The New York Times

July 30, 2003

Rich world's subsidies hitting African growth

By MARK TURNER at the United Nations

Uncertainty over Iraq, bad weather, declining world trade and unhelpful agriculture subsidies in the developed world all conspired to weaken African growth last year, a UN report on the continent's economy has warned.

Average GDP growth fell from 4.3 per cent in 2001 to 3.2 per cent in 2002, despite "relatively sound" monetary policy, falling inflation and improvements in governance across the continent, according to the UN's Economic Report on Africa 2003. The findings highlighted Africa's continuing vulnerability to factors outside its governments' control.

In particular, the UN said, the US decision last year to introduce a six-year $52bn farm bill, boosting crop and dairy subsidies by 67 per cent, did not help Africa's prospects. The subsidy would reduce agricultural prices, making it difficult for small countries to compete.

Its analysis will add to pressure on industrial countries to eliminate trade- distorting subsidies, amid growing concern that a hard core of poor countries, many in Africa, are falling dangerously short of their goals to halve poverty by 2015.

The UN Economic Commission for Africa warned: "Failure to achieve significant progress at the World Trade Organisation negotiations on farm trade - by far the most important issue for developing countries - further weakens Africa's prospects."

In 2002, only five of Africa's 53 countries achieved the 7 per cent growth rate estimated necessary to meet the millennium development goals. Forty-three registered positive growth but below 7 per cent, and five saw a decline in GDP. Growth in four of the five largest economies, Algeria, Egypt, Morocco and Nigeria, slowed.

Even in South Africa, which saw an increase from 2.5 to 3 per cent in 2002, growth was hampered by sluggish performance in the eurozone area, and the appreciation in the value of the rand against the dollar.

African growth was expected to rebound to 4.2 per cent in 2003, but the deteriorating political and economic situation in Zimbabwe and Liberia had possible contagious effects in western and southern Africa.

Renewed flooding and drought also threatened agricultural production for 2003 in the Horn of Africa, and in the south. In 2002, sub-Saharan farm output grew by only 0.8 per cent.

The UN said the findings underlined the importance of developed countries fulfilling recent commitments to increase aid flows, which still fell well short of the extra $50bn a year required globally to reach the millennium development goals.