'Crisis offers Africa a chance'
2008-10-15 07:06
Nairobi - The same marginalisation from the world's big money that stifled Africa's growth may cushion it from the global financial crisis and could even be a boon for the impoverished continent, analysts say.
African investors will be less inclined to look abroad and foreign ones increasingly lured to growing "frontier markets". Possible reduced agricultural subsidies in the West could also benefit the continent, experts predicted.
Some key financial institutions have sunk since a US-born credit crunch what many have described as the most serious financial crisis since the 1929 Great Depression, sending stock markets in the US, Europe and Asia to huge losses.
"It tells us that western banks, once regarded as invincible, are not risk-proof," said Evans Manduku, a Nairobi-based political scientist.
"We are likely to see Africans investing in local government securities, government-owned banks instead of shipping cash abroad. This will be one of the advantages of this crisis," he added.
"African banks survived because of their minimal market value, excessive government control and forex restrictions," said Jackson Mbari, a Nairobi economist.
"This crisis will now trigger even deeper reforms like tighter lending, which is good for fragile economies," he said.
Analysts admitted that a financially crippled West may shrivel aid flows to Africa but argued that may only speed up the shift away from traditional partners and further increase trade with energy-hungry Asian giants.
"Increasingly, the continent will become self-reliant because of trade with China, India and other powers from the east, who emphasise less on governance issues," said Jared Wafula, a Nairobi university economist.
"Rich companies will now bring their cash to Africa, where growth propects are real and risks minimal," he also said.
Standard and Chartered Bank's researcher for Africa Razia Khan said sovereign wealth funds will particulary turn to new "frontier markets," particulary in Africa.
Ugandan State Minister for Trade Nelson Gagawala Wambuzi saw another reason to hope that some African countries could gain from the West's woes.
He predicted African farmers may benefit from a possible reduction in subsidies in developed countries.
"What has been stopping development in Africa is unfavourable policies which protect and advantage European and American farmers. It is only common sense that correct principles and an opening up of markets is what will help these western countries resolve this crisis," he said.
Rightful place
"This is an opportunity for Africa," Wambuzi said. "This is something we can capitalise on. One man's meat is another man's poison. We should prepare as Africans to start taking our rightful place on the planet."
Johannesburg, Africa's largest stock market, took a blow last week, with the All Share index shedding 6.97% and hitting a two-year low. But the panic soon receded and the bourse clawed back some of its losses.
"These markets were driven by fears and emotions, but the fundamentals of trade are still intact," said Joseph Nyaga, a broker.
Analysts now feel that African banks will re-assess their lending securities, and tighten the issue of credit cards which have allowed consumers means to spend beyond their limits.
Last week, the International Monetary Fund warned that the global economy was sinking in a maelstrom of financial turmoil - the worst since 1930s - and faces a painful crawl toward recovery in 2009.
The fund said sub-Saharan Africa will see slower growth this year and next, a sharp spike in inflation pressures, as the region suffers from the turmoil.
-AFP
- AFP