THE World Bank last week released a report on the 2011 global economic outlook.
One of the issues that emerged from the report is that Africa had performed very well during the global economic downturn between 2008 and 2009.
This was in sharp contrast with what was expected by economic commentators.
According to the report the South African economy, the largest economy in sub-Saharan Africa, had been drawn back by the 30 percent appreciation of the rand against major currencies since January 2009.
Lesotho and other Sacu member states were surely adversely affected by this phenomenon.
Sub-Saharan Africa is expected to go to levels that had been expected before the global economic downturn.
However, there has been a decline from eight percent to three percent of capital flows as a percentage of GDP as a result of the economic downturn in developing countries.
This is attributed to the fact that the epicentre of the crisis was the EU and American economies that are the major sources of capital flows.
Food prices are said to be only 15 percent higher than the nominal values of 2005.
There is a huge threat to the current food prices as most commodities are likely to be affected by drought in most parts of Africa and floods in Asia and Australia.
Developing countries are expected to realise a GDP growth of seven percent in 2010, six percent in 2011 and 6.1 percent in 2012.
This is a very optimistic view projecting global economic growth.
The most striking threat to Africa is that the continent will hold at least 20 national elections during the next 12 months.
According to the bank this is a huge risk to economic growth as elections are normally associated with riots and stagnation of African economies.
The current political unrest in Ivory Coast is an indication of what is likely to happen elsewhere.
It is therefore very important that the African Union and other inter-governmental organisations address the issue of Ivory Coast before it spreads to other African states.
Unfortunately our economists and politicians believe so much in the national accounting concept that classifies economic activities in terms of the Gross Domestic Product (GDP).
The GDP is an aggregate demand or products of an economy which includes the economic activities financed by foreigners. Most of the economic activities within our economies are in the hands of owners of capital who happen to be foreigners in most cases.
These foreigners transfer most of the wealth generated from the economic activity in the form of dividends and very little is left for locals.
The trickledown effect that has been advocated for by many economic analysts who have mobilised for foreign direct investments is virtually absent.
At the end of the day we have to realise that whether GDP grows by six percent or 10 percent if there are no proper systems in place to channel wealth generated within the economy to most citizens we will be left as losers.
The people’s uprising in Tunisia last week should serve as a warning to ruling parties that this will be the order of the day unless the ordinary people are involved in the “eating”.
Natives should not be treated as second class citizens at the expense of foreign investors.
I fully acknowledge the importance of foreign-owned capital in developing our economy.
However these investments should be guided in order to create wealth for our people.
The emphasis on making our economies export processing zones where our labour will be exploited in order to provide consumers in the West with cheap supplies while our lives are being destroyed is totally unacceptable.
The other factor which should be treated with caution is the use of mineral resources of our countries to generate wealth.
Most of the African countries that are said to be performing well in terms of GDP growth are those that use their mineral resources almost to full potential.
This is a very unsustainable way of generating wealth as in the long run the minerals will have been depleted and our economies would not have developed.
Our countries are still struggling to recover from the structural adjustment programmes (SAPS) that were prescribed by the World Bank and the International Monetary Fund.
SAPs were prescribed to our countries as if they were the cure-all solution to our economic problems.
But the programmes resulted in massive deindustrialisation of our economies.
We saw governments embarking on privatisation of state-owned enterprises parcelling them out to the very same foreign investors instead of empowering the citizens through a well-managed transfer of ownership.
It is very challenging for countries like Lesotho to meet the seven percent annual GDP growth which is said to be the cut-off rate to generate enough wealth for the populace to benefit.
The question here is whether this rate is expected to result in the same benefits irrespective of who owns capital that has generated that growth.
This theory may be appropriate in the West or in Asia where citizens are owners of capital.
The only solution for Lesotho to graduate into the middle income category is through empowerment of its citizens.
