TRALAC - Trade Law Centre

Western financial crisis to affect Africa's economic growth

Wednesday, 01 October 2008

Source: Chinaview News

The current financial crisis affecting western countries is likely to affect Africa's economic growth if the continent does not look for alternative markets, a top financial official warned here on Tuesday.

Ugandan Finance Minister Ezra Suruma told his counterparts from the Common Market for Eastern and Southern Africa (COMESA) members that Africa's exports to the United States and Europe are likely to be affected because the people there will have low purchasing power.

"We have to find alternative markets for our products," said the minister. He added one option is to increase their exports to Asian countries, which hopefully will not be deeply affected.

Africa, through the African Growth Opportunity Act (AGOA) and the Everything But Arms, exports its products to the United States and the European Union markets tariff and quota free respectively.

According to official figures, Africa's exports to the United States under AGOA tripled to 67.4 billion dollars in 2007.

Suruma told the ministers who were attending a one-day annual meeting of the region's bank, Preferential Trade Area Bank, that the crisis has proved that the concept of capitalism has to be revised.

"Capitalism is not likely to be the same again; the role of regulation by governments is perhaps inevitable. We should brace ourselves for a new world order," he said.

The minister however said as governments revise capitalism, the concept of free market economy should not be totally abandoned.

Mohit Dhoorundhur, chairman of the Board of Directors of the bank, said the impact of the crisis on African economies is still unpredictable though some analysts have said that the continent's financial markets do not have the depth and width of the west to be affected.

"The challenge for the bank, in member states, in fact for the whole of African region is to recognize the need for change and be determined to undertake rapid reforms while the crisis is still at a distance," he warned.

The COMESA is a regional trading block bringing together Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.