Last week, the G-20
group of the world's largest economies came up with a package aimed at ending
the world financial crisis, and helping to restore economic growth. The deal includes over
one trillion dollars in loans and guarantees that will, among other things, help
developing nations boost trade with improved access to credit. From
Washington, reporter William Eagle spoke
to two development experts about the potential impact of the summit on Africa.
For many months, some in the African media
suggested the continent might avoid much of the global market meltdown. Despite
progress in recent years, the continent remains among the regions of the world
least integrated into the global trading system.
changing. A drop in consumer demand in
the industrialized world has hit African exports – including flowers and
produce prompted by trade deals like the US Africa Growth and Opportunity
Act. The continent's stock markets
have dropped by half. African migrants in the West have had to cut the
remittances they send to families back home – a vital part of the continent's
development experts, the G-20 moves may
help, at least in the short term, to cushion the blow.
The summit promised
to crack down on tax havens, which account for the loss of billions of dollars
in revenues per year to Africa – the equivalent of about seven percent of
Africa's gross domestic product, according to the OECD.
is the Africa program manager at the Royal Institute of International Affairs
at Chatham House in London.
"Capital flight from
Africa is considerable," she says. "More money left Africa in 2008 than was invested in
2007. For those countries where
corruption is a big problem, clamping down on tax havens is really important."
The G-20 also
announced it will infuse the International Monetary Fund with one trillion
dollars for loans and guarantees. The
plan includes $300 billion over three years to multilateral development
institutions such as the Africa Development Bank that extend loans to
The summit deal
also provides $250 billion for financing credit to help boost world trade,
which according to the World Trade Organization, is expected to contract by 9
percent this year.
Joel Kibazo is an associate
fellow with the Africa program at Chatham House with a background in economics
"There are countries
and businesses that wanted to continue exporting and trading [but could not]," he says, "because
there were no lines of credit to finance the trade. So however legitimate the business is, if
there is no [financing], it makes things difficult for many countries."
Yet, there are also
concerns about the summit decisions. The
anti-debt group Jubilee 2000 notes that the resources from the G-20 come as
loans, rather than grants. The group is
concerned that the scheme could add millions of dollars in African debt, now pegged at about $300 million dollars..
"We don't know about
interest rates attached to the loans and repayments," she says. "You would hope that the
developed world would have learned its lessons, and if the point of this was to
support the poorest nations in the world, take note of that. "
economists say that African nations might be able to compensate for the drop
off in trade with the West by increasing commerce among themselves. They suggest that Africa might also boost
trade with other nations of the southern hemisphere and Asia, including Brazil,
India and China. which in 2007 represented over 30 percent of Africa's total
But Donnelly says much of the continent still
lacks the roads and other infrastructure to boost intra-African trade. And, she says most African trade is still with
Yet, Kibazo says President Obama's suggestion that
the US may not return to being the world's largest consumer of goods – and among
the last in savings – will pressure Africans to reconsider their markets:
"What you see," he says, "is
confirmation of a paradigm shift that says the US is not the only economic engine
of growth in the world. We've seen the
power of China and [growing demand for imports in] of India. So we may be
looking at a world in which China, India and some of Asian countries also account
for some of the demand for some of the goods that Africa produces."
Kibazo says he's
concerned that the industrialized world may reduce the bi-lateral aid and
commitments made for example to meet the UN Millennium Development Goals, which
include reducing poverty by half by 2015. The UN Millennium Development Campaign
estimates assistance will be reduced by at least $4.5 billion as a result of
the economic crisis.
Donnelly says with regard to the world economy, many African
nations are "at the back of the airplane – where the turbulence is worse." She says despite G-20 support, and debates
over stimulus packages and maintaining aid, it's ultimately up to African
governments to manage their way through the crisis.