Production recovery in crude oil underpinned higher growth in Angola. Lesotho experienced positive growth driven by the industrial sector, particularly the textile and clothing sub-sectors. In Mauritius, growth was resilient in spite of the continued recession in the Eurozone, which had weakened the external sector of the country. Driven by rising domestic demand, economic activity picked up significantly in Mozambique.

Growth was moderate in Namibia, with the primary industries performing well. Similarly, Zambia showed resilience in its growth performance despite lower than expected output from the mining sector. On the other hand, growth remained sluggish in Botswana as the global economic downturn kept output from the mining sector subdued. Output growth in South Africa remained negatively affected by contraction in the primary sector, particularly mining and quarrying. In Swaziland, depression in the small and medium enterprise (SME) sector and an underperforming export sector, following investor pessimism, continued to adversely affect real output growth. Similarly, the adverse impact of continuing drought in Zimbabwe played havoc with agricultural production to negatively affect overall growth.

Across the region, Governments remained steadfast in their implementation of economic policies.

Prudence in macroeconomic management contributed to improvement in the overall macroeconomic environment. Inflation eased in Angola, Botswana, Lesotho, Mozambique, Namibia and Zimbabwe to underpin the continuing policy of monetary easing. However, in Malawi, South Africa, Swaziland and Zambia, inflationary pressures remained high.

Structural reforms continued apace in most countries. In Angola, the new foreign exchange legislation, which requires oil companies to shift a large share of their financial transactions from offshore to domestic banks, is expected to boost private participation in the economy. The structural transformation of Botswana was given an added impetus following the trial run through Zimbabwe of a train carrying coal. This strengthened the case for Botswana to exploit its estimated 212 billion tonnes of coal resources.

In Lesotho, the private sector continued to benefit from ease of doing business following successful measures put in place by the Government. The Government of Malawi launched the National Export Strategy to enhance the diversification of the economy. In South Africa, the Incubation Support Programme – aimed at nurturing small, micro and medium enterprises (SMMEs) into sustainability – will enhance the partnership between Government and the private sector in job creation. Zimbabwe made significant progress in its efforts to improve relations with development partners. The International Monetary Fund (IMF) relaxed most of its restrictions on technical assistance to the country, paving the way for the implementation of IMF-monitored economic programs.

Going forward, strong adherence to economic reforms and more determined efforts at economic diversification is crucial for accelerated, strong, sustained and shared growth in Southern Africa. In Angola, the strategic objective of economic diversification needs to be given greater impetus with measures aimed at closing the infrastructure gap, developing human capital and attracting more foreign financing.

In Lesotho, the poor absorption capacity of donor resources, which often leads to slow implementation of development programs, has emerged as a key challenge. Malawi needs to maintain the support of development partners by sustaining policy reforms and, in particular, avoiding policy reversals. In Mauritius, a more determined effort at economic diversification has become imperative in the wake of the continuing Eurozone crisis. Also, the country’s negative real rate of interest on savings deposits and rising unemployment need attention. Further, Mauritius’ ranking on Transparency International’s Corruption Perception Index, which declined in 2012, suggests that the public’s confidence in the authorities’ fight against corruption has been eroded.

The authorities in Mozambique need to deepen reforms, especially in the financial and banking sector, to enhance competition and, in particular, to foster growth in the agriculture sector – the main driver of poverty for private participation in the economy. Namibia needs stronger policies and strategies to manage its mineral wealth and promote value addition of mining products. In South Africa, the continued violent strikes in the mining sector draw attention to some of the deep-seated structural problems in the economy. Swaziland must strengthen the management of public resources for a more resilient economy. Zimbabwe’s progress in its relations with the IMF is pushing forward the country’s re-engagement with the international community. However, progress still hinges on strong adherence to prudent macroeconomic management.