Cargo Info Africa

ANGOLA

Angola's high growth rate is driven by its oil sector, but record oil prices and rising petroleum production have occurred without improved performance in other parts of the economy. Oil production and its supporting activities, contribute about 45% to GDP and more than half of exports, and much of the country's infrastructure is still damaged or undeveloped from the 22 year-long civil war. Remnants of the conflict such as widespread land mines still mar the countryside even though an apparently durable peace has been established after the death of rebel leader Jonas SAVIMBI in February 2002. Subsistence agriculture provides the main livelihood for 85% of the population, but much of the country's food must still be imported. In 2005, the government started using a $2 billion line of credit from China to rebuild Angola's public infrastructure, and several large-scale projects are scheduled for completion by 2006. The central bank in 2003 implemented an exchange rate stabilization program using foreign exchange reserves to buy kwanzas out of circulation, a policy that was more sustainable in 2005 because of strong oil export earnings, and has significantly reduced inflation. Consumer inflation declined from 325% in 2000 to about 18% in 2005, but the stabilization policy places pressure on international net liquidity. To fully take advantage of its rich national resources - gold, diamonds, extensive forests, Atlantic fisheries, and large oil deposits - Angola will need to continue reforming government policies and to reduce corruption. The government has made sufficient progress on reforms recommended by the IMF, such as promoting greater transparency in government spending, and continues to be without a formal monitoring agreement with the institution. Increased oil production supported 12% growth in 2004 and 14% growth in 2005.

BOTSWANA

Botswana has maintained one of the world's highest economic growth rates since independence in 1966. Through fiscal discipline and sound management, Botswana has transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of $10,100 in 2005. Two major investment services rank Botswana as the best credit risk in Africa. Diamond mining has fueled much of the expansion and currently accounts for more than one-third of GDP and for 70-80% of export earnings. Tourism, financial services, subsistence farming, and cattle raising are other key sectors. On the downside, the government must deal with high rates of unemployment and poverty. Unemployment officially is 23.8%, but unofficial estimates place it closer to 40%. HIV/AIDS infection rates are the second highest in the world and threaten Botswana's impressive economic gains. An expected leveling off in diamond mining production overshadow long-term prospects.

DEMOCRATIC REPUBLIC OF CONGO

The economy of the Democratic Republic of the Congo - a nation endowed with vast potential wealth - has declined drastically since the mid-1980s. The war, which began in August 1998, dramatically reduced national output and government revenue, increased external debt, and resulted in the deaths of perhaps 3.5 million people from war, famine, and disease. Foreign businesses curtailed operations due to uncertainty about the outcome of the conflict, lack of infrastructure, and the difficult operating environment. Conditions improved in late 2002 with the withdrawal of a large portion of the invading foreign troops. The transitional government has reopened relations with international financial institutions and international donors, with President KABILA implementing reforms. Much economic activity lies outside the GDP data. Economic stability improved in 2003-05, although an uncertain legal framework, corruption, and a lack of openness in government policy continues to hamper growth. In 2005, renewed activity in the mining sector, the source of most exports, boosted Kinshasa's fiscal position and GDP growth. Business and economic prospects are expected to improve once a new government is installed after elections.

LESOTHO

Small, landlocked, and mountainous, Lesotho relies on remittances from miners employed in South Africa and customs duties from the Southern Africa Customs Union for the majority of government revenue, but the government has strengthened its tax system to reduce dependency on customs duties. Completion of a major hydropower facility in January 1998 now permits the sale of water to South Africa, also generating royalties for Lesotho. As the number of mineworkers has declined steadily over the past several years, a small manufacturing base has developed based on farm products that support the milling, canning, leather, and jute industries and a rapidly growing apparel-assembly sector. The garment industry has grown significantly, mainly due to Lesotho qualifying for the trade benefits contained in the Africa Growth and Opportunity Act. The economy is still primarily based on subsistence agriculture, especially livestock, although drought has decreased agricultural activity. The extreme inequality in the distribution of income remains a major drawback. Lesotho has signed an Interim Poverty Reduction and Growth Facility with the IMF.

MADAGASCAR

Having discarded past socialist economic policies, Madagascar has since the mid 1990s followed a World Bank- and IMF-led policy of privatization and liberalization. This strategy placed the country on a slow and steady growth path from an extremely low level. Agriculture, including fishing and forestry, is a mainstay of the economy, accounting for more than one-fourth of GDP and employing 80% of the population. Exports of apparel have boomed in recent years primarily due to duty-free access to the United States. Deforestation and erosion, aggravated by the use of firewood as the primary source of fuel, are serious concerns. President RAVALOMANANA has worked aggressively to revive the economy following the 2002 political crisis, which triggered a 12% drop in GDP that year. Poverty reduction and combating corruption will be the centerpieces of economic policy for the next few years.

MALAWI

Landlocked Malawi ranks among the world's least developed countries. The economy is predominately agricultural, with about 90% of the population living in rural areas. Agriculture accounted for nearly 36% of GDP and 80% of export revenues in 2005. The performance of the tobacco sector is key to short-term growth as tobacco accounts for over 50% of exports. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. In late 2000, Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program. The government faces strong challenges, including developing a market economy, improving educational facilities, facing up to environmental problems, dealing with the rapidly growing problem of HIV/AIDS, and satisfying foreign donors that fiscal discipline is being tightened. In 2005, President MUTHARIKA championed an anticorruption campaign. Malawi's recent fiscal policy performance has been very strong, but a serious drought in 2005 and 2006 will heighten pressure on the government to increase spending.

MAURITIUS

Since independence in 1968, Mauritius has developed from a low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial, and tourist sectors. For most of the period, annual growth has been in the order of 5% to 6%. This remarkable achievement has been reflected in more equitable income distribution, increased life expectancy, lowered infant mortality, and a much-improved infrastructure. Sugarcane is grown on about 90% of the cultivated land area and accounts for 25% of export earnings. The government's development strategy centers on expanding local financial institutions and building a domestic information telecommunications industry. Mauritius has attracted more than 9,000 offshore entities, many aimed at commerce in India and South Africa, and investment in the banking sector alone has reached over $1 billion. Mauritius, with its strong textile sector, has been well poised to take advantage of the Africa Growth and Opportunity Act (AGOA).

MOZAMBIQUE

At independence in 1975, Mozambique was one of the world's poorest countries. Socialist mismanagement and a brutal civil war from 1977-92 exacerbated the situation. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, have led to dramatic improvements in the country's growth rate. Inflation was reduced to single digits during the late 1990s although it returned to double digits in 2000-03. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities. In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual budget, and the majority of the population remains below the poverty line. Subsistence agriculture continues to employ the vast majority of the country's workforce. A substantial trade imbalance persists although the opening of the MOZAL aluminum smelter, the country's largest foreign investment project to date, has increased export earnings. In late 2005, and after years of negotiations, the government signed an agreement to gain Portugal's majority share of the Cahora Bassa Hydroelectricity (HCB) company, a dam that was not transferred to Mozambique at independence because of the ensuing civil war and unpaid debts. More power is needed for additional investment projects in titanium extraction and processing and garment manufacturing that could further close the import/export gap. Mozambique's once substantial foreign debt has been reduced through forgiveness and rescheduling under the IMF's Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is now at a manageable level.

NAMIBIA

The economy is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 20% of GDP. Rich alluvial diamond deposits make Namibia a primary source for gem-quality diamonds. Namibia is the fourth-largest exporter of nonfuel minerals in Africa, the world's fifth-largest producer of uranium, and the producer of large quantities of lead, zinc, tin, silver, and tungsten. The mining sector employs only about 3% of the population while about half of the population depends on subsistence agriculture for its livelihood. Namibia normally imports about 50% of its cereal requirements; in drought years food shortages are a major problem in rural areas. A high per capita GDP, relative to the region, hides the great inequality of income distribution; nearly one-third of Namibians had annual incomes of less than $1,400 in constant 1994 dollars, according to a 1993 study. The Namibian economy is closely linked to South Africa with the Namibian dollar pegged to the South African rand. Privatization of several enterprises in coming years may stimulate long-run foreign investment. Mining of zinc, copper, and silver and increased fish production led growth in 2003-05.

SOUTH AFRICA

South Africa is a middle-income, emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; a stock exchange that ranks among the 10 largest in the world; and a modern infrastructure supporting an efficient distribution of goods to major urban centers throughout the region. However, growth has not been strong enough to lower South Africa's high unemployment rate; and daunting economic problems remain from the apartheid era, especially poverty and lack of economic empowerment among the disadvantaged groups. South African economic policy is fiscally conservative, but pragmatic, focusing on targeting inflation and liberalizing trade as means to increase job growth and household income.

SWAZILAND

In this small, landlocked economy, subsistence agriculture occupies more than 80% of the population. The manufacturing sector has diversified since the mid-1980s. Sugar and wood pulp remain important foreign exchange earners. Mining has declined in importance in recent years with only coal and quarry stone mines remaining active. Surrounded by South Africa, except for a short border with Mozambique, Swaziland is heavily dependent on South Africa from which it receives about nine-tenths of its imports and to which it sends nearly three-quarters of its exports. Customs duties from the Southern African Customs Union and worker remittances from South Africa substantially supplement domestically earned income. The government is trying to improve the atmosphere for foreign investment. Overgrazing, soil depletion, drought, and sometimes floods persist as problems for the future. More than one-fourth of the population needed emergency food aid in 2004-05 because of drought, and more than one-third of the adult population was infected by HIV/AIDS.

TANZANIA

Tanzania is one of the poorest countries in the world. The economy depends heavily on agriculture, which accounts for almost half of GDP, provides 85% of exports, and employs 80% of the work force. Topography and climatic conditions, however, limit cultivated crops to only 4% of the land area. Industry traditionally featured the processing of agricultural products and light consumer goods. The World Bank, the International Monetary Fund, and bilateral donors have provided funds to rehabilitate Tanzania's out-of-date economic infrastructure and to alleviate poverty. Long-term growth through 2005 featured a pickup in industrial production and a substantial increase in output of minerals, led by gold. Recent banking reforms have helped increase private sector growth and investment. Continued donor assistance and solid macroeconomic policies supported real GDP growth of more than 6% in 2005.

ZAMBIA

Despite progress in privatization and budgetary reform, Zambia's economic growth remains somewhat below the 6% to 7% needed to reduce poverty significantly. Privatization of government-owned copper mines relieved the government from covering mammoth losses generated by the industry and greatly improved the chances for copper mining to return to profitability and spur economic growth. Copper output has increased steadily since 2004, due to higher copper prices and the opening of new mines. The maize harvest was again good in 2005, helping boost GDP and agricultural exports. Cooperation continues with international bodies on programs to reduce poverty, including a new lending arrangement with the IMF in the second quarter, 2004. A tighter monetary policy will help cut inflation, but Zambia still has a serious problem with high public debt.

ZIMBABWE

The government of Zimbabwe faces a wide variety of difficult economic problems as it struggles with an unsustainable fiscal deficit, an overvalued exchange rate, soaring inflation, and bare shelves. Its 1998-2002 involvement in the war in the Democratic Republic of the Congo, for example, drained hundreds of millions of dollars from the economy. Badly needed support from the IMF has been suspended because of the country's failure to meet budgetary goals. Inflation rose from an annual rate of 32% in 1998 to 133% at the end of 2004 and 246.7% in 2005, while the exchange rate fell from 24 Zimbabwean dollars per US dollar to 15,200 in the same time period. The government's land reform program, characterized by chaos and violence, has badly damaged the commercial farming sector, the traditional source of exports and foreign exchange and the provider of 400,000 jobs.