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Africa And The Global Economic Crisis

12 February 2009 DEPARTMENT OF RESEARCH AND INFORMATION OF THE INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA

AFRICA AND THE GLOBAL ECONOMIC CRISIS: CHALLENGES AND OPPORTUNITIES
INTRODUCTION Most African states may have been spared the worst of the world’s financial crisis due to a limited, if any exposure to off-shore markets, particularly the syndicated financial instruments that turned “toxic”. Nevertheless, the harsh reality is that they have become victims of an unfolding economic crisis of global proportions, a crisis that had its origins in the developed world. Serious shockwaves are hitting Africa’s shores, with the extent and depth of the damage, whether ongoing or forthcoming, being extremely difficult to assess or project at this point in time. The pattern of financial flows associated with investment, lending and trading activity has been dramatically altered for the time being, with the fallout affecting all regions of the world, including the African continent. It is thus critical that counter-balancing actions be pursued to safeguard stability in the short- to medium-term, so as to avoid a further deterioration of economic conditions and the ensuing social implications.

The ongoing global financial crisis has led to a considerable economic slowdown in most countries across the globe and to contracting domestic output in several advanced economies. In addition to the United States of America (USA), Japan and the United

Kingdom (UK), all the countries within the Euro zone (with the exception of its most recent member, Slovakia) are “technically” 1 in a recession. Equity markets have fallen sharply from their recent highs and strong bearish sentiment prevails.

A deep financial crisis, largely perpetrated by irresponsible governance and risk management practices on the part of numerous large corporations, policy-makers and regulatory authorities in the most advanced of economies, has spread globally. Creditor and investor sentiment has...