Africa News blog
African business, politics and lifestyle
By Isaac Esipisu
The continents’ newest and second Africa’s female president took over the reins of power in Malawi to offer a new and more responsive style of leadership that is expected to spur economic recovery of one of Africa’s poorest nation. Joyce Banda was sworn in as president two days after President Bingu wa Mutharika died of heart attack at 78.
The new president, Joyce Banda started her presidency in an enthusiastic and robust way; mending ties with foreign donors that could see Malawi pull out of an economic crisis. The new president of Zambia , Michael Sata, is making the transition easier, contributing 5 million litres of petrol that should help the economy. Banda, a 61-year-old policeman’s daughter who won recognition for championing the education of underprivileged girls, now enjoys widespread support among a population whose lives grew increasingly difficult under Mutharika
Mutharika, a former World Bank economist, also got off to a good start in 2004. Malawi was at the time the darling of international donors. Programmes to subsidize fertilizer and provide seeds to farmers created an economic revival that made it one of the world’s fastest growing economies. But his fortunes turned dramatically and upon his death many Malawians were openly celebrating his passing.
In 2005 the country declared a national disaster as more than five million people were in need of food aid because of widespread shortages due to bad harvests. However, three years later the country produced a bumper harvest, turning it into the breadbasket of the region, mainly because of the success of Mutharika’s fertiliser and seed subsidy programme.
African countries are often being told what they need to do to win more investment and expand their economies, but there is always a question as to whether making the changes will really deliver the rewards.
The lesson from top reformer Rwanda seems to support the argument that it is worthwhile.
A few days back, I had the pleasure to moderate a lively debate on investment prospects in Africa involving private sector panellists and representatives of the World Bank and International Monetary Fund.
The tone was upbeat, but discussion turned heated when it came to debt restructuring in Ivory Coast.
While it might sound obscure (and I won’t go into all the details) it raised broader questions about the role of the international financial institutions in Africa and how that may be reinforced by the global financial crisis.
The concern of some in the private sector was that foreign investors with exposure to local debt in Ivory Coast looked set to suffer the same restructuring terms that holders of foreign debt would have to bear – with the approval of the IMF. Their argument was that this would discourage foreign investors from buying local bonds in Africa.
The IMF came back robustly, saying it was only playing by the rules in Ivory Coast and suggesting that investors make closer checks before putting in their money.
But private sector participants were unclear where this might leave them in future, particularly at a time many African states are eyeing bond markets again.
Some voiced broader concern over how the international financial institutions see the private sector’s role.
Before the credit crisis, a number of African countries had begun turning to international capital markets. But Eurobond plans were put on hold when global markets seized up and the institutions stepped back in to provide emergency help to hard-hit countries. Amounts have been substantial even compared to the $10 billion in concessional financing promised by China over three years. The IMF board approved a $1.4 billion standby loan arrangement for Angola this week.
The question now is how this may change the longer term balance in sources of finance for African states.
Is the private sector overly wary of institutions that are simply doing their best to give emergency help now and fend off future debt crises? Or are those institutions muscling back in to impose their dominance in telling African states how they should go about managing their debts and getting the finance they need? How will Chinese money affect the balance?
Pictures: A money dealer counts the Nigerian naira on a machine in his office in the commercial capital of Lagos, January 13, 2009. REUTERS/Akintunde Akinleye; Dominique Strauss-Kahn, managing director, International Monetary Fund (IMF), is introduced at the International Economic Forum of the Americas conference in Montreal, June 8, 2009. REUTERS/Christinne Muschi
A project in Ethiopia that helps destitute women become self-reliant by providing them with paid employment has attracted a lot of attention from politicians visiting Addis Ababa for an international get-together.
Alem Abebe is a 14-year-old girl who left home three years ago and made her way to the capital. She now earns 50 US cents a day working at the Abebech Gobena project in one of the city’s slums. It’s not enough to send money home, but enough to survive — and to pay for night school.
World Bank President Robert Zoellick ended a visit to Africa this week with the pronouncement that this century belonged to the continent’s development despite damage to economies from the global financial crisis.
Those who remember what were flagged by some at the time as “Africa’s decades” in the 1980s and 1990s may have cause for scepticism given that in many countries they turned out disastrous despite early hopes.
The good news for Africa when the global financial meltdown began was that its financial markets were generally so far behind the rest of the world that groups such as the World Economic Forum reckoned that there was little or no danger. A new paper, posted on the economic research website VoxEU, suggests that that might be a bit too optimistic.
Tilburg University economist and former World Bank official Thorsten Beck -- along with the World Bank's Michael Fuchs and Marilou Uy -- write that despite shallow financial markets, sub-Saharan Africa is unlikely to escape the repercussions of the financial crisis.
Before the G20 meeting, there was a lot of talk inside and outside Africa about making sure the continent did not get left out while the world’s richest and most powerful set out plans to save their own economies.******So how did Africa fare?******On the face of things, perhaps not too badly.******“Our global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in developed countries but in emerging markets and the poorest countries of the world too,” the communique says in paragraph 3.******In concrete terms:******• Resources available to the IMF will be trebled to $750 billion.***• There will be support for a new allocation of Special Drawing Rights of $250 billion – something that could help poor countries***• There will be support for $100 billion more lending by Multilateral Development Banks (those include the World Bank Group and the African Development Bank)***• There will be $250 billion support for trade finance.***• Use will be made of resources from IMF gold sales “for concessional finance for the poorest countries”.***• Global financial institutions will be strengthened and reformed, ensuring that emerging and developing economies, including the poorest, must have greater voice and representation.”******The point on the gold sales was something for which Africa, represented at the summit by Ethiopian Prime Minister Meles Zenawi, had made a particular push.******But not all appeared so impressed. In East Africa based Business Daily, Allan Odhiambo’s piece was headlined “Africa thrown to back burner at G20 meeting.”******According to Nigeria’s ThisDay newspaper, President Umaru Yar’Adua’s main lament was the fact that Africa’s most populous country was not there (South Africa, with the continent’s biggest economy, was represented).******South Africa’s President Kgalema Motlanthe was quoted as saying he was “quite pleased” with the results of the summit.******How well do you think the G20 did for Africa? Will Africa really have a bigger say over the global financial system in future? Will that help?
Where once African officials might have viewed infrastructure projects solely as a good source of kickbacks, these days there is pressure from electorates, at least in some countries, to deliver on promises of improvements.
The growth that many African states have enjoyed in recent years has exposed the failure of the continent’s infrastructure still more starkly – with even South Africa suffering the kind of power outages that much of the rest of Africa has grown far too used to.
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.