Monday, March 30, 2009

Africa’s Economic Slowdown Linked To Global Recession, Fiscal Crisis

Africa’s dependency on foreign powers has now made the continent the most vulnerable victim of the global recession. For decades, foreign investment from Europe, America and

China flooded into African countries, in exchange for cheap mineral resources and cash crops. But now, economists are predicting the global linkages, which once contributed to the creation of enormous amounts of wealth, will further drive peripheral African nations deeper into poverty.

Senegalese economics student and blogger Masake Kane said African countries are finally showing signs of the global recession facing more advanced economies.

“African economies are expected to suffer a $578 billion loss in export earning over the next two years,” said Kane. “While the initial effects of the financial crisis were slow to materialize, the impact is now clear.”

Kane said jobs, firms, mines and livelihoods are being swept away each day. Beyond the numbers, she believed African families are going to bare the brunt of the downturn.

“On a micro-economic level the purchasing power of many households is going to decline, and because the stocks of foreign reserves are running low, many countries will not be able to import food, medical supplies and other basic needs,” Kane said.

In most African countries, production in key sectors is oriented towards meeting Western demand. Diamonds are just one of many commodities facing price deflation as Europeans and Americans purchase less. British diamond company De Beers is halting production in much of Southern Africa, as demand for precious stones have collapsed in the wake of the recession.

The British government has pledged that African countries’ problems will be addressed at the G-20 London summit in April. The summit will gather 20 nations with the largest economies to redeem the struggling global economy. G-20 nations combined own 85 percent of the world’s GDP. The only African nation that will be in attendance is South Africa.

G-20 leaders are pledging to provide more financial resources to the International Monetary Fund (IMF) to assist African nations during the crisis. Lord Malloch-Brown, British Minister for Africa, has said that “without addressing issues facing Africa, and allowing African voices to be heard, the G20 will fail morally.”

Not everyone is convinced that coordinated action by the G-20 and the existing banking system will help Africa at all.

In the lead up to the G-20 summit, Brazil’s president, Luis da Silva, blasted “white blue-eyed bankers” who dragged the world’s non-Western countries into a mess he believes they created.

Ben Woods is the president of the Graduate Political Science Association (GPSA) at Howard University and agrees with President da Silva. Woods said Africa should remember the current cycle of debt and poverty was created by Anglo-inspired institutions like the IMF and the World Bank.

“The IMF was becoming irrelevant, but now with the G-20 trying to give them more money and influence, these global financial institutions could make a comeback. I don’t really expect to see much change under the status quo.” Woods said.

Thursday, Woods and the GPSA are hosting a forum at Howard with representatives of the Venezuelan Embassy and a Howard University professor to discuss alternatives to the existing global crisis. Woods said he worries today’s window of opportunity could close quickly as the global powers work to preserve the world-system.

Kane is hopeful, however, that such an alternative may be on the horizon. She said Africa is already taking some steps to minimize the impact of the current crisis. “I think there may be a general move away from export-oriented economies toward stimulating domestic and regional demand within the continent. This would represent a huge change in Africa,” she said. “Whether or not it translates into a sustained shift or not, we will have to wait and see.”

No comments:

Post a Comment