The Common Market for Eastern and Southern Africa (COMESA) bloc, which is a free trade area with twenty member states, remains the fastest growing economy in the world despite a drop in overall growth, according to a recent newsletter published by the organization. The newsletter states that five of its member states recorded the highest levels of growth between 2014 and 2015, including the Democratic Republic of Congo, Ethiopia, Kenya, Rwanda, and Uganda, which all recorded 5-10 percent growth.
The growth was due to increased private consumption and investment, and the average overall investment as a percentage of gross domestic product (GDP) in COMESA increased from 24.6 percent in 2014 to 26.3 percent in 2015.
However, investments in COMESA-member countries remained below 20 percent of the GDP because most people in the region are not part of a formal financial system that encourages investment.
“It is necessary to generate an adequate level of domestic savings in order to ensure higher level of sustained investment,” notes the newsletter.
Out of the 51 countries that were evaluated on their economic conditions for doing business, Kenya, Rwanda, Uganda, Mauritius, and Seychelles emerged as the leading member states.
This is positive a sign, considering that last year the overall growth of the region was 6 percent, down from 6.5 percent in 2014 due to less demand and lower prices for international commodities, such as oil.
In particular, the falling demand by the Chinese for African commodities helps explain why the continent had the largest trade deficit in the period under review.
The newsletter notes that, “Trade with China registered the largest deficit with a value of $24 billion, followed by the European Union with $21 billion, India with $9 billion and South Africa with $5 billion.”
During this period, total exports from countries within COMESA declined by 8 percent, from $9.2 billion in 2014 to $7.6 billion in 2015.
However, inflation increased in the COMESA region during the period under review. From 2014 to 2015, inflation fose from 6 to 6.8 percent due to a fall in food and oil prices, as well as tighter monetary policies in countries.
The currencies of COMESA member states also decreased due to trade imbalances, delayed disbursement of aid, the high cost of financing infrastructural projects, and a strong American dollar.
To improve such scenarios, the newsletter suggests the need for economic and political governance and management of productivity in individual member states seeking to have comparative advantage.
It further recommends that COMESA member countries should focus on regional integration through implementation of the Tripartite Free Trade Area Arrangement, which will help boost intra-regional trade in manufactured goods.
The renewed focus on Africa’s manufacturing industry is consistent with another report released by the Institute of Chartered Accountants in England and Wales earlier this year.
Titled “Economic Insight: Africa Quarterly Briefing Quarter 1 2016,” the report argues that African economies are relying more on the manufacturing and service sectors, making the continent most vulnerable to swings in global commodity prices.