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IMF projects improved growth for Africa but debt and limited taxes still prompt concern

he International Monetary Fund (IMF) projects that the continent’s economic growth will reach 3.5% in 2024 and 4% in 2025.

Some of the factors fuelling this optimism include the fact that inflation has almost halved, public debt ratios have broadly stabilised, and several countries have issued Eurobonds this year, ending a two-year hiatus from international markets.

“After peaking at almost 10% in late 2022, inflation has nearly halved to around 6% in the early part of the year thanks to decisive action by central banks,” Abebe Aemro Selassie, the director of the African department at the IMF, told reporters during the Fund’s spring meetings this April.

He emphasised that lower inflation has translated to slower food price increases, terming this as a “positive development” for a region where the cost-of-living crisis has been acute in recent years. “In addition, fiscal consolidation efforts are starting to pay off, with the median public debt stabilising at around 60% of GDP, halting a 10-year upward trend,” he observed.

Not out of the woods yet

“These are encouraging signs. But the region is not out of the woods yet,” cautions Selassie, citing concerns around high borrowing costs amid a crippling funding squeeze facing several countries on the continent. “Far too many countries still face a funding squeeze. Their borrowing costs are high, and funding sources curtailed. Government interest payments now account for about 12% of revenues, more than double the level a decade ago. And official development assistance has become scarcer.”

The impact of these challenges on Africa is significant. Rather than increasing investment in critical areas such as health, education, agriculture, and infrastructure – sectors that can drive development and lift millions out of poverty – governments are allocating essential funds toward debt servicing. This has implications for the region’s growth prospects and its ability to withstand future shocks, argues Selassie, who oversees the IMF’s operations and engagement with 45 countries across sub-Saharan Africa.

He believes that in the face of these challenges, governments in the region should prioritise domestic resource mobilisation, laying emphasis on tax policies that help governments cut their deficits. Specifically, he called for African countries to “cut back tax expenditures” that undermine equity. Tax expenditures are special provisions in the tax code – such as exclusions, deductions, deferrals, credits, and preferential tax rates – that benefit specific activities or groups of taxpayers. He also called for continued digitization of tax procedures to boost efficiency and transparency.

Getting African countries to pay more tax, while ensuring that the burden is equitably shared and economic stability and growth are not compromised in the process, will be key in bolstering Africa’s efforts to reduce its unhealthy reliance on international debt markets.

Many African countries receive a much lower proportion of their GDP in tax than do countries on other continents, according to a report by the Organisation for Co-operation and Economic Development (OECD). The report, which covers tax revenue data for 30 African countries between 1990 and 2018, shows that the average tax-to-GDP ratio for the 30 African countries was 16.5% in 2018. This compared with an average of 34.3% in the 38 OECD member states; and 23.1% for the Latin American and Caribbean nations.

Calls for global financial architecture reform grow louder

Africa’s challenge in collecting sufficient taxes partly stems from international firms exploiting loopholes in the global taxation system to evade paying taxes on the continent, leading African countries to an unhealthy reliance on international debt markets.

“A new global tax system attentive to the needs of the global south is a key priority,” notes Brahima Coulibaly, vice president and director of global economy and development, Brookings Institution. There are positive signs that the global taxation system is moving toward greater equity. Last year, an Africa-backed resolution at the United Nations (UN) paved the way for transferring control of international tax rules from the OECD – comprising 38 wealthy countries – to the UN. This shift ensures that all 193 member states are on a more equal footing, giving African countries a fairer chance at shaping outcomes on negotiations relating to international taxation.

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ECA executive secretary Claver Gatete: Only a regional approach can deliver fast development

Rwanda’s former minister of finance Claver Gatete takes over as the executive secretary of the UN Economic Commission of Africa at a time of great change for the continent.

Claver Gatete takes over the leadership of the United Nations’ Economic Commission for Africa (ECA) at a pivotal juncture, as we approach the halfway stage of the UN Sustainable Development Goals (SDGs) and as Africa enters the second decade of its development blueprint Agenda 2063.

The long shadow of Covid-19 still hangs over the global economy with countries around the world, but especially in Africa, trying to recover from the supply chain shocks, sky-high inflation and the subsequent interest rate hikes. Adding to the current instability is the war in Ukraine – arguably a symptom of a re-ordering in the 70-year old rules-based, neoliberal order that had, seemingly, been entrenched in the wake of the last major disruption, the Second World War.

Into the mix comes the latest, harrowing manifestation of the long running conflict in the Middle East and its potential to spill over with incalculable consequences for the world. The need for finance Also on the table is the stark fact what while Western countries, especially in America and Europe, have been able to run large deficits and inject large amounts of cash to kick-start growth, those in Africa and the wider developing world continue to be bogged down by a lack of concessional or affordable financing.

To add to their woes they also face existential threats from climate-related events, hence the urgent demand for a greater say in the global economic and political structures that do not serve them fairly. This is the maelstrom that Gatete steps into as executive secretary of the UN agency, which wasspecifically set up to “promote the economic and social development of its member states, foster intraregional integration, and promote international cooperation for Africa’s development”.

In pursuit of this mandate, the Commission offers advice to member states, helps to strengthen macroeconomic policy and supports efforts towards regional and sub-regional integration. Perhaps the best summary of what the ECA has been responsible for was provided by the late Professor Adebayo Adedeji, the celebrated former head of the organisation, in his presentation – History and Prospects for Regional Integration in Africa” in 2002. He said that the ECA had been involved in “the establishment of virtually all the major existing African regional integration arrangements (ARIA) namely, the Economic Community of West African States (ECOWAS, 1975), the Preferential Trade Area for Eastern and Southern Africa (PTA, 1981) which was subsequently transformed into COMESA, the Central African Economic Community (CAEC, 1983) and the African Economic Community (AEC, 1991)”.

When we met Gatete in Victoria Falls, Zimbabwe, he offered a practical assessment of what the ECA’s role should be during this dramatic moment in the history of the continent. Its more routine task is to support macroeconomic management, which he explains includes fiscal management, supporting the real productive sectors and fostering a balance between payments and monetary policy.

“Everything you do has an implication on the monetary side. Whatever decision you take definitely has an implication because if you have to accumulate more debt or more deficit, it has implications. So we help countries to manage their own macroeconomic situation, because that’s what is going to actually stabilise the country,” he says.
Continue reading ECA executive secretary Claver Gatete: Only a regional approach can deliver fast development

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Oil rises as investors weigh Red Sea attacks, US rate cut outlook

By Mohi Narayan
February 21, 20248:40 AM GMT+1Updated an hour ago

oil

NEW DELHI, Feb 21 (Reuters) – Oil prices regained some ground in Asian trade on Wednesday amid concerns over attacks on shipping in the Red Sea and growing expectations that cuts to U.S. interest rates will take longer than thought.
Brent crude futures rose 24 cents or 0.3% to $82.58 a barrel by 0721 GMT, while U.S. West Texas Intermediate crude futures (WTI) were up 21 cents or 0.3% at $77.25.

The Brent and WTI contracts fell 1.5% and 1.4%, respectively, from near three-week highs on Tuesday as the premium for prompt U.S. crude futures to the second-month contract more than doubled to $1.71 a barrel – its widest level in roughly four months.

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Mapping Africa’s natural resources Nearly half the world’s gold and one-third of all minerals are in Africa

Beneath the surface of Africa lies a wealth of mineral resources of enormous value. In 2019, the continent produced almost 1 billion tonnes of minerals worth $406bn.

According to the United Nations, Africa is home to about 30 percent of the world’s mineral reserves, 12 percent of the world’s oil and 8 percent of the world’s natural gas reserves.

The continent also holds 40 percent of the world’s gold and up to 90 percent of its chromium and platinum – both valuable metals.

A world of minerals in your mobile phone

Most of the electronics we use today are based on a number of minerals – from aluminium to zinc.

In 2021, some 1.5 billion smartphones were sold around the world – up from 122 million units in 2007. As of 2020, nearly four in five (78 percent) people own a smartphone.

More than half of a mobile phone’s components – including its electronics, display, battery and speakers – are made from mined and semi-processed materials.

INTERACTIVE Mapping Africas mineral resources - minerals in your mobile

Lithium and cobalt are some of the key metals used to produce batteries. In 2019, about 63 percent of the world’s cobalt production came from the Democratic Republic of the Congo.

Tantalum is another metal used in electronic equipment. Tantalum capacitors are found in mobile phones, laptops and in a variety of automotive electronics. The DRC and Rwanda are the world’s largest producers of tantalum. Together they produce half of the world’s tantalum.

Top minerals per country

Petroleum and coal are among the most abundant minerals for 22 out of Africa’s 54 countries. As of 2019, Nigeria produced most of the continent’s petroleum (25 percent), followed by Angola (17 percent), and Algeria (16 percent).

Metals including gold, iron, titanium, zinc and copper are the top produced minerals for 11 countries. Ghana is the continent’s largest producer of gold, followed by South Africa and Mali.

Industrial minerals such as diamonds, gypsum, salt, sulphur and phosphates were the main commodity for 13 African countries. The DRC is Africa’s largest industrial diamond producer, followed by Botswana and South Africa. Botswana ranks number one in Africa for the production of gem-quality diamonds – used for jewellery.

INTERACTIVE Mapping Africas mineral resources - top minerals per country

Mineral wealth

At $125bn per year, South Africa generates the most money from its mineral resources. Nigeria comes in second with $53bn per year, followed by Algeria ($39bn) Angola ($32bn) and Libya ($27bn).

These five countries produced more than two-thirds of the continent’s mineral wealth.

INTERACTIVE Mapping Africas mineral resources - top mineral producers

The world’s minerals

According to The World Mining Congress (pdf), the world extracted some 17.9 billion tonnes of minerals in 2019.

Asia was the largest producer, accounting for 59 percent of the world’s total production valued at $1.8 trillion. North America was second with 16 percent, followed by Europe at 7 percent.

Africa produced about 5.5 percent of the world’s minerals worth some $406bn.

INTERACTIVE Mapping Africas mineral resources - world mineral production per continent

Source: Al Jazeera, 15th February 2022

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Blinken’s latest diplomatic trip will take him to Africa as crises continue to vex US foreign policy

WASHINGTON (AP) — Secretary of State Antony Blinken is planning to visit four African countries as the Biden administration tries to keep its eyes on all corners of the world while being consumed by crises in Ukraine, the Mideast and the Red Sea.

The State Department announced on Thursday that Blinken will go to Cape Verde, Ivory Coast, Nigeria and Angola starting Sunday for talks focused on regional security, conflict prevention, democracy promotion and trade. Nigeria is West Africa’s regional heavyweight and plays a major role in security issues, especially those involving Islamic extremist violence in the Sahel, the vast arid expanse south of the Sahara Desert.

The trip will be his third overseas mission in the new year. He returned from a Gaza-focused, weeklong 10-nation trip to the Middle East last Thursday and a three-day trip to the World Economic Forum in Switzerland on Wednesday.

Source: AP,  18th January 2024

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