Pretoria - Issues of sustainability, stability as well as growth in the medium-term are key to sustaining the African continent's expansion, says Deputy Finance Minister Nhlanhla Nene.
"The key to sustaining Africa's expansion is to remain focused on medium-term issues of sustainability, stability and growth, rather than short-term gains," he said on Wednesday.
Speaking at the inaugural African Fiscal Forum, Nene said governments across the continent should manage their public finances with a focus on maintaining planned spending initiatives.
"The consideration that needs to be made is whether the increases in expenditure can be absorbed and spent efficiently. If the global slowdown persists and indicates a change in the structural level of growth, spending plans and tax policies should be adjusted in line with lower growth and financing forecasts," he explained.
The deputy minister said it is important to focus on medium to long-term considerations to sustain the continent's economic expansion and growth as uncertain economic conditions continue to prevail in developed markets, adding that in the next five years, seven of the 10 fastest growing countries are expected to be in sub-Saharan Africa.
Sub-Saharan Africa traditionally exports to the US and Europe which account for almost half of these exports. While there has been an increase in the volume of trade with emerging markets like China and India, trade with developed countries remains a crucial source of financing, remittance and investment flows. "Any further revisions to the growth outlook in these countries would therefore likely affect the performance of Africa over the next 2 years."
Fragilities in fiscal management needs to be addressed by African countries with governments needing to shift public finances from the expansionary stance that was taken at the time of the economic downturn, to a more neutral stance consistent with debt sustainability.
"Should the downside risks in the global economy emerge, the space for additional discretionary fiscal stimulus is limited," he said.
Nene noted that the continent continues to find itself in the fortunate position of still being able to access debt and grant funding.
He however added that failure to manage dependence on aid financing and growing debt stock will lower the growth potential of countries while also reducing countries' ability to respond to future fiscal challenges and economic crises.
The Forum is hosted by National Treasury and the International Monetary Fund (IMF), with the support of the Collaborative African Budget Reform Initiative. It brings together representatives from Ministries of Finance from 14 African countries, the IMF, World Bank, OECD and African Development Bank to discuss fiscal policy challenges facing the economies and governments on the continent.