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The East African : Jan 26th 2015
SPECIAL ADVERTISING FEATURE The EastAfrican EAST AFRICAN VOICES investments boost economic g≥owth Africa. He also underscored the need to fast track and enhance regional connectivity as well liberalisation of services across the region to support integration. Following the rebasing of the major economies in East Africa in 2014 — a process that involves a review of baseline years used for calculating economic growth and inclusion of new data that reflects changing economic patterns, the EAC market it is now estimated closer to $134 billion up from $112 billion in 2013 excluding economic growth in 2014 according to UNECA estimates. In the light of the new fig- ures, analysts say the regional market is a much more attractive proposition for both domestic and foreign investors. “The challenge for countries straints and service delivery challenges. These include low labour productivity, poor cargo off take by rail and road, cargo clearance delays, lack of full automation, operational wastages and poor resource utilisation. “The majority of the cargo of the region both imports and exports go through Mombasa port. Improving the efficiency of the port would greatly facilitate regional trade. There is need to reduce delays and improve security as well as infrastructure,” said Hannington Namara, Rwanda’s Country Director for TradeMark East Oil exploration has been going on in earnest and is expected to earn the economies wealth in the near future. Picture: File like Kenya, Tanzania, Uganda, Rwanda and Ethiopia is to sustain this economic growth further. This will require addressing potential bottlenecks to growth. A good example of potential bottlenecks is infrastructure. There is a significant shortage of electricity in the region. Roads and ports are also congested in many cases. Addressing this is going to be very important going forward,” Abebe Selassie, IMF African department deputy director told The EastAfrican recently. Infrastructure deficit But analysts underscore the need for countries in the region to expand their infrastructure, where the existing gap could potentially undermine growth prospects. Currently, EAC needs at least $100 billion to fund infrastructure projects includ- FEUGIAMET UTPAT He is Lore commy niamconum zzriurem ercillam in ea consequisl iustrud min vel doluptat. Ut dit lore dolore tisi bla adit amet ut augue velesti nsequisi ex el dolorem inim incin ulluptat nons nonsed tat luptat. Loreet nonulputpat lum digniam iliquam, quiscin vullam ilisit vercil elisit aute tatem quip et luptate feu facil iure core tat. Duisi blandrerosto od mincidu smoloreet eriuscilla vullam ilisit vercil elisit aute tatem quip et luptate feu facil iure core tat. Duisi blandrerosto od mincidu smoloreet ing railway, energy, ports and harbours, and information and communications technology, among others, are expected to cost at least $100 billion. Trademark East Africa has pledged $350 million to support regional infrastructure for ports, one stop border points and road connectivity. Analysts say given that do- mestic resources in the region remain meagre and insufficient, governments in the region have to look for ways to bring in the private sector to participate and financing of these infrastructure projects including through public-private partnerships — where the government takes on some contingent liabilities and the private sector comes in to build infrastructure and provide services. Another option encouraging private investment in infrastructure. “It will not be as easy for sectors like electricity, where the capital investment require- ments are very large. But even there it should be possible to entice some private investment—for example by allowing independent power producers to supply to the national grid. For roads, much more use of toll roads needs to be made to help finance construction and maintenance. Using such options is probably the best avenue for countries to increase the fiscal space and avoid significant buildup of debt,” Abebe Selassie, IMF African department deputy director told The EastAfrican recently. But the major obstacle to addressing the continent’s infrastructure deficit does not generally appear to be a lack of financing, but rather capacity constraints in developing and implementing projects. Countries should seek to make the most of new financing instruments and flows by improving their absorptive capacity and removing remaining regulatory constraints, while controlling fiscal risks and maintaining debt sustainability according to the IMF. Analysts also point out the slowing growth in emerging markets including China and other major developed economies could derail expected robust economic growth in East Africa in the coming year. In particular, these trends could soften global demand for key sub-Saharan exports, including commodities, according to the International Monetary Fund. This is because during the past decade, growing links with emerging markets have not only supported the region’s expansion and economic diversification but have also increased its vulnerability to external shocks. WORD ON POLICY Abebe Selassie, deputy director IMF, African Dpt For roads, much more use of toll roads needs to be made to help finance construction and maintenance. Using such options is probably the best avenue for countries to increase the fiscal space and avoid significant buildup of debt. 49 Hannington Namara, Country Director (R) TradeMark EA The majority of the cargo of the region both imports and exports go through Mombasa port. Improving the efficiency of the port would greatly facilitate regional trade. There is need to reduce delays and improve security as well as infrastructure. Andrew Mold, Senior Economic Affairs Officer, ECA The IMF (and other organisations) have been reviewing downwards their forecasts for subSaharan Africa recently — but this is mostly related to phenomenon which do not have such a direct impact on East Africa including falling oil prices impacting on producing countries, Ebola in West Africa, the slow growth of South Africa. a signal that imp≥ovement is consolidated mist said that one reason African currencies have generally been robust “may be because economic growth is starting to come from other places. “Manufacturing output in the continent is expanding as quickly as the rest of the economy. Growth is even faster in services, which expanded at an average rate of 2.6% per person across Africa between 1996 and 2011. Tourism, in particular, has boomed: the number of foreign visitors doubled and receipts tripled between 2000 and 2012. “Many countries, including Ethiopia, Ghana, Kenya, Tanzania Mozambique and Nigeria, have recently revised their estimates of GDP to account for their growing non-re- source sectors.” Telecommunications, transportation and finance are also expected to spur economic growth. Africa’s increasing economic diversification is also down to the fact that African governments have worked hard to make life better for investors. The World Bank’s annual “Doing Busi- ness” report revealed that in 2013/14 sub-Saharan Africa did more to improve regulation than any other region. It singled out Rwanda, which is now deemed friendlier to investors than Italy. FDI into Africa stood at 10 percent of GDP in 2013, significantly above the low single dig- it figures for previous decades. Much of this investment is now in countries which are not resource rich but have diversified their economies. But the Economist report also says that an important reason for increasing investment has been the fact that government fiscal spending has improved. “Until a few years ago, nearly all African economies spent freely when their economies were hot, only to rein in spending when things cooled down,” the report said. “That is the opposite of what most economists would advise a finance minister to do. By A Correspondent Dickon Malunda, senior research fellow, IPAR While appreciation o the dollar favours exports, most countries in the region remain net importers. “This means importers are spending more to buy goods which is likely to increase the cost of goods. It also increases the cost of doing business.
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