Francophone west Africa to grow at slower rate than rest of continent

Bloomberg recently reported that growth in the west African countries using the CFA franc as a currency will be slower than the average for Sub-Saharan Africa next year, damped by poor policies and inadequate infrastructure, quoting the IMF.

The West African Economic and Monetary Union, or WAEMU, which includes Ivory Coast, Senegal and Niger, is projected to expand 4.4%, said Mark Plant, deputy director of the Washington-based fund. That compares with a growth forecast of 5.5% for all of Sub-Saharan Africa. “Clearly a lack of governance, a lack of transparency and a lack of infrastructure all cost,” Plant reportedly said. “They need to hammer away their reforms.”

The economies have the potential to expand 8% in three to five years, if governments spend on infrastructure and undertake political changes, Plant said.

Ivory Coast, the world’s top cocoa producer, held its first election in a decade this month, aiming to reunite a country divided between a rebel-held north and a government-controlled south for the past eight years.

“The region hasn’t grown as fast as it could have and it needs to, if it’s going to make serious strides to reduce poverty,” Plant said. The monetary union, created in 1994, also includes Benin, Togo, Mali, Burkina Faso and Guinea-Bissau. Growth in the region would be boosted if investment regulations were modernised, Plant said. Energy and telecommunications companies “can’t rely on the return of their investment,” he said. The IMF is also advising countries to widen their tax base to finance public work projects such as roads and power plants.

This follows a report earlier in the year by AfDB which suggested that the WAEMU region should consider decoupling its currency from the euro to boost exports, while being linked to what was expected to be one of the world’s slowest growing regions during the recovery would not prove favourable. It noted that the countries in the WAEMU have a significant linkage with European markets, which is a destination to over 36% of the Zone’s total exports.

The WAEMU countries are also countries that make up the regional BRVM stock exchange, which despite the concerns about the region’s growth rate, have had a solid year thus far, with the BRVM 10 and BRVM Composite indices up 24.46% and 18.45% y-t-d, respectively. The performance has been led by an agricultural sub-index that is up 74.49% y-t-d, courtesy of rubber producer SAPH (+220%) and palm oil producer Palm CI (+118.60%).

Article produced by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets.