Executive Summary
In aggregate the southern Africa region has experienced slow growth over the last decade, with declining levels of GDP per capita. While inflation and fiscal deficits have been successfully reduced in recent years as a result of the neo-liberal macroeconomic stance adopted by governments across much of the region, the resultant fall in government spending, together with increased exposure to international competition has had negative growth effects. Only Angola, Mozambique, Botswana and Mauritius are showing sustained growth rates which are likely to be maintained throughout the next half decade, while Zimbabwe and DR Congo are experiencing seriously deteriorating negative growth rates.
It is unlikely that most countries in the region will meet the 6% growth levels required to achieve the reduction of poverty by half by 2015, and while government spending on education and health as a percentage of GDP has increased marginally in most countries over the last decade, with the notable exception of Zambia, actual spending levels remain extremely low, with seven of the eleven countries for whom there is data spending significantly less than the WHO recommended $60 annual per capita on health spending, with Malawi, Mozambique and Zambia allocating $5, $4 and $9 respectively. Under five malnutrition rates have increased in the majority of countries in the region over the last decade, with a regional country average rate of 22%.
Increased regional integration through the SADC Free Trade Area is unlikely to offer significant benefits to the wider area, and will consolidate South Africa’s regional economic dominance, while the customs revenue loss implications of increased regional economic integration are serious for many countries in the region, for whom customs revenue is a major source of state funding. The SA-EU Agreement is likely to have modest spill over benefits within the region and the African Growth and Opportunities Act offers some additional market opportunities to the region, but continued OECD trade protectionism renders any significant increase in exports to the north unlikely. South Africa is likely to continue as a major source of investment within the region, but this investment is primarily oriented to natural resource extraction, or market penetration, rather than productive investment.
Peace in Angola, and to a lesser extent DR Congo, would offer a significant stimulus to the regional economy but while Zimbabwe remains unstable international investor confidence in the region will remain low, and there are unlikely to be major increases in foreign investment flows, particularly given the current global recession. The muted international response to the NEPAD also implies that increases in aid, trade and debt concessions to the region are not to be anticipated.
Economic prospects for the region as a whole are not positive, and despite some increases in industrialisation and trade diversification, the region remains heavily dependent on primary commodity exports, whose terms of trade continue to fall. This situation is compounded by the impact of AIDS, which is reducing per capita growth by between 0.5-1.2%.
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