Africa Progress Panel (Geneva)
Benno Ndulu
27 March 2009
opinion
The impact of the global financial crisis has been largely muted in many African countries. That is thanks in no small part to the prudent management of these economies in recent years.
The fundamentals of the economy in Tanzania, for example, remain sound.
Banks are well capitalised and although interest rates have edged up marginally, we have not seen the dramatic disruptions witnessed in developed countries.
Yet the effects of the downturn in the West - faltering demand for primary commodities, pressure on capital flows and a drop in tourism arrivals - will inevitably mean slower growth on the continent.
This is particularly unfortunate because it comes at a time when multiple sub-Saharan African nations are enjoying the most sustained period of growth since independence.
It is essential that world leaders seize this moment of crisis to reform the global financial architecture to set out a regime of effective surveillance and enforceable sanctions that would cushion the international finance system against similar failures of regulatory policy.
Although there have been suggestions for the creation of new multilateral agencies, it might be more effective to reform existing ones.
A significant flaw of the current order is that multilateral organisations tasked with warning against macro-economic imbalances apply rigorous oversight on least developed countries and emerging economies, without a corresponding level of pressure on developed countries. The current slump, which originated in the west, has shown this approach to be wrong.
A reformed International Monetary Fund (IMF) must display symmetry of treatment to all economies - whether big or small. The proposed global standard to regulate the international finance system will be an effective tool in preventing future crises only if sanctions are well spelt out and enforced.
African policymakers, on their part, should avoid making panic decisions that could adversely affect growth. The temptation in times of weakening fiscal positions is to slash allocation of funds for infrastructure development. It is critically important that African economies continue to invest in infrastructure - which holds the key to improving the investment climate and boosting regional connectivity.
There should also be sustained effort to create an environment for diversification. The current crisis has proved the risk of relying too much on primary commodities. It is time that we channelled greater energy to value addition. Ideas such as facilitating joint acquisition of finance between large scale and small holder producers to boost agriculture; processing of minerals before export and other such should be vigorously pursued. Greater regional integration which will expand markets and drive the quest for diversification of economies also ranks as a priority.
Perhaps the most critical agenda for African leaders is to organise their message. The voice of the continent - on the need for a fairer trade regime and the dangers of a sharp fall in Overseas Development Assistance - must be clear. There should be more initiatives such as the meeting co-hosted by President Jakaya Kikwete and the IMF in Dar es Salaam in March to press for reforms to the global financial architecture and discuss the continent's growth prospects.
Africa has a comparative advantage in terms of natural resources and a surplus of labour. With prudent decision making, smart reforms and stronger engagement with development partners, it can emerge from this crisis stronger rather than weaker.
Benno Ndulu is governor of the Central Bank of Tanzania.
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Perhaps Mr. Annan could learn from a non-African - President Lula of Brazil who spoke more candidly on behalf of all the poorer people of our world, standing next to Gordon Brown this morning. Enough of this cap-in-hand pleading for more aid instead of fairer trade. Is that too much to ask for? For Mr. Lula’s comment, see: http://news.bbc.co.uk/2/hi/uk_news/politics/7964910.stm.
For the ordinary african in 'subsaharan Africa, live has never been easy even before the economic recession from the 'north' does he have a good road, good health care for his family, water and nutrition, free and quality education for his kids, good shelter instead of live in slums and secure future, who is thinking about him, what are the goals of leaders in sub-saharan africa anyway, where are they when countries like, Indonesia, Malasia, etc, where developing. He has not known any better so the recession means nothing to him, excepts the leaders who's windwall from the north will dry up as a result.
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