Bank of France reports industrial activity increased in all sectors in December 1996 BANK OF FRANCE, MONTHLY BUSINESS SURVEY, December 1996. In December, according to the business leaders surveyed by the Banque de France, industrial activity increased in all sectors, except in the intermediate goods sector, where it remained stable. The food processing and consumer goods sectors were the most buoyant. The capacity utilization rate remained virtually unchanged. Overall demand firmed on both the domestic market and the export market, where the strongest flow of orders continued to come from the United States and Asia. The competitiveness of French products was bolstered by the recovery of currencies that had weakened earlier, including the United States dollar, sterling and the Italian lira. Order books approached normal levels in all sectors, except in the intermediate goods sector, where they remained too low. Inventories decreased with the end of the lorry drivers’ strike, and now appear to be normal in the capital goods and automobile sectors. In the coming months, most sectors are expected to continue to show moderate growth. Commodity prices as a whole showed practically no change. Finished product prices held up overall, despite the continuing high level of competition. Investment programmes were limited to renewing obsolete equipment or to meeting the desire to increase firms’ productivity in an intensely competitive international environment. There were few plans for output capacity increases and in all cases were dependent on stronger growth in demand.

However, African countries must learn from the past on how well to manage commodity booms and ensure the productive use of financial resources generated from natural resources. African countries need to invest the resources arising from the exploitation of natural resources in domestic capital formation in order to generate a higher sustainable income that compensates for the depletion of a wasting asset. In this regard, it is important that commodity booms are managed in a manner that benefits African economies through careful planning and the deployment of appropriate strategies. Commodity swaps or barter system have been suggested in some quarters as an innovative way for Africa to get development finance taking into account the fact that most African countries are not able to borrow from the international financial institutions and are just coming out of heavy indebtedness. For this option of financing to be viable and profitable, there is need for commodity swaps to have a long-term positive impact of export diversification and economic growth for Africa. In this regard, commodities could be swapped for infrastructure development to address the large infrastructure gap that is inhibiting further growth and diversification, technology transfer and market access for manufactured goods. These commodity swaps would have to be carefully crafted so that future generations are not disadvantaged from the resources. Currently, China has entered into such deals with countries like the Democratic Republic of Congo, Sudan and Angola and it would be interesting to see how these work and then other countries can learn from these countries experiences.