The current economic troubles in the U.S. and Europe are likely to have a significant impact on African exports.
So said the Committee of Ten (C10), a grouping of African finance ministers and central bank governors, in a statement following a meeting in Cairo, Egypt.
“We reviewed the impact of the recent developments in the United States and European Union on Africa. We highlight that a one percentage point drop in OECD countries’ growth rate will translate into a 10% drop in Africa’s exports and half a percentage point lower GDP growth rate. We urge Europe to undertake decisive measures to address underlying structural problems, and the G20 to bring the global economy back on a sustainable growth trajectory,” read the statement.
The C10 further called on developed nations “to eliminate trade distortion practices, including high import tariffs on African exports and large agricultural subsidies to their local farmers, which hinder Africa’s competitiveness and exports, thus harming development and living standards in our rural communities. We urge that concrete efforts be made to help implement the proposed increased investment in agriculture using the value chain approach.”
According to Yvonne Mhango, an analyst at Renaissance Capital, lower commodity prices are expected to lead to a slowdown in growth in commodity-rich countries. “The demand slump in developed markets has triggered a softening in commodity prices. This implies that growth in Sub-Saharan Africa’s commodity-rich countries, including oil exporters (Nigeria and Angola) and producers of metals and minerals (Zambia and Botswana), may be tempered,” she noted in a recent report.
Even though the developed world’s demand for Africa’s exports will fall, the effect of this will be partially offset by other emerging markets’ sustained appetite for commodities, particularly China.
Mhango added that lower prices will also improve the growth outlook for net oil importers, such as Kenya, which were previously constrained by a high oil price. The recent surge in the price of gold, considered a safe haven during turbulent times, will also benefit Africa’s big gold exporters such as Tanzania and Ghana.