The perils of ignoring Africa's economy

LAUSANNE, Switzerland — When the global financial crisis emerged last fall, many analysts expected Africa to escape relatively unscathed. Africa was so disconnected from world financial networks, the reasoning went, that it would only be marginally affected.

It hasn’t worked out that way.

“We didn’t take into account the economic impact on Africa. It has been huge,” said Michael Keating, executive director of the Africa Progress Panel, an initiative of former U.N. secretary general Kofi Annan.

The problem is that much of Africa’s economy is overly dependent on exporting raw materials, and the global market for nearly everything has dropped precipitously. Virtually the only commodities that haven’t been affected, Keating said, are cocoa and gold.

Unlike other economies, Africa doesn’t have other options. Apart from commodities, much of Africa is dependent on the money that Africans abroad send home. African workers abroad have often been the first to lose their jobs in the crisis. Since an African worker may support up to 20 people or more in his or her extended family, the loss of a job can be catastrophic.

Worse, with most of the developed world pumping billions into emergency stimulus packages, the future looks uncertain for development aid money, which up until now has been one of the few constants that many African governments counted on.

Robert Fisher, a former U.S. Trade Representative economist who is now managing director of international consultants Hills & Company, notes that U.S. aid to Africa is still on track to double by next year.

“The question,” Hills said, “is what comes after that?”

U.S. President Barack Obama may want to continue development aid, Fisher said, but political pressure could keep him from doing it. Fisher was a panelist at a seminar hosted by the German Marshall Fund of the United States and the Evian Group, a network of international business, government and opinion leaders, in Lausanne. The key message emerging from the two-day conference is that the world is moving into a new development era with new technologies, a new geography and new institutions.

With the U.S. and Europe facing enough problems of their own, it’s natural to ask if anyone should care about a continent that is receiving roughly half the world’s overseas development aid and still looks like a basket case.

Italy, which hosted this week's G8 summit, has indicated that it plans to reduce its foreign aid. Prime Minister Silvio Berlusconi has said that he has enough problems at home.

But Michael Keating warns that the reasons for not wanting to see Africa’s economic gains rolled back are not only humanitarian — security is an issue. Piracy off the coast of Somalia shows what happens when you get a failed state. Sudan provided a rear base for Osama bin Laden before U.S. pressure forced him to relocate to Afghanistan.

http://www.globalpost.com/dispatch/africa/090709/the-perils-ignoring-africas-economy