What the economic crisis means for Africa

Like any other concerned citizen, I have, to the extent possible, tried to follow, closely, the voluminous information being generated by the on-going global economic crisis. Forget the sometimes contradictory facts, the reality is that although the severity of the impacts varies at global, regional and various national levels, the crisis is here and alive.

Some have tried to downplay the impacts initially, claiming that because Africa is not in the mainstream global economy there would therefore be minimal impact. Classical is the case of the South African government, which only publicly admitted the crisis after the national elections, then acknowledged that some of the promises made during the campaign may not be fulfilled because of the ‘recently discovered’ crunch.

Yet by the third quarter of 2008, the vehicle manufacturing industry was already showing heavy signs of the toll, with thousands of employees either being laid off or working less time and taking pay cuts. Other industries like textiles were not spared either. In Zambia, the fall in international demand for copper has led to a severe fall in the product’s price, in one year alone falling from US$8,000 to US$3,900 leaving more than ten thousand mine workers in the cold.

In a number of countries in the region, major development projects have either delayed or stalled due to cuts in resources. For example in Mozambique mega economic development programmes running into tens of billions of dollars have been affected, like the Nacala-Velha oil refinery, Chibuto Sands and the Nkanda Nkua dam (electricity generation).

The International Financial institutions (IFIs) estimate that the African economy will shrink significantly and have revised the economic growth projections from 6 per cent to 3.25 per cent for 2009.The International Labor Organization (ILO) has also revised – downwards – its unemployment figures to estimates between 210 to 239 million (globally) in the current year. In a recent press release, the organisation also highlighted that at least 73 per cent of the workforce in Sub-Saharan Africa is in ‘vulnerable employment’.

This leaves nearly all of us Africans vulnerable, bearing in mind that an employed African can have an average of 5 to 10 dependents. Socio-economic impacts are heaviest on the African citizens because of either weak or non-existent social security welfare systems in place to cushion them against the harsh impacts.

Clearly the impact has direct and severe impacts to whatever efforts have so far been made to reduce poverty and bring about sustainable development, thus we will witness ever growing poverty, hunger, disease, illiteracy and vulnerability in the coming years as a direct impact of the current crisis. The Millennium Development Goals (MDGs) although minimal in their nature face fresh and more serious challenges, derailing hopes of achieving them.

African leadership responses to the global economic crisis have been inconsistent, ranging from denial, ignoring the debate, opportunity and threat. African citizenry, although most affected by the crisis, have barely been involved in the economic crunch discourse which remains topical mostly at international level. A few civil society meetings have been held, international media has been way ahead of the African media in churning out information and updates. The African Development Bank earlier in the year convened a meeting and in early June, African Finance Ministers met in Egypt to discuss particularly the issue of resource pressure and domestic resource mobilisation. Beyond this, the discourse has not been taken down to the man in the street, and the solutions, other than begging and pleading for more aid, are not clear.

Africa’s income earning capacity through trade, remittances and development aid (major income sources for the continent) will continue to decrease as the economic crisis impacts escalate. So to will demand for the continent’s mineral resources, including gold, copper, platinum, uranium and diamonds, leading to mine shut downs and job losses. Due to high unemployment overseas, the bulk of African labour, most of which is unskilled and illegally living overseas suffers heavy layoffs as employers cushion their own citizens, resulting in significant reduction in remittances which have previously brought billions annually to the continent. In 2007 alone, sub-Saharan Africa received about $US12 billion dollars through official remittance channels. In the same year, globally more than US$300 billion was remitted while a net total ODA of $US103 billion was received in the continent. Remittances, a huge source of income for the poor globally, are expected to fall by between 5-8 per cent as migrant workers experience layoffs and some return to their original countries, as has already been witnessed in places like Dubai, US, Australia and Spain amongst others.

Most sub-Saharan African countries depend on development aid for, on average, up to 40-50 per cent of their annual budgets. The traditional donors have mainly been the OECD member countries, who give aid in form of humanitarian/emergency grants and loans. Despite increasing concerns that aid has not delivered as expected, it continues to form a significant part of African economies and solutions, and a key criticism has been the recipient dependency it creates on the donor. In the North, aid is generated from taxpayers and the Gross National Product (GNP) resources. It also comes from individual or organisational donations from well-wishers.

Criticism for the motivations for aid as mainly for buying strategic favor from the developing countries has become crystal clear especially in the advent of the financial crisis. Despite multiple pledges and so-called commitments from the developed world over the years, Africa has consistently operated with an aid deficit with its annual requirements of a minimal US$50 billion hardly being met. Both aid quality and quantity have remained far below expectation. Political will by donors to see Africa progress to an independent and sustainable level has remained low, thus the little aid that has filtered into the continent can be viewed as a public relations exercise to buy strategic favour, while the real poverty needs of the continent have been sidelined.

The double standards of the rich to the poor have been exposed as evidenced by how quickly the massive stimulus packages to rescue western corporate were put in place. It has become clearer that the issue of aid is not about the availability of resources but about sheer lack of political will by western leaders to see Africa out of its quagmire. According to the United Nations Millennium Campaign, 50 years of development aid brought in only US$2 trillion while overnight US$18 trillion has been mobilised for bailouts. And now with the pressure to resuscitate their own economies, it will be a miracle if the third world agenda and development aid remained a genuine priority for the rich.

Thus clearly the situation is gloomy for our dear continent – which currently is not doing much on its own to address the crisis, largely hoping that the western solutions will trickle down for Africa to benefit from. Gloomy as the picture maybe, African citizenry is thus challenged to start taking an aggressive stance in finding its own solutions. Civil society organisations have long called on African governments to adopt development frameworks that will depend less on aid in the long run, they have also long called for domestic resource mobilisation and prudent use of these – an issue the international community has recently highlighted, a subtle message to lower the expectations of aid and also a survival strategy as each man fights for themselves to fight the economic crunch. In his first official visit to Africa, United States president Barack Obama emphasised in a speech to the Ghanaian parliament that Africa needs to forge its own future and solve its own problems, and most importantly that Africa’s future is up to the Africans. The western message to the continent has been clear – if this time around Africa does not heed and learn and take care of its destiny, it may never learn and thus remain poor and dependent.

This article intends to challenge the African leadership and citizenry to extract and learn positive lessons from the crisis and shine the light in this gloom. I for one am optimistic and would like, despite the current challenges, to see the continent re-emerging stronger, less dependent and better off after the crisis. This however is largely dependent upon the lessons that the continent chooses to learn from the crisis. Unfortunately, so far the continent seems to take a victim stance and wait for others to come up with a solution for us.

Possible solutions have revolved around more begging and urging major donors not to cut their allocations. But under the circumstances, the question is whether that is a practical and a worthy option to pursue. Instead of going round with the begging bowl, it is time Africans came up with internal solutions to Africa’s problems. And yet the leadership needs to be reminded that a sustainable solution cannot be achieved without the involvement of the citizenry who are the worst affected.

Some possible solutions to cope under the crisis include:
- Using aid resources better: Ensuring that the little aid coming in is reaching the poor for whom it is intended
- Investing in basic services and socio-economic infrastructure to ensure safety nets for its citizens especially during crunch times
- Domestic resource mobilisation and prudent use of the resources
- Promote sub-regional, regional and continental integration
- Living within our means and minimising borrowing
- Have more confidence in its citizenry as an uncompromised resource that will develop its continent.

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* Moreblessings Chidaushe is the programme advisor, Accountable Governance & Economic Justice, Norwegian Church Aid. He writes here in a personal capacity.
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