Although the full impact of the global economic crisis on African development is not yet known, a group of African development and finance experts have gathered in Washington to discuss the crisis and offer recommendations to policymakers at the spring meeting of the International Monetary Fund and World Bank.
The town-hall-style meeting April 23 was composed of a broad array of expert panels, including one with Jeffrey Krilla, senior managing director at Sonnenschein Nath & Rosenthal LLP, a law firm; Katrin Kuhlmann, president of the Trade, Aid and Security Coalition of the GlobalWorks Foundation, a nongovernmental organization; and Eva Bakonyi, the head of partnerships and donor relations at the World Bank’s International Finance Corporation (IFC).
Krilla, who has spent his career focused on Africa and has had wide business and agribusiness experience on the continent, said the “good news” for Africa is that it is the region “least integrated” into the world economy and because of that “Africa has been spared a lot of the primary effects of the initial financial crisis. The bad news is that, instead, Africa is being hit by the aftershocks and the resulting global recession.”
Identifying the areas in which Africa is currently being hurt is the first step toward addressing the crisis, he said. He said inflation has fallen from a 22 percent average across the continent to single digits in recent years. That, he said, has been the direct result of African governments embracing economic reforms. “Almost all African countries have moved steadily, if slowly, toward a more open and market-driven economy,” he said.
Countries should continue on that reformist trend and not backtrack in the wake of these tough economic times, he said, warning that “countries that backtrack will find themselves left further behind when the global recovery returns.”
To help Africa weather the crisis, Krilla offered a few recommendations. The major trading partners should keep their markets open and not resort to protectionism, he said, and ensure that adequate levels of trade credit are made available for African and other developing nations. ”At the same time,” he said, “African governments should resist temptations to return to a command economy or use the crisis as a cover to renationalize companies or interject the state into the market, which has proven so harmful in the past and so lucrative to an elite few.”
He also recommended that African countries use the crisis to get rid of obstacles to business in order to promote trade development and increase regional integration.
Kuhlmann agreed that increased regional economic integration, greater infrastructure and more trade capacity are important for African development. Additionally, she recommended that economic and trade policy be more focused on agriculture.
“When we talk about trade with Africa, particularly here in Washington, we talk a lot about the African Growth and Opportunity Act [AGOA], but AGOA falls short on covering agriculture. It has created opportunity in other areas, but has not really touched agriculture. Agriculture is really where the long-term growth potential is,” she said.
While AGOA has helped create several hundred thousand jobs in the apparel sector in five key African countries, she said, those jobs alone, while important, are not going to be the key to long-term growth. Farming, she said, represents up to 40 percent of Africa’s gross domestic product, makes up a huge percentage of its trade and is an area in which 450 million Africans find employment.
Bakonyi said the International Finance Corporation (IFC) is working to help Africa deal with the current crisis. She said IFC’s mission is to promote sustainable private sector investment in infrastructure, health care and education in Africa and developing countries worldwide by investing with private sector partners on a commercial basis. Additionally, the IFC often provides advice and technical assistance, which, she said, is very important because “money itself does not solve [development] problems in Africa.”
IFC’s investment in Africa, she said, has increased significantly from $140 million in 2003 to more than $1.4 billion in the last two years, but she cautioned that investment may not increase much more in the short term because of the financial crisis.
Focusing on the crisis itself, Bakonyi said African markets, like many others worldwide, have been unable to escape the global economic downturn. “Because of the economic crisis, there is a serious unemployment issue, which leads to human crises,” she said.
While the IFC “always thinks about cooperation and partnership” as it conducts its business, Bakonyi said during these times of crisis the IFC has ratcheted up cooperation to a new level. Cooperation and partnership among international banks, businesses and governments, she stressed, are key to getting through the crisis. To illustrate her point, she said the IFC is now working closely with its Japanese, German and other development counterparts to help promote development progress in Africa.
Africa News Report