The Global Financial Crisis and Africa: Ramifications for Economic and Political Stability

Manchester Trade Vice President Anthony Carroll attended an international conference in South Africa on January 25-26. The conference, co-hosted by the U.S. Department of State and the South African Institute of International Affairs, focused on the global financial crisis and the impact on Africa. The event was attended by South African government officials, economic officers from southern African countries, academics from the United States and regional institutions, and representatives from the United Nations.

The main conclusions of the two-day conference were:

1. The economic crisis affected Africa, but the impact was delayed and not as devastating as it was in other parts of the world. African financial institutions are less connected with the global financial infrastructure and did not carry many of the same risky assets. Capable African leadership and banking and financial sector reforms over the past 20 years helped mitigate some of the impact of the crisis.

2. There was variability in the impact of the crisis among African countries. Major oil-producing countries saw growth rates decline; however, in the cases of Nigeria and Sudan, internal political issues are more the source of economic woes than external economic conditions. Countries like Zambia and the Democratic Republic of Congo experienced declines in commodities exports.

3. African countries were hurt by the crisis in indirect ways, with declines in foreign direct investment (FDI), remittances, and tourism.

4. Africa will slowly pull out of the global recession with predicted growth rates for above 2% and 4% in 2010 and 2011, respectively.

5. Much attention has been paid to China’s rising role on the continent, but the West still accounts for almost 90% of FDI into Africa. China’s investment is concentrated in the extractive industries, and the financial crisis has slowed investment in oil-rich countries like Angola. China’s trade with Africa fell in 2009 and is predicted to remain flat in 2010.