Out-Law News 2 min. read
22 Apr 2015, 9:38 am
The April edition of the World Bank’s ‘Africa Pulse’ report (44-page / 3.84 MB PDF) said gross domestic product growth in the SSA region averaged 4.5% in 2014, a slight increase from 4.2% in 2013, which was in part “supported by continued infrastructure investment”.
The pace of growth is in line with the 4.4% annual average growth rate of the last two decades, but it is weaker than the peak average rate of 6.4% during 2002-08, the report said. Falling commodity prices have hit SSA, which is a net exporter of oil and other commodities, the report said.
However, the report said Eurobond issuance in the region has “remained robust”, reaching a total of $13.3 billion and $12.9bn in 2013 and 2014 respectively, and “has become increasingly attractive, with financing costs in the Euro area falling to lower levels as the European Central Bank embarked on an ambitious programme of quantitative easing in March 2015”.
According to the report, the appetite for SSA bonds “remains strong, as demonstrated by Ethiopia’s oversubscribed debut 10-year $1bn bond issue in December 2014 and Cote d’Ivoire’s return to the market with a $1bn issue in February 2015”. The report said several of the region’s countries are planning to access markets this year.
Some countries, such as Mozambique and Tanzania, “may benefit from continued foreign investments in the mining sector”, the report said. However, “China’s investment slowdown and low commodity prices suggest that foreign direct investment flows will not provide much support to stronger growth in the region”.
In Angola, the oil price assumption in the 2015 budget was revised down to $40 per barrel (bbl) from the original assumption of $81/bbl., the report said. In Nigeria, it was reduced to $52/bbl from the earlier forecast of $65/bbl. “The corresponding downward revision in revenues has prompted plans to cut public spending.”
Governments in most low-income countries are nevertheless “expected to maintain a focus on expanding public infrastructure in priority sectors such as electricity, roads, and water and sanitation”, said the report. “Among frontier-market economies, Kenya and Senegal are expected to grow at a robust pace, supported by strong infrastructure investment and consumer spending buoyed by low oil prices.”
The impact of climate change will also bring mixed fortunes to the region, the report said. Climate change in SSA is “increasing natural disaster risks and also interacts with other trends, such as urbanisation, to change the risk profiles”. The report points out that “higher and more extreme” rainfall is expected in the Horn of Africa and parts of East Africa. This increases the risk of floods, “but may also alleviate the occurrence of rain shortages and increase the potential for hydropower”.
The report said: “On the upside, the changing climatic environment also shifts the cost-benefit ratios of long-needed investments such as in irrigation infrastructure. They stand to become much more necessary and profitable.”
Earlier this year, the third annual Deloitte African Construction Trends Report (28-page / 2.01 MB PDF) said Africa is still “a magnet for foreign investment”. African ‘mega projects’ increased by 46% to $326bn in 2014, led by heavy investment in transport, energy and power, the report said.
The Infrastructure Consortium for Africa noted last December that total infrastructure funding commitments in Africa increased for the second year running in 2013, with the energy, transport, water and information and communications technology sectors the key beneficiaries.
