The governors of the central banks of three countries that have faced some of the toughest economic challenges in eastern and southern Africa have set out their plans to restart growth and return inflation to low single digits. In interviews with GlobalMarkets the monetary policy chiefs for Zimbabwe, Zambia and Rwanda said they believed they had the tools to deal with increasing fiscal and current account deficits as commodity price remain weak, and with rising levels of inflation.
Investors and analyst say the efforts point in the right direction, but they also say these and other countries also need to deal with systemic issues that hamper investment.
Zimbabwe central bank governor John Mangudya said his country faced increasing fiscal and current account deficits that were feeding off each other.
He is, nevertheless, upbeat, saying the answer is straightforward. “In Africa we need to change the narrative from politics to production. We need to stop talking and focus, because increasing production lets you increase employment and exports, and reduce dependency and, in the end, poverty,” he said.
In Rwanda, National Bank governor John Rwangombwa said the challenges from commodity prices were complicating policy choices, even though the economy was still on track to expand by 6% this year.
He said low prices for the country’s exports, as well as drought, were having a negative impact on inflation, which had jumped from 2.5% last year to 6.9% for the past two months. “It is worrisome, but we believe that we will be able to get inflation down around 5%,” he said.
SEDITION CHARGES
Zambia is in a similar situation, but it has the added negative of political uncertainty caused by recent elections. Opposition leader Hakainde Hichilema, who lost the August general election to President Edgar Lungu, was arrested on Thursday on sedition charges, his party reported.
Central bank governor Denny Kalyalya said turbulence created by low commodity prices, particularly copper, had been complicated by the political process. “This has made it harder to make decisions and this has led to a wait-and-see attitude on the part of investors,” he said.
He said high interest rates, around 20%, and inflation, just shy of 19% in September, were creating risks that are keeping capital away. “We know this will pass, but the effects right now have been far reaching on the ground,” he said.
While the steps listed are important, companies in the region and analysts also want to see actions to reduce red tape and corruption.
Reginald Max, who heads up GE’s development and investment unit in Sub-Saharan Africa, said these and other governments in the region need to simplify investment procedures. “Encouraging investment means eliminating red tape. Looking at a 1,000-page document with lots of caveats is really a disincentive for companies considering investments,” he said.