The global economic crisis is beginning to hit African countries hard. Since they had no hand in its making, its effects are especially painful to bear.
But this crisis could also spur Africa to accelerate reform efforts and forge a new way of doing business, one which is grounded in fairness, integrity and sustainable development – rather than the greed and recklessness which got the world into this economic mess.
To catch-up with the rest of the developing world Africa needs much higher levels of growth. Turning our backs to globalization and the open economy, as some would have us do, would spell disaster.
Even in these times, we cannot forget how greater flows of trade, capital and technology have lifted billions out of poverty since the end of the Cold War. It is not these movements which led to the current crisis.
On the contrary, they helped reduce the fall. A workable solution to the current crisis demands acting selflessly in global terms. Even as their exports plunge, the great manufacturing economies of Asia have to resist the urge to dispense their traditional economic medicine, to cheapen exchange rates to increase trade flows.
Rather than reverting to greater protectionism which will hurt most of us, we have to continue to press ahead for greater openness.
Without this push, emerging markets could suffer from a lack of access to wealthier trading partners, and the great developed markets of Europe and North America would be denied the possibility of benefiting from the potential inherent in the younger populations of Asia and Africa.
Africa has a vital role to play in global efforts to remove weaknesses and imbalances, but it needs a stronger voice. Long-term reductions to world trade would be particularly damaging to developing countries, including those in Africa.
Much of this will be determined elsewhere, but Africa has choices. One of those is to reduce its own protectionism in the face of the crisis. Another is to assume a constructive role in global negotiations at multilateral fora, such as the G20, and for Africa to make a greater contribution than simply asking for more aid.
There is no doubt that many states which are already fragile could become even more so as a result of the global economic downturn. Across Africa countless families have been affected by the fall in remittance flows, an increasingly important source of investment and welfare for many countries.
The drop in commodity prices will hit African countries harder than it will benefit them in the form of lower fuel and food costs, not least since virtually all of our continent’s development success stories have been underpinned by the prudent management and use of such primary goods.
The anticipated fall in aid may not be bad news over the long-term since few countries have developed by donor support, but it will pressure those governments who in the short-term rely on this income.
The lack of liquidity in global markets will hit cash-strapped African markets, especially where private equity is needed for infrastructure investment.
One big change about how we think differently about the future compared to two years ago is that we should no longer assume a commodity super-cycle.
This has been painful but not all bad. Africa’s future depends not only on how well we use commodity inflows, but also that this future needs to be about more than commodities.
Botswana is a remarkable example of how to invest a commodity windfall wisely. Without reliable banks and efficient credit markets, Africa like other developing regions will remain poverty-stricken.
But convincing citizens to entrust their hard-earned savings to institutions requires reinstating a sense of value in the banking sector, building a reputation for fair play and fair returns rather than excess and profligacy.
In the immediate-term, African governments will have to manage the economic and political fall-out of lower revenues from natural resources, trade and tax, as well as smaller aid transfers.
They will have to resist the temptation to play to the political gallery and roll-back reforms in the face of such pressures. Over the longer-term, the developing world – and Africa in particular – must renew efforts to build a domestic consensus on the necessity of economic reform, the importance of high growth rates to reduce poverty, and the integration of our nations into the global economy.
If they can do this, they can take advantage of the trends driving capital to emerging markets. Lastly, and most urgently, Africa needs to strengthen and improve its competitiveness.
By improving African competitiveness through lowering the costs of doing business and deepening the continent’s integration with global markets, we can simultaneously reduce our economic vulnerability to crises and increase growth.
Competitiveness is the life-blood of economic growth. Such growth is the linchpin of social harmony and political stability. This is what has propelled Asian development for the past forty years, from Japan’s post-war recovery, through the tigers and cubs, to China’s amazing recent performance.
But it is worth reminding ourselves that Africa is populated by lions that operate as a pride, in comparison with the Asian tigers who tend to be individual animals. Only if the lions of Africa work together will we be able to feed ourselves and our families.
This is Africa’s opportunity. We must seize it with both hands.