Africa weathers record oil prices for now
KAMPALA (Reuters) - Record high global oil prices have so far had a muted effect on sub-Saharan Africa, with exporters reaping rewards and importers less badly hit than many had feared.
A combination of demand, refinery bottlenecks and political fears drove crude oil to a record high of more than $78.50 last week. While the poorest on the world's most impoverished continent are paying the price, the impact has not been the disaster some forecast.
In Kenya, robust economic growth of 6.3 percent in the first quarter of 2007, compared with 4.1 percent in the same period last year, has cushioned the blow on a country that spends around 23 percent of its import bill on oil.
"Pump prices are still rising, but that didn't stop Kenyans buying some 50,000 cars last year," said Mwendia Nyaga, head of the National Oil Corporation of Kenya.
Oil prices that have nearly doubled from $40 a barrel in 2004 brought dire warnings of inflation overtaking African economies. But Nyaga said Kenya could handle it.
"The economic outlook is quite positive and ready to support single-digit inflation," he told Reuters. "I don't think it's crippling."
Across the continent, rises in commodity prices like copper and gold have helped other nations that export minerals, while higher foreign currency reserves and a lower debt burden have all helped absorb the burden of months of high oil prices.
"BIGGEST THREAT"
But no one is complacent about the risk.
"Every time international oil prices go up, that impacts negatively on the fight against poverty," said Zambia's Finance Minister Goodall Gondwe.
"Wrestling with volatile international oil prices is one of the biggest challenges for the developing world."
The largest threat is to infrastructure projects, many funded by donors like the African Development Bank (AfDB), which were planned when oil prices were much lower.
In a report last year, the Tunis-based AfDB said many ongoing thermal power production projects were in danger because they were set up on the assumption that oil prices would remain at around $25 a barrel.
It said it hoped African governments would use higher prices to spur investment in cleaner, alternative energies like solar and wind power.
In Uganda, where banks of costly diesel generators struggle to make up a shortfall left by reduced hydroelectric generation on the Nile, such cost increases are a big risk. Continued...
