/ 3 February 2009

African leaders fear trade, aid cuts

African leaders on Tuesday discussed ways to ride out the global economic downturn, fearful that 2009 will see trade hit and reductions in much-needed aid and development finance.

Earlier sessions of the African Union (AU) summit were dominated by the election of Libyan leader Moammar Gadaffi to head the bloc as well as the conflicts and political strife blighting the continent, but the final day was being devoted to money matters.

Leaders gathered in the Ethiopian capital, Addis Ababa, where the AU is headquartered, warned that Africa would struggle to cope with the global downturn, which could end years of growth in many countries driven by record commodities prices.

“Unless we act, and act now and decisively, the majority of African states could become failed or failing states over the coming decade,” Ethiopian Prime Minister Meles Zenawi told heads of state and government.

The summit was meant to focus on boosting the continent’s energy and transport systems, but the African Development Bank warned that many projects risked losing financing due to tightening global credit.

“We are concerned at the infrastructure projects that are being cancelled,” the bank’s president, Donald Kaberuka, told reporters.

“We are keen to come in and ensure those projects are being completed,” he said, adding that the bank was moving to triple its lending.

As demand has fallen in industries around the world, commodity prices have also come crashing down, creating new problems for the continent’s big exporters.

Angola, which rivals Nigeria as Africa’s biggest oil exporter, is expected to see exports drop 30% in 2008, according to the World Bank.

The World Bank says that Africa’s overall economic growth slowed by about 1,4% last year to 5,4%, and estimates for this year are at a full point lower. Exports expected to drop 2% from 2007.

“Many of you have already seen the danger signs, on top of the poverty, hunger and malnutrition we saw last year as a result of soaring food and fuel prices,” World Bank boss Robert Zoellick told the summit on Monday.

Zoellick has called for rich countries to donate 0,7% of the stimulus packages they approve for their own economies to a fund for developing countries, which would be managed by international lenders.

United Nations Secretary General Ban Ki-moon echoed the call for rich countries to consider poor nations’ needs as they seek to keep their economies afloat.

He warned that the downturn would likely hurt Africa’s “growth, trade and financial flows, but also the fight against poverty and the likelihood of reduced development assistance”.

Even before the global downturn, Africa was not expected to meet all of the Millennium Development Goals, a series of targets aimed at reducing poverty and raising living standards around the globe, Ban noted.

“In responding to this crisis, the international community must take into account the needs of poor countries, and stimulus packages must take this appropriately into consideration,” Ban said.

Earlier sessions had been dominated by debate over Gadaffi’s election as head of the 53-nation bloc, as well as the unrest that affects many member states. — AFP