Africa not insulated from global economic crisis

African Arguments by Desne Masie

The 2008 Financial crisis and the attendant Eurozone crisis are reshaping the future of global finance. But what are the implications of this for Africans?
Why have financial institutions rushed to the aid of Greece, yet African countries such as Malawi been forced to plead for support from the IMF, as Magnus Taylor here writes? Will African countries be neglected and vulnerable now that the crisis turns global?
Insulated, at first


Initially, Africa suffered as a direct result of the 2008 crisis. Sectors such as mining, tourism and manufacturing saw decline, as did flows of foreign direct investment. However, the African Development Bank (AFDB) argues that the continent’s banking sector was insulated due to strict exchange control regulation and the existence of very few of the off-balance-sheet assets that caused the crisis (more on these later). There was though evidence of contagion in declining stock values and capital outflows, and pricing and access problems for international loans and sovereign debts. The AFDB recommended that African countries pursue growth over crisis response strategies, persevere with financial market reform, and rebalance sources of global and domestic income in favour of disengaging from the global economy. Developed economies were asked to honour the pledges made to assist Africa by mobilising capital and the purchase of its exports.
African economies rebounded in 2009 with the continent experiencing some of the highest global growth and investment return rates, in part due to the arrival of speculative capital in search of the next hot destination.  Read more…

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