SOUTHERN AFRICA: The economic future may be darker
JOHANNESBURG, (IRIN) – Africa's marginalisation in the global financial system will not spare it the repercussions of the market meltdown affecting the rest of the world, but how hard its economies will be hit is unclear.
The International Monetary Fund’s (IMF) October survey projected that growth in sub-Saharan Africa was likely to slow to 6 percent in 2008 and 2009, down from 6.5 percent in 2007. The deceleration for oil-importers could be sharper, dropping to 5 percent.
The IMF report, released as global markets shrugged off billion dollar bailouts by panicked politicians trying to limit the impact of the financial crisis, included the warning: "recent heightened turbulence raises the risks, including of a decline in resource flows to Africa in the form of private capital, remittances, and even aid."
Food and fuel prices are likely to remain substantially above their 2007 levels, despite recent price dips. For households in sub-Saharan Africa, which typically spend about half their income on food, that means deeper poverty. The World Bank has estimated that, worldwide, 44 million people will fall into poverty this year as a result of price rises.
In relatively prosperous South Africa, civil society is pushing for the government to intervene to keep families afloat. "People are becoming desperate," said Patrick Craven, spokesman for the Confederation of South African Trade Unions (COSATU).
"We are asking government for an urgent measure to protect the very poorest – an improvement in social grants, minimum wages and urgent action against price fixings," said Craven, referring to allegations of price collusion among the country’s main bread producers – in the eyes of many adding insult to injury among the poor already labouring under higher food prices.
The IMF has acknowledged the need to protect the poor from rising prices, but says the approach by governments so far – reducing taxes and tariffs and increasing subsidies on food and fuel – has not targeted the most vulnerable, and has been expensive to operate. The survey calls for better aimed interventions, supported by donors.
But aid could be another casualty of the global downturn, although the IMF points out that aid flows to sub-Saharan Africa have already been "broadly flat" since 2003. Remittances sent by Africans working abroad, an important source of direct assistance to households, could also be thinner in a recession.
Zimbabwean economist Erich Bloc noted that in the current credit crunch and risk-averse climate, investment was likely to look for safer havens than those offered by some southern African countries.
"Countries such as ours will lose out, because whatever investment is available will be moved to prime, low-risk targets, not destinations that lack credibility and are burdened with lack of respect for property rights as well as poor track records in upholding the rule of law," Bloch told IRIN.
How badly the crisis will hit Africa depends on how severe the downturn is in the West and Asia. The IMF survey suggested that there was roughly a one-in-five chance that growth in sub-Saharan Africa in 2009 would be lower than 5 percent; but the statistics fail to convey the pain felt by ordinary people struggling to make ends meet in already precarious times.