2015 not an 'easy year' for Africa

Despite growth expectations of more than 5% for many African economies, 2015 is not an easy year for the continent, according to Celeste Fauconnier, African analyst for Rand Merchant Bank (RMB). “Our forecast is the same for 2016 and we only expect to see some normalisation towards 2017," she said. “While Africa’s next chapter does include strong growth expectations – forecasts are above 4 and even 5%, there are several domestic and internal risks that are going to impact heavily.” She said this would undoubtedly impact the investment landscape over the course of the next few years. “Monetary policies are becoming more efficient and inf lation is far less of a problem in Africa than has been the case in the past, but it is not going to be easy sailing in 2015 or 2016.” Commenting on fiscal restraint, Fauconnier said most countries would have to start spending less while trying to get more revenue. “That means taxes will increase while investment in projects will decrease. To spend less, countries are going to have to look at wages, but Africa does not want to cut back on wages. It’s all politics,” she said. “Because of the fiscal restraint countries are now trying to issue more debt – a major concern we have identified. Countries like Zambia, Ghana and Kenya are issuing Euro bonds of millions of dollars each. Effectively countries are pushing their debt levels higher and higher.” The concern is that African countries are unlikely to see the debt forgiveness they experienced in the past again. “What we are going to see is countries with substantial debt increasing – and while organisations like the International Monetary Fund are likely to help, we don’t expect to see a Paris Club getting countries out of debt like they did in the early 2000s.” Fauconnier said another issue impacting on the current environment was the balance of payment situation. “That is imports and exports. Imports are increasing as consumers are demanding, but exports are dwindling in many of the countries because of the low commodity prices, and so current accounts are going into deficit.” All of this combined is troublesome, she said. Add the low oil price into the mix and it is not as rosy as one would think on the African continent. Fauconnier said expectations were that the oil price would not rise more than US$75 dollars per barrel in the next two years. INSERT & CAPTION African countries are unlikely to see the debt forgiveness they experienced in the past again. – Celeste Fauconnier