ShareThisWhen the global financial crisis erupted last fall, Africa was one of the few regions of the world that hoped to survive unscathed.
After all, Africa's banks had little exposure to the toxic debts of the Western financial system. Focused on their domestic markets, and relatively well regulated, Africa's banks were able to escape the worst of the global storm.
There was even a hope that Africa could "decouple" from the worldwide recession by boosting its commodity exports to China, where the demand for African oil and minerals has dramatically expanded in recent years.
But as the crisis deepens, it's becoming increasingly clear that Africa's economies will suffer serious damage. Optimistic forecasts are being furiously scaled back, with African leaders now acknowledging that the impact was severely underestimated.
"There's no evidence of 'decoupling' from the world economy," Hannah Edinger, head of research at Frontier Advisory, a research company in South Africa, said at a conference in Johannesburg this week.
The crisis spells the end of an unprecedented tide of growth for the world's poorest continent -- six years of annual growth of 5 percent or more.
And it means more years of hardship for millions of impoverished Africans who had pinned their hopes on the recent boom.
Until recently, the International Monetary Fund had praised the African economies as "surprisingly resilient" in the face of the global crisis. But this week, the IMF warned that all of Africa's gains of the past five years are "at risk" from the "tremendous challenges" of the financial crisis.
Growth forecasts for Africa are closely mirroring those for the world, with Africa's performance being revised downward with each drop in the global forecast over the past three months.
"The downturn in the advanced economies has been stronger than expected, commodity prices have dropped more sharply than anticipated, generalized external funding pressures have surfaced, and the risk appetite among foreign investors in Africa has deteriorated," Takatoshi Kato, the IMF's deputy managing director, said in a statement.
With some African countries heavily dependent on commodity exports for 50 percent to 90 percent of their economic output, the steep decline in commodity prices and the weakness of export markets will cause major damage to Africa this year. The recession in Western economies will also hurt Africa by cutting the level of foreign aid and the amount of remittances from workers in overseas jobs.
"Global trade and aid won't be in Africa's favor," said Stanley Subramoney, deputy chief executive officer of the Southern Africa office of PricewaterhouseCoopers. "You're going to see more protectionism and tribalism and nationalism in global thinking. Africa is on its own."
Even the hopes of a Chinese rescue have failed to materialize. Dozens of Chinese mining companies have pulled out of Zambia and the Democratic Republic of the Congo in the past three months.
"Africa's growth is tied very closely to commodity demand from China, and Chinese growth could be as low as 3 or 4 percent this quarter," said Julian Wentzel, head of research at Macquarie First South Securities in South Africa.
Almost all of the benefits of Africa's recent growth "could be compromised" as a result of the global situation, African Development Bank president Donald Kaberuka said last month.
In its latest forecast, the IMF suggests that the growth rate in sub-Saharan Africa will be just 3.5 percent this year -- scarcely enough to keep up with the population growth.
The continent's biggest economy, South Africa, is likely to grow by less than 1 per cent this year, after estimated growth of 3 per cent last year, according to independent analysts in Johannesburg.
All of this is a jolt for a continent that seemed to have a bright outlook. A year ago, many analysts were convinced Africa had finally left behind decades of stagnation. Poverty was being reduced, if only marginally in some countries. Those improvements are now in jeopardy.
"The deceleration of income growth will undermine the modest gains in poverty reduction that many countries have recorded," said a recent report by the African Development Bank.
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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