Africa yet to feel full force of slowdown


Africa‘s economies are yet to feel the full force of a consumer slowdown in the West, which is likely to cause some corporate failures but nothing like on the scale of other regions, a regional banker says.

“My concern in Africa is that the real sector will start to hurt, and it hasn’t yet felt all of the impact of the crisis,” said Saleem Karimjee, southern Africa head of the World Bank’s International Finance Corporation.

So far, last year’s global financial turmoil has hit Africa mainly in the form of significantly lower demand and prices for key mineral exports such as oil and gas and metals such as copper.

Its banks and companies have also found it harder and more expensive to access international credit, Reuters adds.

However, as the crisis evolves into a wider recession, affecting the spending habits of consumers in Europe and the United States, any related African economy would feel a direct squeeze, Karimjee said.

“It’s hard to predict — how will the average family in the UK change their shopping behaviour because of the crisis?” he told Reuters in an interview, saying his views did not necessarily reflect the official ones of the IFC.

“Will they stop buying roses every week and buy them only two weeks, and how will that affect the cut-flower industry in Kenya?” he said. “This is the cycle I feel has not yet been fully experienced in Africa.”

There are, however, plenty of signs of the pinch starting.

Besides thousands of layoffs at mines in Zambia, Congo and South Africa, the latter’s manufacturing sector, which includes BMW or Mercedes luxury cars for export, has gone into reverse, shrinking by 11.7 percent in March compared to 2008.

Wealthy Europeans and Americans are also cutting back on pricey holidays to the continent’s beach resorts and safari parks.

Tourist arrivals to the Indian ocean island of Mauritius fell 13.8 percent in February year-on-year, and in Uganda officials predict a 20-30 percent decline in an industry that rivals coffee as the country’s biggest foreign currency earner.

Before the economic crisis struck, Uganda had been hoping for 2009 tourism growth of as much as 40 percent.

In March, as the first waves of world recession were washing up on African shores, the International Monetary Fund forecast continent-wide growth of roughly 3 percent — about half that of the previous five years — but said at the time that that might be “too optimistic”.

However, despite the occasional but inevitable failure in manufacturing and other industries, there was little risk of a domino-effect ripple through its still relatively unsophisticated banking system, Karimjee said.

“I don’t think the banks are exposed to the extent that the few failures you will see in the real sector will cause them to crash,” he said.

“You might have one or two that get into trouble, and you might have one or two acquisitions or bailouts as a result, but it’s not going to be anything like as widespread as you’ve seen elsewhere,” he said.