- Jorge Maia is head of Research and Information for Industrial Development Corporation of South Africa, established in 1940 to promote economic growth and industrial development. The opinions expressed are his own –
Serious shockwaves are hitting Africa’s shores as the global economic crisis unfolds.
The extent and depth of the damage is extremely difficult to assess or project, but it is clear that the pattern of financial flows associated with investment, lending and trading activity has been dramatically altered, with detrimental economic and social implications for the continent at large. The adverse impact has been gradually spreading from a regional perspective – a serious setback to Africa’s recent growth performance, which had averaged 6 percent a year from 2003 to 2008.
The effects will vary widely, depending on each country’s integration within the global financial system, its dependency on exports and tourism receipts, official development assistance and remittances from African citizens working overseas, among other factors.
Access to trade credit lines used to finance imports and investments is under threat due to the global credit crunch, while portfolio flows have been reversed and remain weak due to institutional deleveraging, pessimistic investor sentiment or extreme risk aversion.