Economic troubles roil Africa

Amid signs the rest of the world may be recovering from the global financial crisis, Africa is still being hammered. South Africa’s economy, the continent’s largest, shrunk by another 3 percent in the second quarter, an omen that things may get even worse before they improve.

South Africa, among Africa’s most diversified economies, had already seen a plunge in demand for the cars, machinery and other goods it produces.

Africa’s larger economies are more directly affected by the crisis, but even smaller economies are feeling pinched, said Richard Mkandawire, an economist at the African Union’s development agency.

On a continent where most people live in abject poverty, any downturn is magnified. Some African countries are seeing tourist dollars drop as foreigners cut back on exotic travel. In countries like Ghana, there is evidence expatriates working in the West are sending less money home, Mkandawire said.

Africa had at first been seen as isolated from the market and banking turmoil that engulfed Europe and the United States, but a drop in Western consumer demand means Africans are selling fewer of the commodities on which many of their economies depend. In South Africa, manufacturing production dropped by 17 percent in June, and gold output in June was 12 percent lower this year than for the same period the previous year.

Former banker Maureen Dlamini, who has experience across Africa, said the global recession will result in lost ground in the fight against poverty on the continent.

A recent report on the continent’s economic prospects predicted overall growth for 2009 would be 2.8 percent ? less than half the 5.7 percent expected before the global downturn. The report, by the Paris-based Organization for Economic Co-operation and Development and the African Development Bank, said growth in South Africa would be just 1.1 percent, and that Angola’s economy was expected to contract by 7.2 percent.

The picture is rosier in much of the rest of the world. In the U.S., the economy is still shaky, but the Federal Reserve has said the downturn may be “leveling out.” Germany, Europe’s biggest economy, has seen better than expected investor sentiment and other positive indicators. Japan has reached the end of a yearlong recession.

“Just as the impact of the recession on South Africa lagged somewhat behind the rest of the world’s, it seems our recovery will lag too,” South African Finance Minister Pravin Gordhan said in a speech Monday, even before the latest GDP figures were released.

On a street in Johannesburg on Tuesday, workers at a big box store were on strike for higher wages, demonstrating behind a sign that told management: “Stop complaining about the recession ? it is hitting us.”

Shop steward Emmanuel Ramara said the store cited the recession when resisting demands for higher wages. He said it takes courage to strike when every week seems to bring news of another company going out of business. At least a quarter of South Africa’s work force is unemployed, and some experts say the figure could be as high as a third if those who have given up looking out of despair are counted.

“There’s a need for urgency in South Africa’s response” to the global crisis, the country’s minister of economic development, Ebrahim Patel, told reporters last week. “We need to ensure that our industrial capacity is not destroyed by the recession.”

South Africa’s GDP has slid for three consecutive quarters, the first time that has happened in more than a decade. South Africa has long attracted workers from neighboring countries, and now they are sending less money home, Mkandawire said. Any cut is significant on a continent were many live on less than $2 a day.

“Enough money to buy a bag of fertilizer could make a huge difference to a family in Zambia or Malawi,” the economist said.

The picture isn’t all bleak. Moderate growth is expected in 2009 and 2010 in Ethiopia, Rwanda, Sudan, Tanzania, and Uganda ? the fastest growing economies in East Africa in 2008.

Patel said South Africa needs to foster a much stronger economy across the continent, echoing a point made by visiting U.S. Secretary of State Hillary Rodham Clinton this month. She noted that while she was promoting trade between African producers and her country, Africans should not overlook the market on their own continent, estimated at 800 million.

Dlamini, the former banker, concurs. Since February, she has headed the Africa Board, the Johannesburg Stock Exchange’s effort to position itself as a gateway for foreign investors interested in Africa. Companies from across Africa are listed on the Africa Board.

“We have, as Africa, to work together,” Dlamini said.

Copyright 2009 The Associated Press.