South Africa, which has officially slipped into a recession, will host this year’s World Economic Forum on Africa. It’s scheduled for June 10th through the 12th in Cape Town. More than 700 leaders from Africa and elsewhere are expected to attend this year’s meeting.
Katherine Tweedie, Director of Africa for the World Economic Forum, says, “The theme for the summit is Implications of the Global Economic Crisis for Africa. And as such, we’re going to be looking at the global shifts that are happening around the world and the specific implications and effects for the continent."
Feeling the effects
The latest economic figures for South Africa show a drop in the growth rate of nearly six-and-a-half-percent. If South Africa has been hit hard by the global economic crisis, is the rest of the continent following suit?
“For quite some time there was the view and the hope that Africa would be able to come through this crisis a little less unscathed than the rest of the world. But, it goes to show that we really are globally connected. And particularly in certain industries, such as the resource sector, Africa has been largely affected,” she says.
For example, many thousands of miners in South Africa have been laid off because the global demand for minerals has withered. Such layoffs threaten to increase poverty.
But Tweedie says some sectors have been spared.
“Certain industries, such as the financial services sector, for example, in both South Africa and Nigeria, have remained relatively strong and have not required any financial bailout to date,” she says.
Tweedie describes Africa’s economic growth of recent years as “real” and not built on what she calls a credit bubble.
Spend, if you can
Countries like the United States are pumping billions of dollars into their economies to spur growth and end the recession. However, African countries do not have that option.
Tweedie says, “Most African countries are not sitting on significant amounts of capital that can be used as stimulus in this time. And so, they are looking to developed countries to re-commit the aid packages that have been promised over the years leading up to this crisis during the boom times. And I think that it’s important for these aid packages to continue.”
However, some fear that could result in another long cycle of debt for developing countries. In April, G8 leaders, in London, pledged to give a lot of money to the International Monetary Fund for loans during the economic crisis. Critics say in the past, those loans carried conditions that actually made things worse for developing countries.
Tweedie says those fears are justified.
“We have to find a very, very fine balance between the need for assistance, the need for economic stimulus, and not to be too over-extended in the assistance. And I think that this will be an important thing for our leaders to assess when they look at the structuring of the financial assistants that is provided for Africa,” she says.
The other crisis
The World Economic Forum on Africa will also focus on the ongoing food crisis, which triggered riots in some African countries last year.
Tweedie says, “We have a plenary session entitled Africa the World’s Potential Breadbasket. And within this we’re going to be looking at why African and many countries are still reliant on aid for food, when in fact it has significant potential to not only meet its own food needs, but potentially to supply other countries globally.”
The forum will also consider the economic and social effects of next year’s World Cup in South Africa.