Ethiopia: Africa’s consumer-driven economic growth fragile, warns UNCTAD

posted in: Africa

Addis Ababa, Ethiopia (PANA) – The UN Conference on Trade and Development (UNCTAD) has warned that African economies will not sustain the current high economic growth rates driven by consumption of goods and services, which has partly lowered the manufacturing capacity.

Speaking at the launch of UNCTAD’s latest report, the Economic Development in Africa Report, 2014 last week, UNCTAD Director for Africa Taffere Tesfachew said the high economic growth rates recorded in Africa in the past few years have not had a positive effect, because it had been driven by consumption.

“We are not saying consumption-driven growth is bad but the widely spread income distribution should encourage local production. The manufacturing sector is declining and the consumption is accounting for 60% of the Gross Domestic Product (GDP),” he said.

The report, which focused on “Catalysing Investment for Africa’s Transformative Growth,” calls on governments to invest in improving human skills and invest in private firms to get links with foreign firms.

While experts point out Africa’s high population as a source of economic growth and a driver for future investments, UNCTAD warns that relying on consumers to drive growth might lead to more disastrous consequences should commodity prices fall.

“We need to broaden the source of growth from consumption to investment driven growth and encourage the private sector to invest more by giving them incentives,” Taffere said.

For African countries to promote economic growth that would last and help create more jobs, the report calls for the lifting of major barriers to trade.

These include improving public infrastructure, roads, rail and ports and improving access to financing for private businesses, which mostly lack private capital.

“This report provides useful insight which countries like Ethiopia can use,” said Ethiopian Minister Mekonnen Manyazewal. “This report has given us the intellectual knowledge to address our current challenges.”

The report says public investments in infrastructure and other fields is necessary to create adequate room for private sector driven enterprise to invest.

UNCTAD recommends that countries balance the contributions of consumption and investment to the growth sectors because consumption driven growth would not last.

Photo: UNCTAD

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