Africa's Share of the Global Economic Turmoil

Facing the hard times

As the effects of the global crisis bit harder on the people of the continent, there are spontaneous postulations from different quarters of its anticipated threats to the continent. Arno Turner, an adjunct professor at the University of Helsinki and Tampere, Finland, opines on the Harvard International Review that the situation poses a great danger for the nations in Africa. He listed amongst other things the possibility of increased political conflicts and instabilities, corruption and nepotism and increasing African migration


By ONAPAJO HAKEEM
from Kuala Lumpur, MALAYSIA


Moses Adewale and Sarato Abdoullaye never imagined that the economic shock that grabbed the United States of America some months ago will suddenly be responsible for their present predicaments. They never anticipated that the sweeping wave of the effects of the crisis which has crippled the economy of many states will soon affect their personal lives until the wave visited their doorsteps.

Moses, a Nigerian, who had been an employee of a shipping firm in the country for eight years, was served with a retrenchment letter owing to the dwindling financial strength of his employer to manage large staff as banks lending capacity plummets. Apart from this, his landlord has also served him with a notice of increment in his two-room apartment due to the landlord's effort at augmenting his fast depleting income and the new tax regime introduced by the state to create alternative revenue after the drastic reduction in the federal allocation.

For Sarato, a Senegalese, whose husband had been a migrant worker in Spain for three years, the sight of her two kids withdrawing from a private school to a public one is sorrowful. This is as a result of her husband's abrupt loss of job in Spain and his inability to send her the monthly allowance through the Western Union. For her, the hard times are really here.

The crisis arrives in Africa

The cases of the duo depict the present atmosphere of the African economy in the midst of the global financial crisis. Recent events of the fall out of the crisis which are biting hard on the economies of the African states have proven many indigenous and foreign experts wrong on their earlier conclusion that the continent would be insulated from the global shock. For most states on the continent, it is an admixture of crises. Many of them were barely on the verge of severe economic and political disaster and hence surviving on the benevolence of international organizations before the ugly incidence of the economic misfortune befell the world. Countries like Zimbabwe, Somalia, Sudan and Democratic Republic of Congo are immediate references in this category. Zimbabwe for instance had hitherto been overwhelmed by hyper-inflation courtesy of the adamant posture of President Robert Mugabe and consequential repulsion of the super donor countries.

Apart from this, many African countries constitute the 36 countries already listed by the Food and Agricultural Agency (FAO) suffering from severe food shortages that need external aid while the scourge of HIV/AIDS and other diseases still hang around the continent. While grappling with these untold hardships, the reality of the global phenomenon came calling.

Financial crisis increases instability

Although, many African countries are less exposed to world banking system which earlier allayed the fears of the policy makers of the states, but with the dimension the crisis has assumed after its emergence, the continent might end up being the worst hit. This is more evidenced in the mono-cultural nature of most of its economies as the event has warranted a drastic drop in the demand for commodities and the concomitant fall in their prices. Nigeria, Zambia and Angola are big examples of such nations. Nigeria for instance, which maintains the position of the largest producer of oil in Africa and the eighth in the world is one of the major suppliers to the United States and depends solely on oil for its foreign exchange earnings. Its revenue base has depreciated heavily owing to this, making the senate weigh down the budget proposal from the executive on highly important sectors. Coupled with this is the drastic cut in the federal allocations to the different states of the nation which had been the major backbone of the states expenditures. The states have as a result of this being thrown into a dilemma of meeting their recurrent expenditures most especially the salaries of their workers that form the bulk of working population in the nation.

In Zambia, the unimaginable fall in prices of copper had caused a great harm to the economy that thousands of its citizens are now thrown into a dry labor market. The mining industry as the engine of Zambia's economy is directly affected by the crisis to the extent that the nation's currency, Kwacha, has been significantly devalued dampening the tempo of business activities in the state. Many government projects that are germane to the development of the state and realization of the MDG which has been a major target of the government have been put on hold.

The case of South Africa, a supposedly largest economy on the continent, is more critical than any other state on the continent. This is largely derived from the high level of economic integration the state establishes with the world economy. Many financial institutions that sustain the nation's economy are owned by the already liquidated corporations in the developed countries. This occasioned an excessive capital outflow that is gradually snuffing life out of the South African Rand and increasing the rate of unemployment. Furthermore, the major trade partners of the nation are the United States, EU and Japan, which are already wallowing in bitter recession. The consequences of this scenario for the state unfortunately transcends its internal activities as the fate of the next world cup slated for 2010 in the state remains a guess.

As the effects of the global crisis bit harder on the people of the continent, there are spontaneous postulations from different quarters of its anticipated threats to the continent. Arno Turner, an adjunct professor at the University of Helsinki and Tampere, Finland, opines on the Harvard International Review that the situation poses a great danger for the nations in Africa. He listed amongst other things the possibility of increased political conflicts and instabilities, corruption and nepotism and increasing African migration. Arno posits that, "the deterioration of the labor markets and the general economic situation are likely to increase societal instability, because the potential for social unrest increases when people are hungry or unemployed". Corruption, according to him would be aggravated in countries like Nigeria because "there will be ever less prosperity from oil for the local economy, both through official and unofficial channels. In addition to the corrupt elite noticing their informal revenues diminishing, there will be less allocated to the 'honest' domestic markets as well."

Responses from the Governments

In the event of this, the different governments on the continent have instituted several measures toward an amelioration of the anticipated sufferings of the people. Parts of the measures include austerity measures, increased social spending and fiscal regulations. South Africa's president, Kgalema Motlanthe, in an address to the parliament earlier in February has indicated plans to intervene in the economy to cushion the effects on the people by planning to embark on increased social and public spending, creating alternative jobs and supporting the private sectors to prevent weakened investments.

The governments of Kenya and Nigeria have been more austere in their approach at minimizing the effects of the crisis on their nations. In Kenya, the government has ordered cut in luxury spending, mostly on training, office and general supplies, purchase and other equipment. In the case of Nigeria, the president, vice president, governors and other senior officials have embarked on what they term as the "personal sacrifices for the good of the nation" by parting with some of their monthly salaries. On another hand, the government of Nigeria has announced a total deregulation of the oil sector in order to remove subsidy on the prices of petroleum products enjoyed by the people and also pegging of the bank's interest rates to curtail unbearable pressure on the private sector.

While the unfortunate global incidence beset Africa, the different governments should explore the opportunity to devise means of diversifying their economies to reduce their over dependence on commodities and foreign assistances. The governments should also see this as the best period to finally tackle corruption and other human artificialities that have distorted growth and development over the years. In addition to this, it is high time the leaders instituted more rational and radical policies to reduce the extravagant life-styles of persons in and out of government in consideration of the army of suffering masses on the continent.


(Published: 10.04.2009.)