Africa News blog
African business, politics and lifestyle
Africa reforms matter
African governments have been hit hard by a withdrawal of investor money from the continent and need to make sure they remember reforms and avoid high inflation in their attempts to protect their economies, says Razia Khan, head of Africa research at Standard Chartered Bank in London.
Africa gets 3 percent of the world’s cross-border flows, but BIS end-2008 data shows the region suffered the world’s largest decline in cross-border financing due to the global financial crisis, Khan told a breakfast audience of politicians, bankers, investors and journalists in London today.
Africa needs the economic environment that will lure investors back in, she says.
“Financial markets in Africa have not shown signs yet of a significant recovery. “Maybe there is going to be some longer-term support for commodity prices, but governments have to guard against a deterioration of the fundamentals that have been in place to support growth,” she says.
Across sub-Saharan Africa, South Africa will withstand the global recession better than other countries, she adds.
“African growth is still likely to be positive, but macro-economic stability is more of a risk in some countries than in others.”
Keeping pirates at bay
There are some expectations that piracy in the Gulf of Aden is about to tail off for a bit. It appears that pirates don’t like rough weather any more than anyone else does.
Exclusive Analysis, a political risk consultancy, has conducted a detailed study of incidences of maritime hijacking in order to give its insurer clients the heads up about when and under what circumstances piracy is most likely to occur. It has told the International Underwriting Association of London that the arrival of the monsoon in the Gulf of Aden about now usually keeps pirates on shore. Not so for Somalia, where the waters are generally calmer at the moment. Technically, it is when the Sea Scale hits 5 or 6, that is, rough to very rough.
Weather was not the only factor thrown up by the study when it comes to keeping pirates at bay. Among an array of conditions, it found that ships that have freeboards — the distance from waterline to deck — of six metres or more have a lesser chance of being hijacked.
One pirate ship, apparently, was found with a five metre ladder on board — a hint as to how far they are prepared to go, or at least climb.
Why is the world being so damned politically correct on the somali pirates? In a more civilized time pirates were hung when captured, end of problem.
Should developing world have more say in crisis talks?
When world leaders meet in Washington to tackle the global financial crisis, Africa will be represented only by South Africa.
African officials meeting in Tunis this week to discuss the impact of the crisis argued that the continent needed better representation, given the effects that the turmoil is having in Africa as well as the continent’s growing financial importance. The complaint could apply equally to other developing countries.
The global crisis has come just as many African economies were turning a corner, buoyed by improvements in governance, technological change, debt relief, higher prices for their exports as well as inflows of funds from Asia and from Western investors seeking higher yields.
Current Crisis – Cure or Croak
The real economic situation is ever in a state of flux and the ready made solutions in the classical or neoclassical mould evade a lasting solution to the current crisis. Over the years the very concept of ‘economy’ has undergone a sea change. The models that address to the national economies of yester years have become redundant and they don’t go beyond a transitory solution suppressing the real economic forces, side tracking the long term perspectives. The long lasting solution needs a fresh debate among the political economists to come out with an integrated co-operative model, keeping in mind the linkages of the so called developed and the developing economies, in which the monetary and the fiscal policies play a subservient role.
Simon Kuznets was a far sighted development economist who could foresee more than half a century ago that ‘poverty anywhere is a threat to development everywhere’. The ‘national economy’ is a misnomer today and an attempt to resolve the existing depression at the national levels will always belie the expectations, specially of the developed countries, and they are likely to slip from devil to the deep sea.
I look at the present crisis as a consequence of too much monetarism of the developed countries for maintaining their growth rates overlooking the potential development of South Asia, Africa, Latin America and the Middle East. This might lead to relentless speculative tendencies, playing down the primary role of money and ultimate crash down of giant economies of the world creating a worldwide economic chaos. The retrieval from it might take a century.
Will Africa’s mega trade bloc take off?
Three African trading blocs comprising some 527 million people and with an estimated gross domestic product of $624 billion, have agreed to move towards a free trade area. It would span 26 countries from Egypt to South Africa, and would go a long way towards streamlining some of the continent’s numerous trading blocs. Africa is home to some 30 regional trade arrangements, and on average each nation belongs to about four groups, according to international financial institutions. This has led to conflicting and overlapping agreements.
So in a move to ease some of these issues, heads of state who chair the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), and the Southern African Development Community (SADC), met in the Ugandan capital to draw up a pact on integration, and eventually hoping to have a unified customs union. Ugandan President Yoweri Museveni said at the meeting’s opening that: “The greatest enemy of Africa, the greatest source of weakness has been disunity and a low level of political and economic integration.” The meeting’s final communiqué said a timeframe for integration would be considered in one year. Rwandan President Paul Kagame cautioned delegates that African nations must make sure to enforce the protocols and treaties that they’ve adopted. Heads of state at the meeting stressed the need to create economies of scale, bigger markets equal more opportunities to grow, they said.
But many of the existing blocs have already run into trouble. The EAC’s integration, for example, has had some hiccups because some member countries felt their economies would be dominated by neighbours.
So, should Africa think bigger and bigger or try to work on existing institutions? Do you think the creation of a free trade zone spanning COMESA, SADC and the EAC will take off, or will it just remain on the drawing board? What do you see as the major challenges in implementing this agreement?
Well, we return here three years after to say that no progress has been done on that front. Simple, a great idea gone to the dogs……again.
3 key issues must be sorted out first; –politics [we need to focus on economic & social challenges, not power plays], Communication [develop a strong gameplan, and get a decisive majority to buy into it], and Execution [the devil, as always, is in the detail].Kenya has this challenge. Anyone with a basic understanding of economics has known for years that we’re staring at a food, energy and water crises for years. Only now, in 2009, has the government delivered a briefing on how nasty the situation is. It will get worse, but the focus is not on bracing for hard times and implementing long-term solutions. If anything, there are no long-term solutions on the table from Government.East Africa’s biggest economy is merely symptomatic of this kind of problem. Unless we sort this out; — we’re going nowhere prety fast.