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Africa’s growth prospects do appear favourable in the medium-term driven by continued prudent macroeconomic management and strong domestic demand, underpinned by increasing public and private investment especially in infrastructure in most countries. Growth is expected to reach 3.6% in 2018 and 3.8% in 2019.
However, slow growth recovery in advanced and emerging economies and tightening of financial markets in the developed economies may continue to negatively affect export demand and curtail FDI inflows to Africa. Public debt levels are sustainable, but remain high, calling for the need to invest funds borrowed into productive sectors to generate returns that could allow timely repayment and enhance the countries’ growth prospects. Some countries may also face problems in repaying their debts as they are caught in an environment of low growth prospects, widened fiscal deficits, weaker currencies, and lower export revenues.
Given the above current economic outlook on the continent, promoting industrialization in Africa should continue to meet the requirements of private businesses, in particular, SMEs that are the backbone of the private sector across the continent. The continent undoubtedly needs to promote “Made in Africa” in which the private sector, in particular SMEs, has a crucial role to play.
Africa’s industrial policies should be coherent with other policies including trade policies to promote value addition and economic diversification. These policies could include ‘smart protectionism’, of which nascent industrial sectors can develop productivity through learning-by-doing, technology upgrade, support from leading firms and reducing tariffs on imported inputs to industrial sectors, as well as reducing barriers to imports of services that are inputs to the industrial sector. The industrial policies should also pay attention to developing producer services, such as design, marketing and branding that promote the “Made in Africa”.
Mobilizing finance to support the private sector in Africa cannot be overstated. Promoting financial markets development, that harnesses domestic resources for long-term development, is accessible in an inclusive way to the range of economic actors would be a significant contribution to improving the capacity of Africa’s private sector to participate in Africa’s industrialization and value chains development. At the regional and continental levels, harnessing cross-border financial flows from Africa’s Diaspora that remains a consistent source of external inflows could be crucial for the continent’s development. Initiatives to enhance the use of remittance channels, cutting the associated costs and mobilizing remittances for investment purposes, could help channel the Diaspora’s finance into industrialization process of African economies.
It is also important to stress that our continent will have to actively promote all viable means of domestic as well as foreign resource mobilization. This includes harnessing excess liquidity at banking sector for development (particularly in long- term development projects), stemming illicit financial flows out of Africa, tackling tax evasion, and challenging transfer mispricing.
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