Do not leave Africa in a scramble
Published: March 16 2009
To many minds, Africa is a picture of hopeless misery: afflicted by poverty, scarred by corruption and ravaged by Aids and war. These facts are true, but they tell only half the story. In many sub-Saharan African countries output briskly outpaced population growth during the last decade, leading to sustained growth in income per capita and promising a lasting escape from poverty.
Behind the success lies many African leaders’ willingness to adopt solid macroeconomic policies and move towards more transparency and less red tape. Economic integration with the world deepened and trading relations diversified. Record-breaking prices boosted commodity exporters’ incomes. The private sector’s success, for example in telecommunications, showed that Africa does not lack good business opportunities. Before the crisis, countries such as Ghana were on course to escaping aid dependence by entering global capital markets.
But Africa is now slipping. Foreign direct investment has shrivelled. Capital markets have seized up as funds flee to the safety of rich-country sovereign bonds – with which the market is flooded. The price of trade credit has soared, sharply halting trade flows, with commodity exporters suffering additionally from the drop in prices.
As tax revenues fall and demands on public services rise, governments without large savings are in a squeeze. African leaders warn of a popular backlash: if the public suffers undeserved pain after governments followed what rich countries told them to do in the 1990s, economic growth and democratic stability are at risk. Already coups and riots are on the rise.
The world’s leading countries must act to end the global crisis as soon as possible. In the meantime, Africa should not be a casualty of other priorities. African governments that have shown a commitment to sound policies must be helped to fill temporary funding gaps. And rich countries should quickly prop up trade finance: it would do much good and cost little.
Development aid can do ill as well as good; the long-term goal must be to get rid of it. But that is no argument against short-term crisis assistance, which has been provided – quickly – to small and relatively rich European countries; many African countries need the same. Moreover, rich countries made aid promises at the Gleneagles summit that they have yet to fulfil.
The potential cost of the crisis in Africa is not just unemployment; it is starvation, civil war and the closing of an escape route from poverty. That is a price the world cannot afford to pay.
Copyright The Financial Times Limited 2009