In today’s interconnected world, any crisis stretches far beyond one nation. Without regard to the type of problem or its origin, a flu pandemic, a terrorist attack or even a financial crisis can spread around the globe rapidly.
While the recession may be hitting Americans’ pocketbooks, may have changed many families’ lifestyles and altered their business models, Africans are also feeling the shock waves of economic change. Meanwhile, as the news of President Obama’s first planned trip to Africa with his July visit to Ghana shows, Africa really matters, more than ever before in a global economy.
Dr. Ilene Grabel, professor of international economics and global finance at the Joseph Korbel School of International Studies at the University of Denver contends, “One of the most important things that African governments have to do is try to capitalize on the political space that has been provided by the U.S elections, change in sentiments and the global financial crisis.”
Grabel is emphatic when she says, “This is the time when it is critically important for wealthy countries to increase their foreign aid commitments to Africa.”
Those nations did nothing to start the crisis, and therefore should not become victims in the process, she admonishes.
And yet, for Africa, home to more than 900 million people, an amalgamation of 53 nations with variations in economies, politics, cultures and languages, and including more than two-thirds of the Heavily Indebted Poor Countries of the world (HIPC), a reduction in capital flows caused by the current crisis can only make its situation more difficult.
The dimensions and ramifications of the crisis for Africa are highly consequential.
Foreign Funds To African Nations Slow
The flow of money from African emigrants abroad back to the homeland to their families to help with basic necessities, such as school fees and healthcare, has slowed significantly as a result of the global crisis.
“There are all kinds of countries in Africa where for the last eight to 10 years remittances have been the most important source of foreign currency inflow, especially for the smaller countries,” Grabel explains.
In March, a World Bank forecast projected a fall in remittances worldwide to $290 Billion compared to $305 billion in 2008, due to the financial crisis.
When developed nations such as the United States run into problems such as the current economic ones, they tend to look for areas where they can cut back. Official Development Assistance (ODA) to African nations, monetary allocations which include loans or grant offers to assist other nations for economic development purposes, have been reduced as well.
If living standards have not been affected in poor countries as a result of the crisis, they will be very soon.
“That has become more important as African governments have started to receive less and less development assistance (foreign aid) or overseas development assistance (ODA), so that these inflows of remittances have been critically important to the living standards of many African families.” Grabel says.
The other question is whether the U.S. will maintain its commitments to Africa under the Millennium Challenge Corporation (MCC) agreements and whether it will hold its pledge for a $48 billion increase in AIDS treatment to Africa under the President’s Emergency Plan for Aids Relief (PEPFAR).
Grabel cautions that this is not the time for foreign governments to try to cut back in their support for any struggling countries.
“I am hoping that our government does not do that, but politically, it may be very hard for the administration in this country and even in other wealthy countries to resist demands from their own populations,” she says.
To help stall the impact of the crisis in some of the most affected countries, some governments have offered inducements to their citizens residing abroad to lure them into returning home to work, according to Grabel. Many countries have made job offers to foreign nationals and offers to pay a portion of the return airfare.
Also, “many governments have been forcibly deporting many migrants from Africa and also Latin America,” Grabel points out, noting it has happened in the U.S, Italy and Spain where migrant labor is in high demand.
As Commodity Prices Drop, Africans Search For New Economic Options
In the commodities business where African nations such as Ghana and the Ivory Coast reign supreme, a slight fall in the prices of cocoa and coffee in 2009 is having a drastic effect in revenues that otherwise would boost these countries’ economies.
“The falling commodities prices have hit the commodities exporting countries much harder than those countries that are in a position of not having a commodity to export,” Grabel says
If things have not worked out so well for the U.S capitalist model, perhaps it is time for African nations to rethink their options as well.
Grabel makes the point that the failed system, which orchestrated the crisis in the U.S. and which many nations around the world have tried to mimic through the setup of their own stock markets, should be a lesson for African nations. If they have been following a U.S system for 25 years that now appears broken, perhaps that may not be the way to go.
“Now, more than ever, is the time for developing countries to think about what kinds of policy initiatives really make sense for their own countries that are consistent with the values of their populations, political conditions and that they should look to a variety of other developing countries,” she says.
She recommends African nations look to the economic models of India, China and Brazil, among others. For one, India has been very cautious in opening up its markets to foreign investors. While China has problems of its own, it now has a strong foothold in Africa that not only benefits China but is helping many African nations.
“It would be worrisome, I think, if China and India started to pull out of African countries,” Grabel says.
Editor's note: George Bamu, a native of Cameroon, is an Aurora-based freelance journalist and founder of Africa Agenda, which aims to promote positive communication about Africa by utilizing the media and education. He can be reached through the organization’s web site at www.AfricaAgenda.org.
