Growth, projects at risk in SSA

A sharp or protracted decline in oil and commodity prices could affect ongoing resource infrastructure development projects in sub-Saharan Africa, the latest International Monetary Fund (IMF) World Economic Outlook report has warned.

The IMF said a continued dip in commodity prices will have a major impact on some of the fastest-growing countries like Nigeria, Ethiopia, Angola, Ghana and Liberia.

“A protracted decline in oil and commodity prices would affect commodity exporters that do not yet have sufficient fiscal buffers, and could affect planned or ongoing resource development projects,” said the report released on Tuesday. Price drops could slow the flow of cash to government accounts, making it difficult to pay for growth-promoting infrastructure and development projects.

The Fund’s warning comes as Ghana develops its second oil field, the Tweneboa-Enyenra-Ntomme (TEN) discovery, which is expected to produce 80,000 barrels of oil per day commencing 2016. Tullow Oil and its partners developing the field will be counting on a robust oil price to continue incentivising them to finish the project within the projected time.

Oil, which is down only 3 percent year-to-date, has been spared the fate of gold which has lost more than 20 percent in 2013. Ghana’s gold export revenue dropped 12.6 percent year-on-year in the first eight months of 2013, with mining firms threatening to cut jobs as projects lose their viability.

Last month, the Ghana Statistical Service (GSS) slashed the economy’s growth forecast from 8 percent to 7.4 percent, as energy shortages in the first half of the year and weak agricultural output slowed the pace of economic activity.

Regional growth forecasts

Sub-Saharan Africa’s regional growth forecast was cut to 5 percent, down half a percentage point from the Washington-based lender’s April 2013 forecast.

According to the fund, "spillovers from sluggish external demand, reversal of capital flows, and declines in commodity prices are contributing to somewhat weaker growth prospects in many countries”.

The main threats to the region’s outlook are a global economic downturn or a further deceleration of growth in China or other major emerging markets that could weaken exports through lower commodity prices or reduced inflows of aid and FDI.

The IMF advised that “macroeconomic policies should generally remain focused on rebuilding buffers where these have been depleted and on keeping inflation under control”.

An increase in domestic demand has led many to believe that the region is on track for sustained growth, the likes of which raised many Asian nations out of poverty.

However, the report points to the fact that sub-Saharan Africa remains vulnerable to external shocks.