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Monday, July 6, 2020
ACCRA, May 28 2009 (IPS) - African governments should invest in creating jobs, providing social services and building food security to shield people against the effects of the global economic and financial crisis. They should also develop micro-credit facilities to make money available to small businesspeople and boost economies.
These proposals were raised at a two-day conference of the European Commission and the European University Institute (EUI) entitled ‘‘Financial markets, adverse shocks and coping strategies in fragile countries’’, which brought together 80 researchers and policy-makers from Africa, Europe and international organisations in Ghana’s capital Accra last week.
The workshop was held as part of the preparations to produce the European Report on Development (ERD) aimed at finding solutions to the problems that these countries face in light of the economic crisis.
The overall picture on the continent does not look bright. Dwindling foreign aid and remittances and a slow-down in foreign investments across Africa as a result of the global financial crisis has exacerbated the fragility of these countries.
An earlier report by the EUI said the fragile nature of these countries has ‘‘severely affected their development prospects. If they are to make progress towards the Millennium Development Goals, they and aid partners need to find new and innovative ways of overcoming their vulnerability and moving away from their fragility’’.
Africa’s current situation therefore calls for new thinking. Luca Alinovi, an economist at the Food and Agriculture Organisation (FAO), said that ‘‘in some countries we have found that food is not working because the people who are used to buying their own food do not want to rely on these interventions’’.
He suggested that African governments should seriously consider investing in employment, social services and food security.
The leader of the ERD team, Giorgia Giovannetti, noted that the development of micro-credit facilities is another area that African governments must consider to help those in the small business sector and to boost economies.
‘‘We foresee that the decrease in aid to these countries and a fall in export revenue as a result of low commodity prices may lead the people in some of these countries to riots and other civil disturbances,’’ Giovannetti told IPS.
She regarded the conference as part of a wider attempt to involve Africans in this effort of the European Union to develop ideas on how African countries can protect themselves from the onslaught of the global crisis.
Giovannetti stated that ‘‘though no serious research has yet been conducted, newspaper headlines in the West indicate that no one is willing to invest in fragile states. The consequences of this are that poverty will increase and it would put a lot of countries in trouble that they are not prepared for.’’
Yaw Nyarko, a Ghanaian and New York University professor of economics, warned that lower inflows of foreign investment and development aid will have a severe impact on Africa. ‘‘Ghana started raising funds on the international bond market to finance development projects. However, the global crisis has closed this door.’’
He argued that, while it seems as if ‘‘Ghana is doing well now, the situation can implode if the crisis is not controlled because the government’s deficit is growing’’.
The country’s central bank governor, Paul Acquah, earlier in the month told journalists that ‘‘the Ghanaian economy has not been immune to the contagion of the global crisis, even though the impact has been relatively limited in the first round’’.
Acquah added that private inward transfers received by non-governmental organisations, embassies, service providers and individuals through the banks in the first three months of 2009 amounted to 1,98 billion dollars, which represents a 7.3 percent decline from the same period in 2008.
A study of the EUI states that, ‘‘many Sub-Saharan African countries are in situations which can be described as fragile and which is caused by, among other things, conflict, post-conflict, poor governance as well as weak institutions’’.
Janvier Nkurunziza, an economist with the United Nations Conference on Trade and Development (UNCTAD), confirmed this with his gloomy description of Burundi’s prospects, which will be badly affected by the global financial crisis despite having no established banking system in place.
‘‘Burundi is a weak state with very few people having bank accounts. It has a high default rate among bank borrowers," he said. The country is ‘‘very fragile as a result of political and economical stability’’.
The ERD is due to be released in October this year.
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