Weathering the Storm: Sustaining Africa’s Economy in a Global Financial Crisis
Tunis, 13 November 2008 – The African Economic Conference (AEC) went into the second day on Thursday, November 13, 2008, in Tunis, where the prevailing global economic crisis continued to dominate discussions after African finance ministers and central Bank governors adopted a wide-ranging resolution on how to tackle the crisis.
In a paper presented at the conference, Benno Ndulu of the Bank of Tanzania cited among issues of concern, the fact that African countries were still not in a position to determine the extent to which their economies were vulnerable to the crisis which began early in the year with the collapse of the mortgage industry in the Unites States, followed by a global financial meltdown which has affected the brand names of global capitalism.
"Would it lead to a paradigm shift – inward-looking and state intervention? How should African countries respond to the crisis? How would African countries finance reversible shock and adjust to its permanent futures? Should we revisit globalization…"?
These are some of the key issues Mr. Ndulu put on the table, arousing divergent views among hundreds of government ministers, academics, top officials of multilateral finance institutions and experts attending the annual event organized by the African Development Bank Group and the UN Economic Commission for Africa.
Whatever the case, African countries face immense challenges navigating through the shock that would manifest itself through the inescapable decline of commodity-driven demand, slow-down in Foreign Direct Investment (FDI) and Official Development Assistance (ODA), reduced access to credit, inflation, high cost of finance and foreign reserves outflow from Least Developed countries (LICs).
This dismal scenario is further worsened by the fact that Africa’s business portfolio is heavily skewed toward natural resources that have been key players in the continent’s recent growth.
For sure this situation would require appropriate strategization on how to pursue and reap the dividends of globalization, given the fact that the continent cannot escape the turbulence of international trade since its natural resource base makes it market-dependent and the eternal victim of the vagaries of the terms of international trade.
The conferees agreed that the phenomenon would impact African oil as well as base and glitter metal exporters, resource-poor coastal importers and landlocked resource-poor countries, in various ways and magnitude.
Unfortunately, the solutions are few and far between. According to the Tanzanian central banker, these would include judicious opening of national capital accounts, fighting against regional fortresses and the redefinition of the role of the state.
Individually, the countries will have to engage in indigenous resource mobilization through raising revenue collection, domestic savings, local loan syndication and issuance of local currency sovereign bonds as well as the inevitable draw-downs on accumulated reserves.
African ministers who discussed the crisis during a day-long session arrived at similar conclusions. They noted that the crisis would imperil the continent’s considerable achievements of the last decade.
They issued a communiqué indicating individual and collective action and they type of support they expect from the international community to mitigate the crisis.
Hence, the conference demanded that the issues be brought to the attention of the forth-coming G20 meeting and called for the resumption of the Doha Round of trade negotiations suspended over disagreements on agricultural subsidies and trade preferences among the major economic actors.
"…this crisis could not have come at a worse time for the African continent; it constitutes a major setback at a time when African economies were turning the corner," the conference noted in the communiqué.