The global financial crisis is threatening to turn back the clock on the progress achieved on the African continent during decades of reforms. Developments that have geared economic policy towards establishing Africa as a more attractive destination for private capital may be under threat, warns a new report by audit and consulting company Deloitte.
The report also projects longer-term impacts in the Southern African Development Community (Sadc) region.
“Our findings show that the crisis has triggered a quick depreciation of currencies and significant declines in stock market prices, with foreign investors in securities and equities selling off large portions of their holdings.
However, as sub-Saharan Africa is less integrated in the global financial and commercial system, compared with other regions, it is expected that growth will soften relatively more modestly,” comments Deloitte mining-sector expert Annie Snyman.
Despite this, the impact of the financial crisis on the mining industries of the countries studied has been marked, particularly in terms of employment figures and contribution to the respective national budgets.
“Unfortunately, these two trends are likely to continue to play out because the economies are largely dependent on exports,” says Snyman.
The key impacts of the economic crisis, outlined in the report, include the decline in mining production and regional output, increased job losses, reduced government revenues and reserves, decreased social spending, increased poverty levels, heightened social tensions, growing frustration at governments’ inability to effectively deal with the crisis, and pressure on local empowerment initiatives.
While these somewhat harsh impacts are likely to play out, China’s interest in the African continent will continue to drive some economic development as it seeks to establish a reliable supply of resources.
“China’s willingness to invest in Africa, and elsewhere, was confirmed in March this year when Angola announced that it had secured another billion-dollar loan from China,” remarks Snyman.
Besides Chinese investment, there are a number of short-term responses, outlined in the research, which leaders should consider , to cushion the severity of the downturn in the mining industry.
These include such actions as planning to minimise job losses, improving beneficiation capabilities, creating an economic stimulus package targeted at the mining sector, creating ‘opportunity centres’ for retrenched mine workers, providing training in suitable self-employment options, and reining in political ambitions to drive the investment agenda.
“The findings of this study will guide governments, current and future players in the mining industry, international partners, trade unions, civil society and citizens to learn from the lessons of the past, and deal innovatively with the current situation facing our continent to create a sustainable future,” concludes Snyman.