North Africa Unrest, High Prices Hamper Continent's Economic Recovery

Although Africa weathered the 2009 global economic crisis, the unrest in North Africa combined with rising fuel and food prices could slow growth this year, a new report from the African Development Bank warns.

Article first published as Unrest, High Prices Hamper Africa's Recovery on Technorati.

 Ghana community farmers (IMAGE – Trees ForTheFuture)

Africa's economies have weathered the global crisis relatively well and rebounded in 2010, according to the African Economic Outlook 2011, launched on 6 June 2011.

But recent political events in North Africa and high food and fuel prices are likely to slow the continent’s growth down to 3.7% in 2011, the report warns.

During this year, sub-Saharan Africa will grow faster than North Africa. The report predicts a rebound to 5.8% in 2012. Economic growth in Africa has averaged 5% in the past decade.

The new report was launched in Lisbon, which later this week will host the African Development Bank’s (AfDB) annual meeting, the first gathering of African finance ministers and other officials to be held in Europe for 10 years.

"Africa is growing but there are risks. Urgent attention is needed to foster inclusive growth, to improve political accountability, and address the youth bulge," said Mthuli Ncube, Chief Economist and Vice-President of the AfDB.

New trade with emerging economies

Co-authored by the African Development Bank (AfDB), the OECD Development Centre, the United Nations Development Programme (UNDP) and the United Nations Economic Commission for Africa (UNECA), the report covers 51 of the continent's 53 countries.

It urges African countries to develop closer cross-border ties in dealing with traditional and emerging partners so they can boost sustainable and inclusive growth.

Despite its large oil and mineral exports, Africa today still accounts for only about 1.5% of global trade. However, Africa is becoming more integrated in the world economy and its partnerships are diversifying, revealing unprecedented economic opportunities.

New routes opened between Africa and emerging countries are promising, the report states. "New partners bring new opportunities for African countries," said Mario Pezzini, Director at the OECD Development Centre.

Emerging economic powers like China and India are seeking to extend their influence in Africa, not only through trade and investment but also through diplomatic alliances.

China's $126 billion annual trade with Africa is worth almost three times that of India's $ 46 billion. But India is moving to shrink that gap, as witnessed at the second India-Africa Forum on 24-25 May 2011 in the Ethiopian capital, Addis Ababa. India's bilateral trade with Africa is forecast to exceed $50 billion this year.

China now Africa's main trading partner

In 2009, China surpassed the US and became Africa’s main trading partner, while the share conducted by Africa with emerging partners has grown from approximately 23% to 39% in the last 10 years.

Africa’s top five emerging trade partners are now China (38%), India (14%), Korea (7.2%), Brazil (7.1%) and Turkey (6.5%).

While traditional partners, as a whole, still account for the largest proportion of Africa’s trade (62%), investment (80%) and Official Development Assistance (90%), the report notes that emerging economies can provide additional know-how, technology and development experiences required to raise the standard of living for millions of people on the continent.

World Bank echoes warning on fuel, food prices

On 12 May 2011 the World Bank also warned that high food and fuel prices could slow Africa's rapid recovery from the global financial crisis. Sub-Saharan Africa's economy was likely to grow by 5.1% in 2011 and 5.4% in 2012, it said. An earlier forecast by the Bank had shown the region growing by 5.3% this year and 5.5% in 2012.

The sub-Saharan African economy grew by 4.7% in 2010, rebounding from 1.7% growth in the previous year, when the world economic crisis hit output.

"Having presented a fairly optimistic picture, I should add that there are some real risks to this growth forecast. Perhaps most importantly is this increase in food and fuel prices that we are seeing right now," Shantayanan Devarajan, World Bank chief economist for Africa, told Reuters in an interview.

"If food prices and particularly fuel prices continue to rise, there is some really serious risk to the growth forecast."

On a positive note, Devarajan said sub-Saharan Africa should also see higher foreign capital flows in 2011 - after rising 6% to $32 billion in 2010 - as perceptions about the continent improve.

Bribery Act's Impact on British Defence Industry

BAE's Tornado fighter/bomber, sold to Saudi Arabia as well as the RAF - Image: Andrew Parsons/PA

This article was first published in Defence Management Journal, Issue 53 - Summer 2011

The UK Bribery Act 2010 was due to come into force in April 2011, but has been put back until three months after the final official guidance on the Act is published.

The Act has attracted considerable negative media coverage, and anti-corruption groups allege there has been intensive last-minute lobbying against it, from unspecified corporate circles.

It comes at a time when the British defence industry is under increasing public scrutiny.

After the headlines created by the Strategic Defence and Spending Review and consequent job cuts, the uprisings in the Arab world since the end of 2010 focused attention on the weapons that British companies supplied to Bahrain, Libya and others, including teargas and crowd control ammunition, which have been used against protesters and insurgents.

In 2009, UK defence export orders were worth £7.2 billion, according to ADS. The UK was fifth in the global weapons suppliers league after the USA, Russia, Germany and France, although the volume of British arms exports actually fell by 11 per cent between the periods 2001–2005 and 2006–10, the Stockholm International Peace Research Institute (SIPRI) said in data published in March 2011.

With the domestic spending squeeze tightening, Britain's defence manufacturers must maintain if not strengthen their position in the international marketplace. Industry figures are not happy that government guidance on the Bribery Act has been delayed, but say the legislation should not stifle business because anti-corruption measures are already in place.

Penalties

The Bribery Act was enacted in response to growing worldwide pressure on the UK to address a perceived lack of commitment to anti-bribery law enforcement. With this extra-territorial legislation, UK-linked companies involved in bribing officials and executives anywhere can be fined and their assets recovered.

It creates four categories of offences: offering, promising or giving a bribe to another person; requesting, agreeing to receive or accepting a bribe from another person; bribing a foreign public official; and the corporate offence of failing to prevent bribery by individuals acting on its behalf.

Failing to prevent bribery introduces strict liability for corporate organizations and is the most significant departure from current law, legal experts say. Ignoring the Act could cost companies dearly, with the maximum penalty for individuals being 10 years imprisonment and/or a fine, and for the new corporate offence an unlimited fine.

The only defence available to commercial organizations charged with strict liability corporate offences will be to show that the organization had "adequate procedures" in place to prevent bribery being committed.

"The breadth of the act is already prompting complaints from British business abroad, concerned that the strictures will give undue advantage to competitors with no links to the UK, who are not covered by the legislation," the Financial Times commented on 24 February 2011.

Concerns

Tobias Bock, a project officer at the anti-corruption watchdog Transparency International, estimates that the global cost of corruption in the defence sector is at least 12.5 billion pounds a year.

But facilitation payments by UK firms are already illegal and will continue to be banned when the Act comes into force, though the government’s earlier draft guidance failed to make this explicit.

Transparency International UK spokesman Robert Barrington says honest companies "have nothing to fear from the Act, and should welcome it as an opportunity to create a level playing field." But he warns: "Defence is a notably high-risk sector for bribery. The Act should remind every company in every industry that bribery is unacceptable and there is now a greater likelihood of being caught and punished."

Barrington told DMJ in an interview: "If I have a concern about the defence industry, it's that smaller and medium-sized companies that are exporting to difficult markets might be less aware of their obligations and the legal implications."

Derek Marshall, MD of Policy and Public Affairs at ADS, said many of the UK's bigger companies, especially multinationals, "have adjusted for quite a while now to the notion that they will have to comply with legislation like the Bribery Act and the US Foreign Corrupt Practices Act (FCPA), so the impact on them will be very limited."

"The real issue for us is having proper guidance soon (from the Ministry of Justice) on how the Act will be interpreted… For the time being, we seem to be in uncharted waters," he told DMJ.

Further delay in publishing the guidance will not only prolong uncertainty for companies, but could also undermine how the government’s commitment to the Act is perceived.