Africa: Too Big to Fail?
September 3, 2009: London, UK
If there is a lesson the worst financial crisis since the 1930s has reminded us of, it is the interconnectedness of countries in our current globalised age. The epicentre of the crisis may have been in the United States, but the ripples were felt globally. With the effects of the crisis landing on distant national shores, concerted global actions have been required, as the G20 London summit in April this year attempted to demonstrate.
In response to the crisis, and often at great cost to their taxpayers, many governments have been keen to rescue companies they consider “too big too fail,” wresting these corporate logs from the rough currents of the crisis. Recognising the acute impact these companies have on employment, supply chains, credit, and growth, for instance, governments have been quick to offer generous support programmes.
Africa, as a recent AU/NEPAD paper noted, is bearing a disproportionate burden of the effects of the financial crisis – a crisis it did not create – with export earnings, remittances, and foreign direct investment on the decline, and capital outflows on the rise (1). Furthermore, the World Bank has noted that the effects of the crisis will “deepen the degree of deprivation of the existing poor” (2). In other words, make the already poor, poorer.
There is no doubt that the implications of the financial crisis have been serious and the responses swift. But consider, with reference to Africa, when does a crisis become “a crisis” to instigate the responses witnessed? And when do entities become too big too fail?
That there is an HIV/AIDS crisis in Africa is evident. That extreme deprivation, poor governance, and conflict disproportionately impact the world’s poorest continent is also evident. Indeed, it is also evident that the continent least responsible for climate change will be the one most affected by it.
So, from the perspective of crises, Africa fits the bill (Bearing in mind the above are just a few of the many disproportionate crises afflicting the continent).
More recent developments, however, suggest deeper attention be paid to Africa. For one, Africa is becoming a stage where the world’s increasingly multipolar reality is being played out. China, for example, has become Africa’s most dynamic player in places such as Sudan (oil), Angola (oil), Zambia (copper), Zimbabwe (uranium), and Equatorial Guinea (timber) (3). Second, terrorism is a growing threat on the continent, with Africa already having been a casualty (witness the 1998 US Embassy bombings in Nairobi and Dar es Salaam). Third, on a more positive note, Africa was actually on the up prior to the crisis: over the last decade Africa witnessed its fastest ever period of economic growth (4); its telecommunications and banking industries have been thriving, with future prospects continuing in areas such as agriculture.
True, Africa may not be “too big” and has its own fair share of weaknesses (e.g. corruption), but it is certainly getting bigger.
A show of solidarity was evident when the G20 made its announcement of concerted global actions to stem the tide of the financial crisis. Commitments were made (and previous commitments reiterated) on Africa by the G20, soon followed suit by the G8 in L’Aquila, Italy. Still, there remains a deep divide between promises and reality with regards to supporting the continent.
Having experienced a financial crisis so far, and the degree of creativity, innovation, and resources brought forth in response to it, an opportunity lies before the citizens of developed and developing countries alike to reflect upon the perception of a crisis and what constitutes “too big to fail.” Better still, this is an opportunity to bring at least the same degree of creativity, innovation, and resources to concerted global actions to Africa’s crises, and its growing “big-ness.”
1. AU/NEPAD (2009) The Impact of the Current Global Financial and Economic Crisis on African Economies and Africa’s Common Position on Reforms of the International Financial System [Accessed Thursday September 4 at 8:30pm BST from: http://www.africapartnershipforum.org/dataoecd/32/44/42949241.pdf]
2. The World Bank (2009) Swimming Against the Tide: How Developing Countries are Coping with the Global Crisis. [Accessed Thursday September 4 at 8:43pm BST from: http://www.un.org/ga/president/63/PDFs/WorldBankreport.pdf]
3. Foreign Policy in Focus (2007) “Too Big to Fail?” [Accessed Thursday September 4 at 8:43pm BST from: http://www.fpif.org/fpifzines/wb/4073]
4. “The Baby Bonanza” The Economist, August 29th-September 4th 2009, pp. 20.