Africa could soon suffer seriously from the global credit crisis as Western countries start to build up huge amounts of debt in an effort to head off an international recession.
African ministers are concerned that the West will become so focused on domestic problems that they will ignore their development pledges for Africa.
The serious threat to African economies posed by the global financial crisis was an emerging theme at the World Economic Forum in Davos on January 27-31.
Politicians and economists stressed that an era of relative optimism about Africa’s economic prospects was coming to a close.
A number of key reasons are now emerging as to why the financial crisis could threaten Africa’s economies, which have felt themselves relatively insulated against the mounting credit problems.
First is the issue of trade and financial protectionism where Western ministers will be under pressure to direct loans towards their own markets at the expense of others.
Second are concerns about the fall in commodity prices.
Agriculture is also suffering from the high price of fertiliser, which is inhibiting investment.
Finally African economies are also suffering from a fall in remittances from their own Diaspora who themselves have been hit by the credit crunch in the West.
Speaking to the opening session in Davos, Trevor Manuel, South Africa’s finance minister, said that Africa’s economies were “at risk of decoupling, derailment and abandonment.”
Mr Manuel also believes that the huge volume of debt being issued by countries like the US and the UK could crowd out other sovereign borrowers.
The South African minister’s concerns are shared by Kofi Annan, the former secretary-general of the United Nations, who told the UK-based Financial Times: “Africa had nothing to do with the sub-prime crisis but we are all going to be affected.”
Mr Annan believes that the loss of remittance income sent by Africans working overseas will be the biggest blow.
“Africa gets billions from the diaspora,” he said.
This concern was echoed by Rachid Mohammed Rachid, Egypt’s trade minister, who told the forum: “Workers in the Gulf and elsewhere are being sent home, so remittances will eventually go down.”
Ngozi Okonjo-Iweala, a managing director of the World Bank, has suggested that 0.7 per cent of the spending stimulus packages adopted by developed nations be directed towards the developing world.
However, he is not optimistic this will happen.