Kenyan President Mwai Kibaki’s New Year address had a sobering message; east Africa’s biggest economy should brace for a tough year because of the global financial crisis.

It was not the most encouraging message after a year that had few silver linings for the country of 36 million, still recovering from a bout of post-election violence early last year.

But the global crisis has strained even some of the world’s most advanced economies as well as many across Africa and Kibaki was not about to shield Kenyans from reality. He even cancelled the traditional New Year’s Eve state ball that is held in his official residence in Mombasa, on the steamy Indian Ocean coast.

Government minsters and officials, used to ushering in the New Year with a waltz with their spouses at the party, had to quickly make new plans for the occasion.

Indeed, redrawing plans, revising growth numbers and tightening belts is a routine which Kenyan officials are used to by now. Last week, the economic secretary in the ministry of finance told Reuters that growth estimates for 2008 had been lowered to less than 3.5-4 percent, down from an earlier forecast of 4.5-6 percent.

In the same week, the government stated its intention to declare a national emergency over a drought that has left about 10 million facing starvation.

In the trendy parts of Nairobi, all seems to be fine.

Young urban professionals still flock the numerous malls and coffee houses for a bit of shopping and animated catch-ups over drinks.

But underneath the calm, most have had to tighten their belts. A newspaper cartoonist depicted how hard times were forcing a rethink of cultural norms. Families were dispensing with the tradition of sharing a meal with visitors by asking them to carry their own food.

What expectations do you have for Kenya in 2009? How is the global crisis being felt elsewhere in Africa?

If you lived on an archipelago that defined paradise with palm-fringed white sand beaches and emerald green waters, you would expect a relaxed, lazy pace of life.

Lazy would be a generous description of the Seychellois soldier’s wave at the entrance to State House as I arrived with my local colleague George Thande - who is admittedly a regular visitor here.

The Seychelles were ruled by the French before the British and State House in the capital Victoria is every bit the luxurious colonial mansion: a lush garden exploding with tropical colours; an oil painting of Britain’s Queen Victoria hangs in the wood-panelled reception room close to a portrait of Castor, a runaway slave from the 19th century with a fearsome reputation; a Daimler and Rolls Royce are parked on the forecourt.

But President James Alix Michel, cannot afford to be relaxed. This is an exotic destination at the sharp end of the global financial crisis.

The Indian Ocean archipelago may lie thousands of miles from the financial hubs of the world, but the bankers on Wall Street and in the City of London, not to mention the celebrity visitors, help keep the Seychelles’ tourism-dependent economy afloat.

On Friday, however, Michel told Reuters he thought visitor numbers might drop by as much as 25 percent, a painful blow for a heavily indebted economy –  its $800 million debt is somewhat more than 2007 gross domestic product according to World Bank figures. The country, with only 85,000 people, is in desperate need of foreign currency to replenish severely depleted reserves.

When the Seychelles failed to service an interest payment on a $230 million bond late last year, it called in the International Monetary Fund, which pledged a 2-year $26 million rescue package. Now negotiations are underway with creditors over how to re-structure the debts.

On Friday, Michel called on creditors to forgive fifty percent of the country’s debts.

But should they be forgiven or was the previous government reckless in the way it borrowed heavily to invest in social projects such as free education, free healthcare and housing over more than two decades?

Or does the fault lie with the creditors who issued loans they perhaps knew were ultimately unsustainable? The government might well argue that while it had borrowed irresponsibly - if it felt for good reason - but there had been no shortage of people willing to stump up the cash.

President Michel is holding out for an oil strike under the Seychelles’ offshore plateau. Seismic surveys suggested there could be reserves of oil and gas amounting to billions of barrels. But that’s not for years to come.

The Seychelles can’t wait that long.

(Picture 1: Miss New Zealand, Lauralee Martinovich, poses for photographs after taking the 2nd Princess title in the 1997 Miss World Pageant in the Seychelles. Reuters/Mike Hutchings)

(Picture 2: Seychelles’ President James Michel poses for a photograph during an interview with Reuters in Victoria. Reuters/Richard Lough)

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.

Many African countries have spent decades gearing economic policies to attract more private capital and dispel a reputation as unreliable investment destinations.

But turmoil on world markets has cut the supply of money as the world’s biggest banks shift funds from new projects to shoring up balance sheets, leaving African governments wondering how their infrastructure will get built.

African officials were dismayed not to have a bigger voice at the summit in Washington.

“Africa … was not associated even slightly with the preparation when it’s a question of deciding the future of the world to which this continent belongs, in fact and by right,” said Jean Ping, head of the African Union’s executive Commission.

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?

It seems everyone in Africa has family members living abroad.

Just stop someone on the street and ask if they have a cousin, a brother, or a sister living in Europe, the United States or elsewhere around Africa, and most likely they’ll say that they have two or three or more. Remittances from those loved ones total some $40 billion per year, according to the United Nations. In some countries, diaspora money makes up more than 20 percent of the gross domestic product, and analysts say, remittance cash may be as much as 50 percent higher than current estimates due to informal transfers.

But there is growing concern that this money could be a victim of a spiralling crisis in global financial markets.

It’s still too early to tell how much remittances from the estimated 30 million Africans living abroad have been impacted by the crisis, which, world financial bodies warn, could lead to a global slowdown. But some families have already been told to expect less money.

This year, the continent has suffered a dual attack from high oil and commodity prices. And now, if there is a shortfall in remittances, a third front would put an added strain on wallets and purses. But in some ways, Africa is better-placed to weather some of the storm because its banking sector is relatively unexposed and its economic ties with Asia are deepening. For remittances, the fear is that if a recession hits Europe or the United States, traditionally resilient flows could ebb as migrants’ purse strings are pulled tighter and tighter.

Will a slowing of global economies hit remittance money from Africa’s large diaspora? Or, will Africans abroad prove resilient yet again and continue to send the same amount of money to families back home?

South Africans have widely greeted new President Kgalema Motlanthe, many of them with a sense of relief after the bitter and divisive power struggle between his ousted predecessor Thabo Mbeki and Jacob Zuma, leader of the ruling African National Congress.

Motlanthe, quiet spoken and dignified, struck exactly the note the public were looking for when he took office, sober but smiling gently - a huge contrast to the theatrical ebullience of Zuma and the aloof, intellectual style of Mbeki, who was seen as arrogant and out of touch with his people.

The sense of relief was palpable on Friday.

“Motlanthe restores order” said the front page headline of Johannesburg’s Star newspaper, over a picture of the new president swearing the oath of office. “New leader steers SA to calm,” said the Pretoria News. “For now the country has at its head a nice and largely untainted man with not much ego who doesn’t think he knows everything and who listens to people. You can almost feel the relief in the republic,” Business Day said in an editorial.

But Motlanthe’s honeymoon may not last.

He must try to end an unprecedented battle inside the ANC while his country, Africa’s biggest economy, faces serious stresses including record inflation, slowing growth and a power supply crisis that has hit vital platinum and gold mines. Yet, he has little room for manoeuvre. Although fully accepted as the third president since the end of apartheid, he is seen only as an interim leader, holding the fort until Zuma takes over after elections expected around April next year.

This will make it difficult even to make a mark, without arousing suspicions that he wants the permanent job himself–something that many South Africans would welcome.

Ironically this suspicion, if allowed to grow amongst Zuma’s militant allies within the party, could create new divisions instead of allowing Motlanthe to do the job for which he has mainly been elected — gluing back together the once monolithic ANC which is now torn by rifts that have distracted policy makers from addressing huge economic and social problems including persistent and widespread black poverty, an AIDS epidemic and rampant crime.

He has promised to stick with the economic policies of Mbeki, who presided over South Africa’s longest period of growth, but is already under pressure from Zuma’s leftist allies to shift policy away from protecting investors and towards rapidly spreading the fruits of black rule. On Friday, his first day in office, the powerful COSATU trade union confederation called on him to eradicate policy and create jobs.

Can Motlanthe make a difference and end South Africa’s instability? Could he eventually dislodge Zuma to become the next president? Or will he just leave problems untouched until the election? What do you think?

Isolation might seem like a good idea when it comes to the storm sweeping global finance and there is no doubt that African countries are among the most isolated in the world economy.

Avoiding the impact seems unlikely, though, particularly at a time when Africa as a whole has been enjoying its fastest growth for decades and the continent has become an increasingly popular investment destination - not only for Asian countries in search of resources but for frontier investors willing to take higher risks for higher returns.

The African Development Bank’s chief economist told Reuters that Africa should withstand the first round effects of the financial crisis but that export demand and access to finance could be hit in the longer term.

Although some still see Africa’s isolation as a measure of protection, the enthusiasm of frontier investors has been fading too. The impact can be seen on stock exchanges from Lagos to Lusaka. Ghana has postponed a new debt issue due to the global conditions.

Such things might not appear to have much direct impact for most people in Africa, but rising world prices for food and fuel are being felt even in the remotest villages. If the prices of Africa’s export commodities fall because of global turmoil then that pain is likely to be felt too. If rich countries can afford less aid, that could also be damaging for some dependent states.

What fallout do you expect in Africa? What action might mitigate any damage?

For Zimbabwe’s long-suffering people, the true meaning of the signing of a power-sharing agreement between President Robert Mugabe’s ZANU-PF and the opposition MDC would be how quickly it leads to an improvement in their daily lives. An economic crisis that began in 1998 has turned the once prosperous Southern African country into a basket case economy with the world’s highest inflation at over 11 million percent. Millions of Zimbabwean’s who have fled across the borders to escape unemployment and severe shortages are waiting to see if the political deal will result in economic rebound paving the way for their return.

The agreement negotiated by South African President Thabo Mbeki provides for the sharing of power between veteran President Robert Mugabe and Morgan Tsvangirai, leader of the main opposition Movement for Democratic Change (MDC). Tsvangirai takes on the new role of Prime Minister with extensive powers, with Mugabe’s 28-year hold on power significantly eroded.

But will Tsvangirai wield sufficient powers to place the new coalition government on a new policy track needed for rapid economic reform? Will the international community be confident enough to unlock the needed economic rescue package to help accelerate economic change? How quickly can the collapsed commercial farming sector start to turn around? How will business raect to the new deal? Most important, how quickly will ordinary Zimbabweans begin to feel the impact of the power-sharing deal? Read the following insights from two leading analysts and have your say.

Marian L. Tupy, The Cato Institute

“The government should trust the ingenuity of the Zimbabwean people and allow their creative energies to rebuild teh country with minimum bureaucratic hindrance.” (Read full analysis)

John Makumbe, University of Zimbabwe

“The major political party, the MDC, has devised a very promising economic recovery and rehabilitation programme for the transitional period. It is my considered view that if that programme is effectively implemented, the Zimbabwean economy could recover within as short a period as two to three years.” (Read full analysis)

Marian L. Tupy, The Cato Institute 

All economies, no matter how decrepit, can be revived through good institutions and economic freedom. That said, it is impossible to predict how quickly the people of Zimbabwe will be able to enjoy a notable improvement in their standard of living.

Zimbabwe today is one of the least politically and economically free countries in the world. The speed of Zimbabwe’s social and economic recovery will depend on the speed and extent of reforms.

Of immediate concern to the economic revival is hyperinflation, which will have to be stopped through dollarization or the establishment of a currency board. Taxes will have to be made simpler and lower to encourage productivity, and minimize tax evasion. Trade will have to be liberalized to allow influx of cheap imports to relieve the suffering of the Zimbabwean population. The business environment will have to be made friendly to private entrepreneurs through far-reaching deregulation.

Much will depend on the government’s success in ending political violence in Zimbabwe and restoring property rights or offering compensation to those whose land was expropriated by Mugabe. Respect for the sanctity of people and property will be an important part of a larger, long-term, goal of restoring the rule of law to Zimbabwe. Of course, the above is not an exhaustive list of reforms that the government will have to undertake, but it is a start.

The new government must realize that the future prosperity of Zimbabwe will not be achieved through dollops of foreign aid or micro-management by the World Bank and the IMF. The government should trust the ingenuity of the Zimbabwean people and allow their creative energies to rebuild the country with minimum bureaucratic hindrance.  

 John Makumbe, University of Zimbabwe

 The signing of an agreement between Robert Mugabe’s ZanuPF party and the two formations of the MDC marks the beginning of an exciting period in the political history of Zimbabwe. The national economy has been devastated by, inter alia, disastrous political and economic policies formulated and implemented by the Mugabe regime. Fortunately, most of the development and economic infrastructure still remains largely intact, and the Zimbabwean economy could recover from the current meltdown in a fairly short time.

Zimbabweans are reputed to be hard-working people. Although many highly skilled Zimbabweans have since left the country for greener pastures both in the region and further afield, the country still boasts a highly skilled labour force.

There is also significant goodwill from several developed countries, and some of them have already promised to provide significant amounts of money to assist Zimbabwe in its economic recovery programme.

The major political party, the MDC, has devised a very promising economic recovery and rehabilitation programme for the transitional period. It is my considered view that if that programme is effectively implemented, the Zimbabwean economy could recover within as short a period as two to three years. Part of the MDC’s RESTART programme seeks to attract both domestic and foreign direct investment in order to revive previously existing industries as well as expand the ones that are currently operating at 25% to 30% of their original capacity. The RESTART programme also seeks to encourage as many skilled Zimbabweans as possible to return home and help in re-building the shattered economy.

Several development co-operation agencies have already indicated their interest in resuming or renegotiating appropriate development assistance programmes with the new and inclusive government of Zimbabwe. The RESTART programme will also focus on the revival of the crucial agricultural sector by, for example, creating a land commission to examine such matters as multiple land holding practices, under-utilisation of arable land, and the critical shortage of agricultural inputs. The restoration of a vibrant agricultural sector will re-energise the Zimbabwean economy to recovery in a very short time, indeed.