S van der Merwe: Tokyo International Conference on African Development
(TICAD) IV

22 March 2009

Honourable Lt General Mompati Merafhe, Vice President of the Republic of
Botswana
H E Nobuihide Minorikawa, Vice-Minister of Foreign Affairs of Japan
Honourable Ministers
Co-chairs
Excellencies
Distinguished guests
Ladies and gentlemen
When we met for TICAD IV in Yokohama, most commodity prices were at peak levels
and general demand for Africa’s exports was strong, financial flows were on the
ascendancy and the aid commitments of many OECD members were relatively on
track.

At the time of our gathering in Yokohama, we could not have inferred when
the commodity super-cycle and boom phase would end. But, the commodity
super-cycle and boom between 2000 and early 2008, which had tremendous benefits
for each of our economies, has now turned, and many of our gains in meeting the
millennium development goals are threatened. Developing countries and economies
in transition had nothing to do with the behaviour that triggered the bust, but
what started as high risk lending in the housing market, coupled with a flurry
of new financial instruments and risk-management techniques in the United State
(US), has turned into an economic and developmental crisis.

During the early stages, of what was still a financial crisis, it was
thought that the fallout would be restricted to the developed world and those
developing countries and economies in transition would be insulated. The impact
on our economies was treated with complacency, a view that is reinforced by the
contents of the extraordinary fiscal stimulus packages that the US and many
European governments have introduced to bail out failing and failed banking and
financial institutions and programmes that aim to restore growth. The
complacency persists, and even more alarming is the possibility that the
stimulus packages may be used to protect industrial activity in the developed
world, at the expense of the developing world and, may harm the medium to long
term prospects for the recovery of our economies.

In fact, the broader international economic environment for developing
countries has deteriorated sharply, and since the latter part of 2008, the
global economic slowdown has shifted rapidly towards these economies. The
downturn in global growth, decline in most commodity prices, and tighter credit
have significantly worsened the economic outlook for Sub-Saharan Africa (SSA).
According to the February 2008 update of the world economic report, growth in
SSA is projected to slow sharply from 5,4% in 2008 to 3,5% in 2009, and is now
forecast to dip below 3% (2,8%).

How the crisis impacts on Sub-Saharan Africa is quantified in an
International Monetary Fund (IMF) study released in March this year. Three key
results stand out:
* A one percentage point slowdown in the rest of the world has led to an
estimated half percentage point slowdown in Sub-Saharan African countries, felt
partly at the same time (0,2%) and partly in the following year (0,3%)
* A non-fuel commodity price induced income reduction by 10 percent tends to
reduce growth in Sub-Saharan African exporters by about 1,5% points after two
years
* An oil price shock tends to be significant only above a certain threshold,
which is assessed to be a 5 percent change in prices. A net oil importer in
SSA, with oil imports of some 20% of GDP, facing a decline in oil prices of
approximately 50%, could expect an increase in its growth rate by some 0,3% to
0,4% point.

Single commodity economies, of which there are many in Africa, appear to be
the hardest hit by the crisis. Angola and Zambia recorded impressive growth
over the past years, predominantly as a result of the rise in copper and oil
prices, respectively.

However, with the sharp decrease in the prices of commodities, both Angola
and Zambia’s economies have come under pressure.

But the statistical account does not reflect the potential human and social
costs of the crisis on our economies. The downturn has resulted in a number of
expansion projects being put on hold; mining operations closed resulting huge
job losses, and deepening poverty in Zambia's economic heartland. The closure
in December 2008 of the Luanshya Copper Mine in Zambia, a joint venture of the
Swiss-based International Mineral Resources and Bein Stein Group Resources, has
resulted in 1 700 retrenchments.

Countries that are members of the Sub-Regional Customs Union (SACU), will be
affected by an estimated decline of R6,8 billion (US$680 million) in customs
revenue over the 2008/09 financial year, compared with projections, and a
decline of between 8 and 12% over the medium term. Coupled with the rapid
decline in customs revenue, Botswana, Lesotho, Namibia, South Africa and
Swaziland are experiencing a slowdown in most of the key sectors.

South Africa’s Finance Minister, Mr Trevor Manuel, used the word “crisis” 13
times in his 2009 Budget Speech that he delivered on 11 February. This was not
meant to alarm. Its intention was to focus minds and actions. Not being the
cause of this crisis is not an excuse to be idle. Africa needs co-ordinated
response and coherent message that the African Union takes to the G20 Summit in
London in April 2009. During the 12th AU Summit that was held in February 2009,
the African Heads of State and Government responded to the global financial
crisis, as encapsulated in the Addis Ababa Declaration on the International
Financial Crisis.

It was emphasised that:
* the global financial crisis should not be used as an excuse to cut
development assistance to Africa
* additional resources should be mobilised aimed at finding innovative
solutions to addressing threats posed by the crisis
* capacity building initiatives should focus on regulation and supervision of
the African financial system
* it was prudent to fast track the establishment of the African Investment
Bank, the African Monetary Fund and the African Central Bank.

In light of the above, the key elements of the AU’s recommendations to the
G20 should encapsulate:
* approaching the impact of the crisis on Africa with the same urgency with
which developed countries have responded to their domestic crisis
* additional resources that can take the form of a 0,7% of rescue packages,
increased and sustained investments in infrastructure, an early review of the
capital adequacy of the African Development Bank (AFDB) and support for
mitigating facilities such as the AFDBs emergency liquidity facility and trade
finance facility
* increased policy space and flexibility in a way that promotes results above
rigid conditionality and improves aid effectiveness and assistance to
Africa
* conclude an ambitious and development focussed Doha Round
* provide adequate voice and voting rights to African countries in
International Financial Institutions and major global governing bodies, in a
manner that fully integrates Africa into the system.

In conclusion, we are starting to get a clear picture of how the financial
crisis is turning into a global economic and developmental crisis, which may
still worsen. The international community is coming together to contain the
damages and reverse the inevitable downturn. While doing so, we must not lose
sight of our collective responsibility to prevent the recurrences and to ensure
an international monetary and financial system that supports sustained and
equitable development.

Thank you.

Issued by: Department of Foreign Affairs
22 March 2009
Source: Department of Foreign Affairs (http://www.dfa.gov.za/)