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First round of BAC 2010

Series: G1-G2-H


The Impact of the World Financial Crisis on Africa


The good news for Africa is that it is the region "least integrated" into the world economy and because of that Africa has been spared a lot of the primary effects of the initial financial crisis. The bad news is that, instead, Africa is being hit by the aftershocks and the resulting global recession.

Identifying the areas in which Africa is currently being hurt is the first step toward addressing the crisis. Inflation has fallen from a 22 percent average across the continent to single digits in recent years. That has been the direct result of African governments embracing economic reforms.  Almost all African countries have moved steadily, even if slowly, toward a more open and market-driven economy.

Countries should continue on that reformist trend, and not backtrack in the wake of these tough economic times (and) countries that backtrack will find themselves left further behind when the global recovery returns.

The major trading partners should keep their markets open and not resort to protectionism, and adequate levels of trade credit are made available for African and other developing nations. At the same time, African governments should resist temptations to return to a command economy or use the crisis as a cover to renationalize companies or interject the state into the market, which has proven so harmful in the past and so lucrative to an elite few.

African countries use the crisis to get rid of obstacles to business in order to promote trade development and increase regional integration. Increased regional integration, greater infrastructure and more trade capacity are important for African development, additionally, economic and trade policy should be more focused on agriculture. When we talk about trade with Africa we talk about the African Growth and Opportunity Act (AGOA), but AGOA falls short on covering agriculture. It has created opportunity in other areas, but has not really touched agriculture.

Agriculture is really where the long-term growth potential is. While AGOA has helped create several hundred thousand jobs in the apparel sector in five key African countries, those jobs alone, while important, are not going to be the key to long-term growth. Farming represents up to 40 percent of Africa's gross domestic product, makes up a huge percentage of its trade and is an area in which 450 million Africans find employment.


The International Finance Corporation (IFC) is working to help Africa deal with the current crisis. IFC's mission is to promote sustainable private sector investment infrastructure, health care and education in Africa and developing countries worldwide by investing with private sector partners on a commercial basis. Additionally, the IFC often provides advice and technical assistance, which is very important because money itself does not solve development problems in Africa. Focusing on the crisis itself, African markets, like many others worldwide, have been unable to escape the global economic downturn. Because of the economic crisis, there is a serious unemployment issue, which leads to human crises. While the IFC always thinks about Cooperation and partnership as it conducts its business, during these times of crisis the IFC has rocketed up cooperation to a new level. Cooperation and partnership among international banks, businesses and governments are key to getting through the crisis.


Adapted from The Bureau of International Information Proqrams.


Guided commentary

1)     Why have African countries been more protected against the effects of the financial crisis? (2 points)

2)     Basing on the text, find out three (03) recommendations mentioned that constitute solutions to the crisis. (4 points)

3)     According to the text, what is the role of agriculture in the resolution of the crisis in African countries? (4 points)

4)     Referring to the text, what is the contribution of international institutions to help solve the crisis in Africa? (4 points)

5)     What is the impact of the financial crisis on your country and what solutions do you propose to solve it? (06 points)

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