In its latest update, the International Monetary Fund predicts that, as a direct consequence of the global economic crisis, Africa’s growth will drop to a low of 3.4 per cent, or less, in 2009. This is contrasted with 6.2 per cent economic growth in 2007, followed by 5.2 per cent in 2008.
Because of Africa’s integration into the global economy, the financial and economic crisis spread to the continent due to lower levels of trade, foreign direct investment, migrant remittances, and official development assistance. Moreover, with worsening growth projections for Africa’s main development partners in 2009, the continent will also be hurt by declines in export earnings, tourism, and the value of national currencies. Already a number of African countries are under severe stress.
Significantly, the deepening economic crisis exacerbated the serious political and socio-economic challenges already being experienced in Africa, due to poverty, underemployment, rising inequality, unfair globalization and difficult social conditions for large segments of Africa’s population.
The financial and economic crisis comes at a time when Africa is only beginning to recover from the effects of the food and fuel crises. To ameliorate the adverse consequences and to avoid further damage to the social fabric of the continent, it is vital to recognize that no country or region alone can deal with the consequences of the crisis, hence global, coordinated solutions are called for.
More importantly, a profound mindset shift, underpinned by a new set of moral and ethical value system, is required. The hegemonic practices, exploitative objectives, and historic maneuverings have to end. The global response to the crisis must be value-driven and pursue the overarching objective of alleviating the burden of the economic downturn on people, especially vulnerable groups. To this end, the removal of the existing barriers to a fair global trade system is a major first step. The elimination of agriculture subsidies in OECD and currency manipulations by China and others should receive serious and immediate attention.
Over the past year, there has emerged a growing implicit protectionism within G8 member countries that is detrimental to global recovery and growth. Together with the so-called fiscal stimuli introduced by the G8 countries and others, the focus thus far has been on narrow national interests. Understandable as it might be, such short-termism and politically driven initiatives have distracted attention from some of the root causes of the global crisis.
From Africa’s vantage point, the G20’s focus should be on strengthening and restructuring multilateral institutions, with a view to urgently transforming them on the basis of sound and equitable governance principles. Genuine and coherent economic policies as well as the reform of the global economic governance architecture will have to form an integral part of an effective response to the crisis. De-globalization and segmentation of the global socio-economic system is a false and counter-productive tendency that cannot serve Africa’s interest over time.
Strengthening continental structures is another requirement of an effective and sustainable response to the situation. This in turn necessitates a more credible commitment by the richer nations to their global aid commitments, which thus far has left much to be desired. It is common in times of crises for the leaders, G8 or G20, to make popular commitments and subscribe to politically correct goals. However, it is the delivery of the promises and the genuine removal of structural, institutional and policy barriers that would set the world economy on the path of recovery.
Alongside G20 leaders, a critical responsibility rests with the leaders within Africa – political, social and intellectual – to respond to the crisis with a sense of empowerment, integrity and commitment. There is much that can be achieved within the continent, and that should be pursued with the urgency that the conditions demand. True, it would have been ideal if more African countries were represented at the G20 leaders’ table. That South Africa is the only African member country of G20 is no excuse for the other leaders to wait for the G20 decisions to embark upon some key initiatives that would stimulate economic activity, food production, and social cohesion on the continent.
After all, the track record of G20 leadership does not inspire much hope, and yet the severity of the socio-economic circumstances demands visionary and committed leadership now.
Iraj Abedian is the chief executive of Pan-African Investment & Research Services. The opinions expressed are his own