Question

What is Sub-Saharan Africa's political economy, culture, investment and finance market.

Answer 1

In the world the poorest continent is Africa. But one can see the first time in a generation amid all the bad news and there is a new hope for change. As an increasing the numbers of the countries in Sub-Saharan Africa there is a growing sign shown of economic progress and reflection of the implementation of better economic policies and structural reforms. These countries have successfully cut domestic and external financial imbalances, enhancing economic efficiency. They have given greater priority to public spending on health care, education, and other basic social services. In addition, there has been a growing movement toward more open and participatory forms of government that encourage cooperation between the state and civil society.

Nonetheless, the economic and social situation in sub-Saharan Africa remains fragile and vulnerable to domestic and external shocks, and the region has a long way to go to make up for the ground lost over the past two decades. Despite some upturn in economic growth rates, poverty is still widespread and in many parts of the continent extremely acute. Investment remains subdued, limiting efforts to diversify economic structures and boost growth. Furthermore, a number of countries have only recently emerged from civil wars that have severely set back their development efforts while, sadly, new armed conflicts have erupted in other parts of the continent. These conflicts and other adverse factors, notably poor weather conditions and a deterioration in the terms of trade, have led to some loss in economic momentum in the region over the past two years.

Sub-Saharan African countries therefore face major challenges: to raise growth and reduce poverty, and to integrate themselves into the world economy. Economic growth rates are still not high enough to make a real dent in the pervasive poverty and enable these countries to catch up with other developing nations. What is needed is a sustained and substantial increase in real per capita GDP growth rates in these countries, coupled with significant improvements in social conditions.

In many sub-Saharan African countries, central banks still lack the necessary autonomy; financial sectors are thin and have difficulty in mobilizing domestic savings and attracting foreign private capital; banking institutions are fragile; and intermediation is inadequate. Therefore, few measures to be taken in to accounts are

1. ensure that central banks are independent and fully accountable
2. deepen and broaden financial markets
3. establish or strengthen the institutions responsible for the prudential regulation and supervision of banks
4. complete the rehabilitation of weak commercial banks and improve loan recovery
5. open the banking sectors to healthy competition and international best practices in bank management, particularly through privatization and
6. Strengthen the legal framework for banking activities.

Although the process of trade liberalization has advanced throughout the region, trade regimes are still significantly more complex and restrictive than elsewhere. Import tariff rates remain too high and too dispersed, in part because governments are very dependent on this source of budgetary revenue but also because of the prevalence of statutory and piecemeal exemptions. Eliminating these exemptions, preferably in the context of medium-term tax reform programs, would allow tariffs to be reduced more rapidly. At the same time, export taxes could be substantially reduced, if not eliminated.

Efficient regional integration would allow many countries to surmount the obstacles posed by their relatively small sizes, permit them to realize greater economies of scale, and increase their ability to trade on a global basis, thus further enhancing growth. In addition, trade liberalization would also help improve the quality of governance because complex and discretionary tax regimes are prone to abuse and create opportunities for corruption.

Governments should explain to the public the trade-offs between the short-term costs and the long-term gains of structural adjustment programs, in order to build national consensus behind the reform process and benefit from a greater participation of civil society in the formulation and implementation of policies. In addition, governments will need to sustain their efforts, adapting them as necessary to changes in the domestic and external environment. Most important, efforts to sustain sound macroeconomic and structural policies will be more fruitful and the gains more widely shared across Africa if regional—as well as international—initiatives are taken to prevent and resolve the conflicts that continue to afflict the continent.