Although Africa has been hit by the current global recession, the continent is riding out this crisis much better than previous downturns.

“From the African Development Bank’s (AfDB's) point of view, the continent would have been hit much more had it not gone through some good, well managed, economic reforms in the years before the crisis,” AfDB external relations and communications unit head Antoinette Batumubwira tells Engineering News Online.

“This is important to note. The reforms include those undertaken with IMF [International Monetary Fund] and AfDB advice. All this has strengthened the continent.”

These reforms included a greater focus on the private sector, strengthening its role in African economies, capacity building in economic management areas in African States, and governance reforms. “Also, African banks had been more conservative in their policies than those in the US and Europe,” she highlights. “That also helped.”

Still, the continent has been affected by the crisis. “Over the past seven years, the average growth rate [for Africa] has been 7%. We predict growth for 2009 to be 2,8%,” reports AfDB economist Iza Lejarraga.”But, this deceleration will be short-lived. We expect a rebound in 2010, to 4,5% growth.”

However, the deceleration is bad for budget balances. “The ['African Economic Outlook 2009'] report predicts a regional budget deficit for 2009 of about 5,5%,” points out Lejarraga. “Prior to the crisis, we predicted a surplus of 3,5% for this year.”

('The African Economic Outlook 2009' report is published jointly by the AfDB and the Development Centre of the Organisation for Economic Cooperation and Development.)

The effects of the crisis have not, however, been uniform across the continent. “The picture is very heterogeneous. Economies that are more closely integrated into the global economy will have stronger contractions,” she explains. “Likewise, countries dependent on mineral exports are suffering more. Countries with more diversified economies and more diversified export markets are less affected, as have countries with economies based on agriculture. Countries less integrated into the global economy have also been less affected.”

The AfDB has been actively seeking to assist African countries to ride out the storm. “We reacted very quickly to the crisis,” affirms Batumubwira. “In the bank, we decided to create a task group to analyse the impact of the crisis and our response to it.” (African Finance Ministers had met at the bank’s head office in Tunis in November 2008 to discuss the global crisis and determine how to minimise its impact on the continent).

The result was the development of four initiatives by the AfDB.

The first is the emergency liquidity facility, which totals $1,5-billion, and which is available to central banks (for onward lending), to regional banks, and to private-sector banks.

The second is the trade finance initiative, which in its first phase was assigned $500-million but which has now been augmented by a second phase, with an additional $500-million, for a total of $1-billion, and now forms part of the global trade liquidity rogramme launched on July 6.

The third initiative involves the accelerated transfer of resources from the AfDB to eligible countries, requiring weeks, rather than months, for authorisation. “For example, Botswana gained a $1,5-billion loan for the diversification of its economy away from mining,” she reports. “This is the biggest loan ever from the AfDB to a country.”

The fourth provides policy advisory support – that is, advice on the development of appropriate policies to meet the crisis – to those African countries that need it.