Standard & Poor’s predicts growth in sub-Sahara Africa

A global investment bank has forecast good prospects for the African economies even as the world’s economic outlook remains gloomy.

The economies of the sub-Sahara Africa are set to continue growing steadily in the coming two years, Standard & Poor’s Ratings Services said in a new report, ‘High Commodity Prices And Infrastructure Spending are Fuelling Growth Among sub-Saharan African Sovereigns’, released at the weekend.

The report tallies with positive regional forecast by the International Monetary Fund, which expects 5.4 per cent growth in the region.

“Several factors should account for this steady growth, including high public investment spending, strong commodity exports, and increasingly diversified trade with growing emerging economies, such as China,” said the firm’s credit analyst Christian Esters.

But the company noted that high infrastructure spending was keeping government deficits higher than pre-crisis levels in many countries.

Amongst the states undertaking large projects are Kenya, which apart from the proposed Lamu port project, has completed major road and port projects. Others are Cape Verde, Uganda, Ghana, Gabon, Mozambique and Senegal.

But the American rating agency said that if these projects resulted in budgetary constraints, it was confident most governments had the necessary wriggle space, especially through putting off some capital expenditure.

“We anticipate that continuing high oil prices should help to sustain solid current-account surpluses of some of the rated oil-exporting sovereigns in 2012, such as Nigeria and Angola,” said Mr Esters.

“However, the fiscal benefit of oil revenues has in some cases been offset by spending increasing faster than revenues. This is often owing to subsidies on imported refined oil products, such as diesel.”

The agency said the rated non-oil exporters like Kenya would experience pressures as prices were expected to remain high.

It cautioned economies dependent on few commodities including Botswana with its diamonds and copper-dependent Zambia would remain exposed.

The report said that for the continent in general, a growing averseness by investors may erode confidence shown by foreign investors to the sub-Sahara Africa since 2009.