Africa the worlds poorest continent
played no role in the making of the 2008 global economic
Yet it was hit particularly hard by the fallout. Tumbling
commodity prices for oil, copper and titanium, decreases in
trade, investment flows and remittances sharply reduced
Africas income. Budget revenues for commodity-exporting
countries such as Angola, Nigeria and Zambia shrank by more
than 50%. For other governments foreign aid dried up.
Remittances to the continent dropped by over 8% with a
profound impact on poverty alleviation in places like Ghana or
Lesotho, where the flows comprise 28% of GDP.
Though African financial institutions steered clear of toxic
assets, they could not escape the effects of evaporating global
liquidity. Whats more, the crisis hit at the worst
After registering marginal and even negative growth rates,
it appeared Africa had turned the corner. In 2008, fuelled by
high commodity prices, the region recorded growth of 5.7%,
albeit shy of the 7% rate needed to achieve the Millennium
Development Goals. Net foreign direct investment inflows had
risen from $13 billion in 2004 to about $33 billion in 2007.
Portfolio equity flows had also shot up, reaching a value of
$15 billion in 2006.
Africa had also been weathering food and fuel price shocks
in 200708 ahead of the crisis. The IMF says Africa grew
at 1.9% in 2009 but expects a slight improvement to 3.1% this
year. Even then, with a population growth rate of 3.0%, income
per capita will be stagnant or even negative for some
countries. Some 53 million Africans will slip deeper into
The impact of the global crisis varies across the continent.
Its a different picture, for example, for Ghana, Nigeria,
Kenya, South Africa, where key economic drivers have more to do
with the extent of financial integration with the rest of the
world and whether they are oil or mineral exporters.
Theres yet another picture again for oil importers
such as Burundi, Guinea-Bissau or Liberia, which are fragile,
resource-poor and dependent on foreign aid.
Fortunately, Africas resilience has been remarkable so
There have been no African so-called PIIGS
countries that are financially bankrupt. And there are
only a handful of countries Ghana, Kenya, Nigeria, South
Africa that have sovereign debt.
Nor has there been widespread civil unrest following
austerity measures as with Greeces violent
protests. But that possibility exists among Africas
restive youth population. About 40% of Africas 1 billion
population is under the age of 15, and high unemployment among
them is a serious concern.
In the near term, Africa will have to maintain fiscal and
monetary stability while dealing with budget deficits that are
likely to increase, and dwindling development finance
occasioned by the global economic crisis. The delivery of
social services has also been impaired. Stronger economies such
as Botswana, Ghana and Mauritius are in a position to weather
this challenge compared to weaker ones such as Benin, Mali and
The temptation for many policy-makers is inflationary
finance, but this would be disastrous. Zimbabwes currency
was abandoned when inflation hit 6.5 quindecillion
novemdecillion percent 65 followed by 107 zeros
in February 2009.
A more judicious alternative would be to undertake major
structural reform. Bloated bureaucracies with over-lapping
functions, a multiplicity of goals and redundant staff need to
be trimmed. Kenya, for example, has 92 ministers and deputy
ministers; Ghana has 64 and Zimbabwe 58. Further savings can be
achieved by curbing waste, graft and corruption in the
government sector, which are serious problems in Angola, Congo
DR, Kenya and Nigeria.
The African Union estimates that corruption costs Africa
$148 billion annually, which may be compared to the $30 billion
in foreign aid that Africa receives from all sources in a
CLUB DE MADRID PRINCIPLES
For the long haul, Africa will have to reduce its
vulnerability to external shocks or crises and improve its
capacity to cope with them. Towards this end, the Club de
Madrid, an association of former presidents around the world,
met in Accra last November to brainstorm this very issue. The
meeting was as remarkable in its high-profile attendees as its
frank talk: speakers included ex-presidents John Kufuor of
Ghana, Olusegun Obasanjo of Nigeria and Benjamin Mkapa of
There was near-unanimous agreement that the global economic
crisis has compounded existing challenges of food
security,unemployment, poverty reduction, basic public
service delivery, climate change and migration, any of which
has the potential to foment civil strife and to frustrate the
achievement of the Millennium Development Goals. Furthermore,
it was recognized that the ultimate responsibility for dealing
with the crisis rests with Africas leaders, who must
articulate, implement and assert an appropriate strategy to
mitigate the impact of the crisis.
Specifically, the meeting stipulated the following
Good governance is the foundation of sustainable and
Africas greatest resource is its people. A much
greater investment in human capital, especially women, is
needed. The energy of the continents large and youthful
population must be channelled for the benefit of social,
political and economic progress. Youth must be empowered by
widening and deepening educational opportunities, including
providing adequate education at all levels as well as
Agriculture must be reprioritized. Investment in
technology and research is essential to improve food
Africas economic growth strategy has been too
oriented to global markets to the neglect of cultivating local
and regional markets. African countries need to strengthen
their own domestic markets as a first recourse to drive
The informal sector comprises the great bulk of
economic activity on the continent, and must assume greater
prominence in Africas economic planning. Informal sector
assets need to be monetized, including rights to land and other
property, as a mechanism for legally empowering the poor and
expanding opportunities in the formal sector.
African countries must cultivate a climate conducive
to private-sector development, particularly for small and
medium enterprises. Public-sector resources need to be deployed
and to facilitate inclusive growth.
Regional fiscal and trade policies need to be made
more coherent. Regional and sub-regional bodies such as the
African Union and the regional economic communities need to
coordinate more effectively to stimulate growth and
development. Customs unions, common markets, free trade areas,
all supported by joint investments in improved national and
regional infrastructure, will empower Africa to realize its
Such frank talk has been rare in Africas officialdom.
Forthright admission of mistakes, their correction and adoption
of better economic policies are essential if the continent is
to break out of the poverty trap. The continent has immense
natural resources, but they have been grotesquely
Yet reform has been a tall order for Africas
autocrats. The record before the 2008 global economic crisis
was abysmal, and the pace of reform excruciatingly slow.
Under pressure to reform abominable economic and political
systems in the 1980s and 1990s, most African leaders
implemented the barest minimal cosmetic reforms needed to keep
western aid flowing. Africans derided this manoeuvre as the
Babangida boogie (named after former Nigerian
military ruler Ibrahim Babangida) one step forward,
three steps back, a flip and a sidekick to land dollars in a
fat Swiss bank account.
Loath to see any diminution in their power and control,
leadership across the continent shunned reform. When asked to
cut government spending, they established a Ministry of
Less Government Spending. When asked to establish
democracy, they empanelled a coterie of fawning sycophants to
write the electoral rules, tossed opposition leaders into jail
and held coconut elections to return themselves to
Between 1981 and 1991, the World Bank spent some $25 billion
to sponsor structural adjustment programmes (economic
liberalization) in 29 African countries. In 1994, only six
Gambia, Burkina Faso, Ghana, Nigeria, Tanzania and
Zimbabwe were adjudged economic success stories. But
within four years, all had vanished from the list, except
Yet, each year the World Bank trots out another list.
The reform process was stalled by vexatious chicanery,
strong-arm tactics, wilful deception and political acrobatics.
Fewer than 10 African countries can be described as economic
success stories Benin, Botswana, Ghana, Mali, Malawi,
Mauritius, Rwanda and Uganda and only 16 out of the 54
African countries are democratic. Intellectual freedom remains
in the Stalinist era: only eight African countries have a free
and independent media.
Even in economically successful countries such as Ghana and
Uganda, there has been some back pedalling. In Ghana, serious
questions have been raised about the countrys commitment
to private-sector development, with wanton government
interference in private-sector deals. In 2009, the government
sought to abrogate various deals involving Vodafone, Aker ASA
In Uganda, privatization proceeded in fits and starts. The
process was halted twice by Ugandas own parliament
because, according to the chair of a parliamentary select
committee, Tom Omongole, it had been derailed by corruption
with three senior ministers who had had political
responsibility. The sale of 142 enterprises was initially
projected to generate Ush900 billion or $500 million. However
by 2003, the revenue balance was only Ush3.7 billion.
Two factors will weaken already wavering commitment to
First, is the expected backlash against the so-called
neo-liberal Washington consensus. Ideologically, the crisis has
discredited laissez-faire economics or free-wheeling capitalism
and may produce a retreat into statism government
control and direction of economic activity.
When governments in rich countries are injecting huge
stimulus spending plans and bailing out big banks and
businesses, why should African governments be told to curb
spending and loosen control?
Second, Chinese forays into Africa greatly impede the
prospects for reform. In the past, western donors attached
reform conditions to their aid programmes. But Chinese
investment and promises of aid without conditions have removed
the incentives to reform.
One example makes the point. In 2002, the IMF scrapped a
donors conference for Angola, citing corruption and the lack of
transparency in government finances. But in November 2003,
Angolas finance minister travelled to China to seek
financial assistance. A year later, China extended to Angola a
$2 billion oil-backed loan, whereby future oil production is
mortgaged against the loan.
In 2006, Chinese premier Wen Jiabao visited Angola and
announced that China had extended another $2 billion to Angola,
on top of the $1 billion announced a few months earlier and the
original $2 billion from 2004.
Regardless of the geo-political and ideological posturing,
however, unvarnished pragmatism is required of African leaders.
The aid and investment resources Africa desperately needs can
be found in Africa itself, and it requires reform to unlock
Global Financial Integrity, a Washington-based NGO,
estimates that $1.8 trillion in illicit funds were moved out of
Africa between 1970 and 2008. If anything, the global economic
crisis has underscored the imperative of prudent economic
management, sound developmental policies and good governance.
African autocrats who ignore this dictum do so at their own
Elections are coming up in Egypt, Ethiopia, Senegal, Sudan,
Uganda and other countries. The chaotic and violent aftermath
of recent elections in Kenya and Zimbabwe should send a clear
message that Africans will no longer put up with the Babangida
George Ayittey, a native of Ghana, is president of the Free
Africa Foundation in Washington, DC. His forthcoming book, The
March of Freedom: defeating dictators, will be published by