There is now little doubt that the international economic downturn of the last two years is likely to have a severe and significant impact on Sub-Saharan Africa.
Much of 2008 was dominated by arguments that the continent would escape the impact of the downturn seen in western economies, mainly because of a general lack of toxic assets in its financial sector, and the lack of a substantive share of global trade. Tight controls on the banking sector in the region's economic giant, South Africa, and in Africa's most populous state, Nigeria, had brought little fall out from the international banking crisis.
All that appeared to change with the IMF's conference on the economic impact of the global crisis on Africa, held in Dar es Saalam, Tanzania, in February this year. The first figures of 2009 had revealed a slowing down in Africa as a result of the international crisis and for the first time economic forecasts were slashed from an expected 6 to 7 per cent to around 3 per cent. This is a figure that falls well short of growth needed for sustainable development in many countries across the region.
This was a jolt that helped turn attention to how the region's economies could navigate their way through the sharp downturn and what measures might help mitigate the worst impacts on their economies and people. Although such thought and planning was overdue, it is positive that now it will be a priority.
The African Development Bank, the continent's largest development institution, held its meeting in Dakar, Senegal, in the first week of May 2009. The meeting was dominated by a sombre mood among ministers and officials. The Bank itself highlighted a renewed emphasis on the expansion of infrastructure and also indicated plans to raise more money.
During the course of the meeting it emerged that a growth rate of 3 per cent this year could be too optimistic. The view now in some quarters is that 2009 growth in the region as a whole will be around 1 to 1.5 per cent.
Although there was concern that attendance at the World Economic Forum in Cape Town, South Africa, would decline, this was not the case. However, it became clearer at this meeting that South Africa had started feeling the effects of the international economic crisis and that but for the preparations of the 2010 FIFA World Cup, a sharper decline would have materialized. The motor industry is expected to be a particular casualty, and the agitation of labour and trades unions started barely weeks after the inauguration of President Zuma, presenting early challenges for the new government. Tourist numbers, both internal and those coming from abroad, are expected to decline this year. In some quarters there is talk of stretched government finances starting to affect some programmes. However, no concrete data is available to verify this. That Trevor Manuel stayed on in government and the appointment of Gill Marcus as the new Governor of the Reserve Bank of South Africa, are both seen as advantageous to the South African situation.
In Uganda, President Museveni continues firmly in power despite widespread evidence of a slowing down in the economy. Remittances which have underpinned the economy for more than a decade have declined sharply. A decrease in both tourists and business clients, would-be hotel guests, has brought a sharp retreat in a service sector that had had boomed over the last three years as Uganda hosted several large conferences. Several businesses have started reducing staff, raising the prospect of an increase in unemployment levels.
Overall, Africa seems to be struggling to come to terms with an economic crisis that is not of its making but from which it cannot escape. There are now clear signs that investment has started to dry up and the question now is how far back the reduced investment and government budgetary support, not to mention slowing of business and economic activity, will set development goals. There is real concern that interest in Africa's plight will fall sharply as Europe and the United States wrestle with their own economic challenges.
Yet it is not all doom and gloom. Investor meetings in Zurich and Frankfurt in July showed there was still an appetite for investing in Africa. The two meetings were oversubscribed, mainly by those wishing to learn more about the continent's potential and sectors of possible investment. It remains to be seen whether this interest is converted to actual investment in the second half of the year and beyond.