Has Africa Escaped the Economic Storm? Opinion Is Divided across the Business and Economics Spectrum over Whether Africa Escaped the Global Economic Storm or Is Yet to Feel the Worst Effects of It. Tom Nevin Discusses

Article excerpt

A reader of Africa's business and financial press would be forgiven for wondering if Africa has been significantly hit by the global economic crunch or not.

Most Africans are measuring the effects of the developed world's financial tempest on their home economies by whether or not they still have a job, the strength or otherwise of their currencies, the frequency with which they are being hassled by their banks and the dwindling number of foreign-owned shops and businesses on their city streets.

Some influential newspapers make no bones of the fact that African countries are bleeding as profusely as their Western counterparts; others are convinced that local economies have escaped the worst of it.

Who's right?

Business writer Sifelani Tike says Africa is hard-hit as the turmoil engulfing Western financial markets forces many companies on the continent to shut down mines and factories while governments have resorted to devaluing currencies. 'The financial sector is seriously affected and is reeling from massive capital flight," he writes in the Zimbabwe Herald, "Africa--battling a multitude of problems--has become a victim of the global financial crisis created by rich countries in the North. The raging global financial crisis has forced commodity prices to nose-dive, dealing a major blow to mining-based African economies which had registered some positive growth in the last few years. The gains made are now being eroded, worsening poverty across the continent," Tike maintains that mining companies in mineral-dependent economies in Africa are scaling down operations, resulting in massive retrenchments and lay-offs.

"Botswana, South Africa, Zambia, the DR Congo and Zimbabwe are some of the hardest hit countries in southern Africa. These countries have registered significant cuts in their export receipts, severely affecting revenue flows for the governments," says Sifelani.

"Mineral revenue forms the bulk of governments' total revenues and, in Botswana, mineral revenue accounted for about 35%-50% of the total government revenues over the past five years."

A sharp decline in commodity prices in the past three months for minerals such as platinum, copper, nickel and gold has slowed down economic growth and led to a significant fall in government revenues.


Hold on a second, says Graham Mackay, chief executive of SABMiller, the world's second biggest brewer.

"In spite of the World Bank's most recent economic forecasts for Africa which downgrade growth expectations for this year from 6% to 4.6%, I believe there are three substantial reasons for continued optimism about Africa."

First, he says, Africa is still experiencing a period of heartening growth, above the world average since 2000 and comparable to trends in other emerging markets.

Second, positive development momentum is to be found throughout the continent. "There is political stability, better governance and increased investment in infrastructure, Solid improvements are to be found across all the economic, political and social indicators."

Third, many African markets are being stimulated by increasing consumer demand, driven by income growth and urbanisation.

"We are undoubtedly in difficult and uncertain times for business. This will present significant challenges but will also create opportunities for strong players. Business will need to be responsive, agile and bold in the way it responds to the effects of the economic downturn."

Worries in high office

A negative view from the top comes from UN executive secretary of the Economic Commission for Africa, Abdoulie Janneh. He maintains that the global financial crisis will have a serious impact on African economies. "While Africa's banking systems have not been affected by the crisis because of prior reforms and limited integration into the global economy, the threat to its real economy is indisputable," he said. …