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March 12, 2009

The recession reaches Africa

It's quickly becoming clear that the global economic downturn isn't going to spare Africa.

Few African countries are heavily exposed to the world banking system, so some experts argued as recently as a month ago that sub-Saharan nations could weather the storm. But as the downturn worsens, African countries are being hit in a variety of ways. World prices of commodities are way down, and a lot of one-horse economies (Angola with oil, for example, and Zambia with copper) are seeing revenues shrink dramatically. Countries that depend on big inflows of foreign cash, such as tourism and remittances, are also seeing those sources dry up as rich countries get clobbered .

This week the IMF warned that "the outlook for economic growth in sub-Saharan Africa in 2009 has worsened in recent months." Economic growth across the continent is expected to slow from 5 percent last year to 3.25 percent this year -- not bad in a global recession, perhaps, but a sharp gut-check for countries with fast growing populations that are struggling to lift themselves out of poverty.

Already we are seeing copper mines shut in Zambia and Congo, diamond giant De Beers close some operations in Botswana and powerhouse Nigeria wobble due to falling oil prices.

There's bad news even in more diversified economies. Today in Kenya we learned that the government faces a $1.25 billion budget shortfall and has frozen employment, suspended development projects and slashed those famous civil servant perks. As the Nation newspaper reported, the austerity measures cut deep and wide:

Only staff in a security capacity will be hired, and all projects are on hold until the next financial year. In a sign that the government is in financial trouble, the Treasury has also ordered cuts in spending on training, office and general supplies, purchase of furniture and other equipment.

Expenses on board meetings, conferences, seminars, workshops, retreats, refurbishment of buildings and routine maintenance of assets have also been cut by 10 per cent of the original budget.

Foreign trips by ministers and parliamentary committees are to be scaled back to save money. Finance permanent secretary Joseph Kinyua has asked accounting officers of all departments to slash spending on transport, allowances, foreign and local travel by up to 15 per cent.

The shortfall has a lot to do with drought and import prices, but the drop in tourism, remittance income and tax revenues certainly won't help. Neither, of course, is the fact that Kenyan politicians' solution to last year's post-election crisis was to more than double the size of the Cabinet -- with all the attendant costs. Such a move might have seemed politically inclusive then, but it looks downright foolish and profligate now.

Mulosh, a commenter on the Nation website, put it best: "Go for the simple one: cut ministries to 18 from 44, you will have more money than you need! oh I forgot, politics must come first."

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Comments

Yatin

look on the bright side, at least inflation should come down

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ABOUT THIS BLOG

shashank

Somewhere in Africa was written by McClatchy correspondent Shashank Bengali, who covered sub-Saharan Africa from 2005 to 2009. He's now based in Washington, D.C., as a national correspondent.

Read Shashank's stories at news.mcclatchy.com or send him a story idea.



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