$55 bn of private capital flows to Africa in 2010

According to a top economist of the World Bank, a total of $55 billion of private capital is estimated to be flowing into Africa this year, reports newsagency Reuters. No figures are given for 2008 and 2009, but the flows in 2007 were $49 bn.
Shanta Devarajan, the World Bank’s chief economist for Africa, told Reuters in an interview: “We are seeing private capital flow back into Africa after the recession.. The fact that African policymakers responded with prudent policies during the crisis means that the policy environment in Africa has never been better, the productivity of external resources in Africa has never been higher.” There was praise for maintaining prudent macroeconomic principles and public investment.
“There are risks in Africa, nobody is denying those, but look at the rate of return to investment in Africa, it’s the highest in the world.” The World Bank estimates Africa needs $31 billion a year for the next 10 years, just to get its infrastructure up to the level of the island nation of Mauritius.
The World Bank projects growth of 4.5% for 2010 and 5.1% for 2011, fuelled by good agricultural performance and public investment. Devarajan said: “Agriculture has been good in several countries, but also some of the investments that countries made in the past are beginning to bear fruit. During the crisis, countries did not neglect investment.” He added that Africa was poised to embark on two decades of economic growth of the kind that India in the last 20 years.
Major development challenges include youth unemployment, a huge lack of infrastructure and bad leadership. There are 200 million young Africans and 7-10 million of them join the labour force annually, mainly in the informal sector, Devarajan told Reuters.
Inflows also come from remittances, debt relief and aid. The Bank says that remittances sent home by Africans living abroad are forecast to grow by almost 2% in 2010 from $21 billion previously. In some cases, local currencies will appreciate as a result of the inflows, but that could be managed so the real exchange rate does not strengthen too much, said Devarajan.
He added that inflation in the mid-2000s was half its previous level – in 1993, 23 countries had inflation over 20%, but by 2007 only 2 did.


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