Zhang Zhongxiang

The African economy has weathered the storm. This is what mid-year reports on the global economic situation released by institutions like the International Monetary Fund say, while giving Africa credit for its economic development. However, Zhang Zhongxiang, Deputy Director of Center for West Asian and African Studies of Shanghai Institutes for International Studies, maintains that adverse impacts of the world economic crisis on the weak African economy are severe, even hindering the realization of the Millennium Development Goals, despite the rapid revival of its economy. Excerpts follow.

T he impact of the global financial crisis on Africa "came and left in great haste." Due to its relatively weak economic foundation, Africa was badly stricken by the global financial crisis originating from the United States. In 2009, African absorption of foreign direct investment declined by 19 percent, with an economic growth rate of 1.6 percent, being lower than its population growth rate of 2.3 percent. In contrast, Africa had become the third fastest growing economy in the world with an average annual economic growth rate of 4.9 percent prior to the financial crisis from 2000 to 2008, twice that of 1980s and 1990s.

In the era of globalization, the African economy has been closely linked with the world economy. When the world financial crisis occurred, instead of being immune, Africa was severely hit with a sharp decline of exports, devastated tourism industry, significantly decreased immigrant remittance, cuts in international aid and foreign direct investment, fueling inflation and rising unemployment rate.

However, since the first half of 2010, Africa has seen a revival from the global economic crisis. According to the Economic Report on Africa 2010 issued by United Nations Economic Commission for Africa, the continent's economic growth rate in 2010 is estimated at 4.8 percent. Nevertheless, Africa has not completely rid itself of the influence of the financial crisis.

The reasons for African economy to witness recovery at a speed faster than expectation follow:

Global economic recovery has laid the foundation. After the outbreak of the financial crisis, major economies successively issued economic stimulus packages and resorted to enhance international cooperation. G-20 summits were held four times to discuss ways of tackling the crisis through cooperation. The vigorous recovery of the emerging economies represented by China and India helped bring the world economy out of depression. The recovery of the African economy benefits from the recovery and growth of global trade, the revival of foreign investment as well as the recovery in prices of bulk commodities and raw materials. For example, the oil price has risen from the lowest $40 per barrel to current $80 per barrel. Nonetheless, resources do not account for the whole African economy. According to statistics, in recent years, consumption-related industries contributed 44 percent to African GDP, far more than industries relating to natural resources.

Africa's own efforts are the key factor. With more than a decade's development, Africa's resource advantages have been greatly boosted its development. Africa has become the third fastest growing economy in the world with an average annual economic growth rate of 4.9 percent from 2000 to 2008, twice of that in the 1980s and 1990s. In 2008, African foreign exchange reserves amounted to $137 billion, and domestic savings accounted for 26 percent of GDP. The macroeconomic environment of Africa was greatly improved, enhancing its ability of resisting the economic crisis. About two thirds of African countries have adopted an "anti-crisis" fiscal policy.

After the outbreak of the financial crisis, African countries made active responses. On one hand, they appealed to the international community to keep their commitments of assisting Africa. On the other hand, they tried to survive by fully exercising the government's role in regulating the economy: increasing investments in agriculture and infrastructure to enhance the sustainability of economic development; encouraging the development of private sectors to promote economic diversification; and promoting regional economic integration to increase Africa's overall strength in coping with the crisis. The Economic Community of West African States and Common Market for Eastern and Southern Africa established customs unions in 2005 and 2009 respectively and the Southern African Development Community is planning to build one this year. In addition, the African Union is committed to the promotion of peace and development of Africa by actively participating in the resolution of African hotspot issues, and take the year of 2010 as "Year of Peace and Security in Africa." All these measures have helped Africa's economic recovery.

Chinese contribution cannot be ignored. Since 2000, China has enhanced overall reciprocal cooperation with African countries through the platform of Forum on China-Africa Cooperation(FOCAC). After the outbreak of the financial crisis, China did not cut its investment and assistance to Africa. In 2009, the Sino-African trade volume still exceeded $90 billion. Compared with the sharp cutbacks of global transnational investment, China's direct investment to Africa in 2009 increased by 47 percent over the same period last year. When African countries suffered from financing difficulties, China helped their infrastructure construction by providing preferential credit and export buyer's credit. At the Fourth Ministerial Conference of FOCAC held in Egypt in November 2009, Premier Wen Jiabao declared eight new measures to further enhance Sino-African cooperation. According to statistics, Sino-African cooperation has maintained a contribution of up to 20 percent of African economic growth for many years. It is widely acknowledged by the international community that Sino-African economic and trade cooperation promotes common growth and development of China and Africa.

Of course, there are also some restrictive factors in the continuous development of African economy. First, the irrational world economic order still exists, putting Africa in a disadvantageous position in the world economic system. Africa is vulnerable to price fluctuation in the international market as it exchanges primary and agricultural products for manufactured goods and due to its single-product economy. Second, there are still many trade barriers among African countries, limiting trade development inside the continent. According to African Development Report 2009 issued by United Nations Conference on Trade and Development, the trade volume among African countries only accounts for 9 percent of the total value of African trade, far below the world average level. Third, the economic recovery of the Eurozone is lacking in strength, with an uncertain future of the sovereign debt crisis of European countries, the deterioration of which will inevitably influence Africa, as Europe is the traditional export market and major supporter of Africa. In addition, high population growth rate and fund shortages in Africa will all influence the sustainable development of the continent's economy.

Currently, the global industrial structure is undergoing a new round of adjustment. With the development and rise of wages of emerging economies, it is certain that some industries and enterprises will be transferred to Africa where there are rich natural and labor resources. Africa should seize this rare opportunity by vigorously developing various economic and trade cooperation zones, promoting its own industrialization and transforming resource advantages into manufacturing advantages so as to achieve sustainable development.