senegal (4.6 per cent)
and Uganda (4 per cent).
10. The manufacturing sector continues to endure and operate under
relatively high cost conditions, due to obsolescence entailing frequent
stoppage for repair, high interest rates and declining external value of the
domestic currencies. The reduction in tariff and resulting competition have
limited capacity utilization to about a quarter.
III. THE EXTERNAL SECTOR
11. The terms of trade (TOT) registered a robust 4.6 per cent improvement in
1996, and the unit value index of exports increased by 4.7 per cent, against a
0.1 per cent increase in the unit value of imports. As a result, the
purchasing power of exports reached its highest level since 1990, increasing
by 8.8 per cent. Export receipt increased by nearly 9 per cent in 1996,
spurred by a 4-per-cent rise in volume and a 5-per-cent increase in prices.
On the other hand, imports grew more rapidly, at 10 per cent, of which 9 per
cent was accounted for by increase in volume (table 3). The terms-of-trade
effect is, however, still negative at 11.6 per cent of real exports, while
GDP, adjusted for negative terms of trade, showed a loss of 2.6 per cent in
GDP. There has been distinct dichotomy among different commodity exporters.
Oil-exporting countries enjoyed the entire benefit, where receipts increased
by 23.3 per cent, reflecting a 19-per-cent terms-of-trade improvement, while
non-oil-exporting countries experienced a mere 1-per-cent increase in their
TOT, with a 5-per-cent decline in export earnings. This was the result of a
decrease of 17 per cent in beverage prices, 11 per cent in metals and
minerals, and 3 per cent in agricultural raw materials.
12. The current account deficit was $17.4 billion, due to an excessively
large negative balance of $15.8 billion in the service sector. The $20.8
billion external financing covered the overall deficit of $19.7 billion and
increased the reserve by $1.1 billion.
13. Although Africa's external trade accounts for a small and declining
share of global trade, exports and imports have continued to impose a
significant influence on the region's economy, both in terms of magnitude and
of product mix. With exports alone accounting for a quarter of regional GDP
and imports providing a fifth of the domestic supply, Africa is now the most
open of all the regions in the world except the East Asia and Pacific rim
subregions. The extensive trade liberalization and exchange rate reforms that
have been implemented across the continent since 1990 have yet to trigger a
vibrant export base, reduce the current account deficits to a sustainable
level or kick-start rapid economic growth.
Table 3. Balance of payments, 1991-1996
(Billions of US$)
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1991 1992 1993 1994 1995 1996
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Exports f.o.b. 95.0 92.9 87.3 94.3 107.9 116.1
Imports f.o.b. 90.1 93.6 92.7 98.3 116.1 125.1
Trade balance 4.9 -0.7 -5.4 -4.0 -8.2 -9.0
Services net -10.7 -8.7 -10.1 -7.2 -7.0 -7.3
Unrequited transfers 17.7 19.5 18.8 15.0 15.2 14.7
Income net -15.6 -13.6 -13.1 -15.7 -16.3 -15.8
Current account -3.7 -3.5 -9.8 -12.0 -16.3 -17.4
Capital account,
including errors -1.2 -3.0 -4.2 -3.4 -1.8 -2.3
Overall balance -4.9 -6.5 -14.0 -15.4 -18.1 -19.7
Change in reserves
(- increase) -9.7 -1.4 -4.8 -8.2 -3.2 -1.1
Net external financing 14.6 7.9 18.8 23.6 21.3 20.8
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Sources: IMF, World Economic Outlook and International Financial
Statistics (Washington, D.C.), various years, Economic Intelligence Unit;
national sources; and ECA secretariat estimates.
IV. THE SOCIAL SECTOR
14. Despite attempts to reduce political instability and civil unrest, the
overall social situation remains daunting in 1996. Two factors operating at
cross purposes continued to worsen the social condition in the region. On the
one hand, the population growth rate is twice the world global average
(2.8 per cent against 1.5 per cent). On the other hand, the efforts of
Governments to reduce their budget deficits has entailed disproportionate
reduction in those activities that would have ameliorated the social
situation. Cutbacks on expenditure on education and health reduced the
capacity of countries to empower and graduate their people into productive
work forces. However, some countries have started developing wide systems of
social safety nets and specific pro-poor policies. The overall thrust of
social policy formulation and implementation hinges on the local initiative,
basic education and health for all and on putting women at the centre of the
development enterprise. The decline in governmental investment reduced
employment generation not only in the public sector but also in the private
sector, due to its "crowding-in" effect. The ongoing programme of
privatization pursued by several African countries may have helped generate
employment to compensate for the governmental lay-offs of general service
staff.
15. The economic and social crisis has not helped to reduce political
tensions and civil unrest. The competition for declining resources has often
exacerbated political instability and social conflict. The number of refugees
and huge population movements not only disrupt an orderly development process
in the source countries but impose heavy costs on those countries providing
respite. Peace and stability are the primary prerequisites for attaining and
maintaining high levels of growth and development. Though a number of
countries are taking measures to create a conducive political environment
through improved governance, more needs to be done to overcome the increasing
plight of the people.
V. MAJOR POLICY ISSUES AND CHALLENGES
16. In 1996, African Governments persisted in reforming and re-engineering
their economic environments, often at great social and political cost.
Measures towards reinforcing a market-based private-sector-driven economy have
been the cornerstone policy in many African countries. Many countries have by
and large reduced the predominant role of the State in the production process;
policies inhibiting the private sector have been replaced by more market-
friendly regulations. Considerable efforts have been made everywhere in
Africa to revitalize the social sector, minimize needless waste of human and
natural resources, promote popular participation and democratic governance,
focus world attention on the continent's needs for a more supportive
international economic environment, and reinforce efforts at conflict
prevention and resolution.
17. Still, there are genuine concerns about the region's socio-economic
transformation and sustained development, in the medium term, given the
persistence of anachronistic production structures and deep-rooted economic
malaise. In addition to the many factors responsible for weak economic
performance in Africa in the past, new forces have emerged as a result of
growing global interdependence and competitiveness which needed to be taken
into account in the course of developing appropriate policies to guide the
economy into the twenty-first century. Among the inhibiting domestic
structures and growth-constraining factors in Africa are the internal social
disarticulation at almost all levels of production; weak and undiversified
production base; economic delusion and fragmented domestic factor and product
markets; low level of endogenous human resource development and capacity
utilization; and weak physical, institutional and technical capacities.
Sustaining and reinforcing the current growth momentum in the context of
poverty alleviating strategies remains thus a major policy challenge to the
African countries.
18. The heavy reliance of African economies on a narrow range of primary
exports is a potent source of danger to its medium-term prosperity and
long-term viability. For the generality of African countries, therefore,
economic diversification is not a matter of choice but a necessity, given the
risks associated with unpredictable fluctuations in export earnings and the
need to attract FDI and acquire requisite technology for a dynamic economy.
The creation of wider markets through regional and subregional economic
integration remains a fundamental prerequisite for a viable economic
diversification strategy in Africa, if only to make up for the small size of
domestic markets and to encourage the restructuring of national production
systems to take advantage of complementarities in resource endowments and
economies of scale.
19. With the decline in the external resource inflows to Africa and with
little or no prospects for any major improvements in accessing external
savings, particularly in the form of official development assistance (ODA),
African Governments are now fully aware that effective mobilization of both
domestic and external resources is crucial for long-term sustained
development. They are also conscious of the need to redouble their efforts to
redefine their strategies for resource mobilization. While the mobilization
of external resources should target and tap into the growing non-debt-creating
arrangements and particularly direct foreign investment (FDI), the domestic
counterpart should seek to exploit the rich potential within both the urban
and rural milieus. Closely linked with the renewed efforts to mobilize
financial resources is the need to ensure efficient management and judicious
allocation of those resources.
20. A compelling policy perspective relating to renewed resource mobilization
efforts in African countries is the creation of a more enabling environment
for the attraction of FDI, which has practically become the most dynamic form
of external resource flow. Some of the difficulties in attracting increased
flows of FDI to Africa stem from the lack of improved investment opportunities
and business profitability in comparison with the other regions of the world
and the relatively underdeveloped and undeveloped infrastructure and narrow
markets in Africa. African Governments need to place themselves in such a way
that they and the private sector will be able to mobilize the resources
necessary to finance additional investment by reducing inefficiency and
creating an environment conducive to the retention of savings, by reversing
capital flight and, above all, by encouraging savings through appropriate
policies and incentives and the necessary institutional mechanisms for their
intensive mobilization.
VI. MEDIUM-TERM OUTLOOK AND PROSPECTS FOR 1997
21. There are modest grounds for optimism regarding growth prospects for
Africa in 1997, though the sustainability of the growth remained fragile.
Preliminary estimates indicate that the African economy could grow by 4.2 per
cent in 1997. This estimate is based on the following assumptions:
(a) The weather in 1997 will be as conducive as it was in 1996;
(b) Prices of primary commodities in the world market will stabilize
at their 1996 level or increase slightly;
(c) Relevant and development-oriented policy reforms will continue to
be implemented in 1997 and beyond;
(d) The level of investment will increase from the current 21 per
cent of GDP in 1996 to at least 25 per cent in 1997, driven mainly by
intensive mobilization of domestic resources;
(e) Political instability and civil unrest will abate, allowing
States to assume their developmental functions.
22. At the subregional level, the strong recovery in central Africa in 1996
is expected to continue in 1997, owing mainly to the mining sector,
particularly oil, and the anticipated resolution of the political instability
in Rwanda, Burundi and Zaire. Economic performance in East and southern
Africa will critically depend on the weather and prices of primary commodities
on the world market. The optimal weather condition which prevailed in 1996
extended into the first quarter of 1997. In addition, the revamping of the
former East African Community, whose permanent tripartite Commission was
inaugurated in March 1996, is expected to exert positive pressure on the
economic activity of the subregion.
23. The apparent improvement in the weather and the turnaround in the prices
of minerals, particularly of copper, gold and diamonds, are expected to
maintain the economies of southern African countries in high gear in 1997.
Basic indicators at the end of the first quarter are signalling a vibrant
economy in that part of the continent. In West Africa, the weather, along
with the prices of oil, coffee, cocoa and gold on the international markets,
are the major determining factors, as is the case for most African countries.
The signals so far have established a credible base for spirited growth.
24. In the North African subregion, conditions in Western Europe are as
important as the weather and the prices of oil and potassium. The policy of
dampened demand being pursued in Western Europe to meet the conditions for the
single currency that is expected to commence in 1999 is expected to have a
negative effect on the industrial sector, particularly with respect to
textiles of the subregion.
25. Notwithstanding, this projected overall economic growth may be
compromised by the clouds of uncertainties that are usually associated with
other developments in the external front, such as the burden of debt and the
persistence of low investment. However, with the recent improvements in
growth performance and ongoing attempts at economic reform and successful
experiments in democratic governance in many parts of Africa, the continent
seems poised for increased FDI flows.
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