Global crisis will constrain Africa for five years, says Manuel
By Gordon Bell, Business Report, 18/01/2009, Cape Town
The global economic crisis was stifling investment into Africa and would put strain on the region for at least another five years, finance minister Trevor Manuel said on Friday.
Manuel said trade finance was drying up, budget revenue was more difficult to raise and some investments were being scrapped, resulting in job losses.
"The current economic pressures are not of short duration, we are looking at a number of years, at least five years or so," Manuel said on the sidelines of a meeting of African policy makers to find ways to deal with the crisis.
"If the conditions are as constrained over five years as they are now, then everything will go backwards."
Major developed countries are in recession, stung partly by a credit squeeze, and growth is slowing in emerging economies as commodity prices fall and capital inflows decrease.
Manuel said an International Monetary Fund report next week should give more details of the effects but it was clear that trade finance, which tended to be in hard currencies, was difficult to access. When finance was available, interest rates were high.
Much-needed inward investment was also at risk, while aid flows were falling.
"We are also seeing foreign direct investment termination. Where there were latent investments in sectors such as mining and so on, we are seeing outflows as these investors try and square their positions back in their home countries.
"The consequences of that is, of course, job losses."
The meeting of the African committee of 10, which follows talks organised by the African Development Bank last November, aims to formulate a co-ordinated response to the crisis. It also plans to push for a greater say for the continent within the Group of 20 (G20) leading economies. Only South Africa currently sits on the G20.
African Development Bank president Donald Kaberuka said the crisis had an international dimension and required a collective response. "This is not simply a financial crisis. It comes on top of the food crisis, volatility in energy markets and deepening poverty in Africa."
Kaberuka said the bank was setting up two funds totalling up to $2.5 billion (about R25 billion) to help African countries deal with the slowdown.
An emergency liquidity fund of up to $1.5 billion would pump money into countries to ensure that planned development projects did not falter. A trade finance fund would help firms better access credit lines.
In a speech earlier, Manuel said African countries were experiencing capital outflows as a result of the global downturn.
"The export markets developed with enormous sacrifice are suddenly closed to imports from our countries, as a result of falling consumer demand and increased protectionism."
This was causing significant fiscal pressures, he added.
The global economic crisis was stifling investment into Africa and would put strain on the region for at least another five years, finance minister Trevor Manuel said on Friday.
Manuel said trade finance was drying up, budget revenue was more difficult to raise and some investments were being scrapped, resulting in job losses.
"The current economic pressures are not of short duration, we are looking at a number of years, at least five years or so," Manuel said on the sidelines of a meeting of African policy makers to find ways to deal with the crisis.
"If the conditions are as constrained over five years as they are now, then everything will go backwards."
Major developed countries are in recession, stung partly by a credit squeeze, and growth is slowing in emerging economies as commodity prices fall and capital inflows decrease.
Manuel said an International Monetary Fund report next week should give more details of the effects but it was clear that trade finance, which tended to be in hard currencies, was difficult to access. When finance was available, interest rates were high.
Much-needed inward investment was also at risk, while aid flows were falling.
"We are also seeing foreign direct investment termination. Where there were latent investments in sectors such as mining and so on, we are seeing outflows as these investors try and square their positions back in their home countries.
"The consequences of that is, of course, job losses."
The meeting of the African committee of 10, which follows talks organised by the African Development Bank last November, aims to formulate a co-ordinated response to the crisis. It also plans to push for a greater say for the continent within the Group of 20 (G20) leading economies. Only South Africa currently sits on the G20.
African Development Bank president Donald Kaberuka said the crisis had an international dimension and required a collective response. "This is not simply a financial crisis. It comes on top of the food crisis, volatility in energy markets and deepening poverty in Africa."
Kaberuka said the bank was setting up two funds totalling up to $2.5 billion (about R25 billion) to help African countries deal with the slowdown.
An emergency liquidity fund of up to $1.5 billion would pump money into countries to ensure that planned development projects did not falter. A trade finance fund would help firms better access credit lines.
In a speech earlier, Manuel said African countries were experiencing capital outflows as a result of the global downturn.
"The export markets developed with enormous sacrifice are suddenly closed to imports from our countries, as a result of falling consumer demand and increased protectionism."
This was causing significant fiscal pressures, he added.