30 September 2009
U.S. Has Worked to Help Africa Weather Global Financial Crisis
Treasury official tells U.S.-Africa Business Summit of “vigorous support”
Washington — The Obama administration recognizes the effect the global financial crisis has had on sub-Saharan Africa and has “responded with vigorous support,” says Deputy U.S. Treasury Secretary Neal Wolin. Now it appears that Africa may be turning the corner in meeting the challenges of the 21st century, he adds.
In a keynote address September 30 to the Seventh Biennial U.S.-Africa Business Summit, Wolin said the Obama administration “recognizes the seriousness of this crisis for Africa’s economies” and has responded with “vigorous support through the international financial institutions and through bilateral assistance to address the immediate impact of the crisis.”
“Working with development partners, African governments, too,” he added, “have taken immediate measures to cushion the impact of the crisis, loosening monetary and fiscal policies when possible to stimulate growth.”
These steps, he said, along with the emerging global recovery, are likely to lead to a rebound in African economic growth. He said the International Monetary Fund is projecting a healthy 4.1 percent growth rate in real gross domestic product (GDP) for sub-Saharan Africa in 2010.
Wolin said that private capital flows, after shrinking since 2006, are now forecast to expand again next year. He said the summit — organized by the Corporate Council on Africa — is convening at a time of enormous consequence for Africa and for the world.
“The global financial crisis has proved again, in case anyone doubted it, that the nations of the world are inextricably intertwined — North and South, developed and developing. For African nations,” he said, “that truth was clear before the global crisis.”
As global shifts in supply and demand sent food and fuel prices skyward in 2008, the financial crisis compounded those economic shocks, which hit developing countries especially hard, he said. “As growth rates in developed nations plummeted, demand for African exports fell, [and] so did the level of foreign direct investment and remittances.”
This year, he said, capital inflows to the region are projected to be half of their 2007 levels and the slowdown has had particular impact on the region’s largest economies: South Africa, Nigeria and Angola, and has adversely affected smaller African economies as well.
The value of exports from sub-Saharan Africa — which shrank by 38 percent this year after six years of double-digit growth, is expected to grow by 13 percent in 2010, and thus “appears to be turning the corner,” he said.
Looking beyond the crisis, Wolin said African economies must better position themselves and partner with developed economies and strong economic partners to achieve strong, sustainable growth in the years to come.
Wolin saluted those African countries that are working to improve their investment climates and strengthen their financial sectors.
“Some of the most impressive examples of progress in these areas come from countries that, only a short time ago, were locked in devastating conflict,” he said. Those countries include Rwanda, he said, which came back from genocide in 1994 to be named the world’s top reformer in the report Doing Business 2010, produced by the World Bank. The report looks at business regulations and the ease of doing business in 131 economies. “Rwanda’s practical steps include reforming the processes for starting businesses, registering property, protecting investors, trading across borders and accessing credit,” the report states.
Such changes, along with prudent economic policies and the empowerment of women, “have had a profound impact,” Wolin said. Rwandan GDP growth has averaged above 7 percent from 1997 to 2006 and has continued its strong performance over the past three years, despite global financial conditions, he said.
Wolin also cited Liberia and the reforms implemented by that country’s president, Ellen Johnson Sirleaf, which now make it easier to start businesses, obtain licenses and trade across borders.
While more reforms are needed, he said, such as a revision of the investment code, commercial code and land tenure rules, the results have been “encouraging.”
Wolin also saluted the “bold actions” of the new Nigerian Central Bank governor, Sanusi Lamido Sanusi, who has implemented a variety of reforms in Nigeria, which stand as another example of “transformative African leadership in a country whose history has been deeply marred by corruption and internal conflict.”
Wolin warned that while progress is being made, “we should not overstate the progress of African nations overall in improving their investment climates and strengthening their financial sectors.” Many countries, such as Zimbabwe, he said, “continue to throw roadblocks in the way of investors.”
Africa’s future, Wolin said, holds “great promise” if the kinds of efforts undertaken in Rwanda, Liberia and Nigeria are replicated.
He cautioned, however, that what Africa will also need for sound economic development is progress in infrastructure and agriculture, where the United States “stands ready to commit substantial resources and technical assistance, but looks to Africa to lead the way.”
One key area of infrastructure, he said, is electricity. “Africa has the lowest access to electricity of any region in the world,” with the high cost and lack of a reliable supply being consistently cited by businesses as an obstacle to investment, he said.
“Addressing the electricity problem is essential not only for business but for humanitarian purposes as well,” he said. “Electricity powers the wells that provide drinking water. It even affects rural health care” when facilities cannot operate after dark because of a lack of electricity. While fixing the problem will not be easy, he said, it is essential and possible through innovative partnerships.
At least five African heads of state were expected to attend the CCA summit, which will showcase the latest trade and investment opportunities across Africa through more than 50 industry-specific sessions. More than 1,500 people are expected to attend the summit, which opened September 29 and runs through October 1. The previous CCA summit was held in Cape Town, South Africa, in 2007.
