World Economic Forum at Davos - Implications for Africa

by Felix Ngasama

The world’s top politicians, businessmen, financial and economic gurus have completed their annual gathering at Davos in Switzerland.

Unlike previous gatherings, this year’s occasion was a showcase of sheepish executives and politicians who have been exposed as not really smarter than us - ordinary folks. They also have feet of clay and capable of making wrong decisions and grave mistakes such as those which have led to the current global financial meltdown and grim economic outlook.

Equally notable was the absence of anti-globalisation protests that have marked previous gatherings. It is anyone’s guess as to what could have stopped the anti-globalisation activists from staging the protests this year. Me thinks the activists could have decided to let the global financial black hole created by the so called economic and financial wizards who gathered at Davos do the talking on their behalf.

Something unusual happened at the World Economic Forum this year. In a departure from the very foundations and values of free market capitalism which advocates a hands-off involvement by governments, this year’s keynote plenary speeches came from government leaders – Chinese Premier Weng Jiabao and Russian Prime Minister Vladimir PutinVladimir Putin – both of who took a dig at the US free market system. Is this a sign of more government involvement in the business affairs of their respective countries beyond the current macro level? After all, private sector financial institutions and other businesses in major European countries and the US have gone knocking on government doors with begging bowls asking for financial aid.

Karl Marx and Vladimir LeninVladimir Lenin must be excitedly turning in their graves and giving each other high fives in jubilation at the sight of sheepish capitalist corporate executives queuing outside state palaces pleading for financial bail out even if this means the state should take over some shares in their companies and have direct ownership and control. Lest we forget, the US government under George W BushGeorge W Bush bailed out AIG by taking taxpayers’ money and buying AIG stocks in order to financially rejuvenate the ailing insurance giant.

The theme of the World Economic Forum was “Shaping the Post Crisis World” but this was in name only. The delegates were unable to look into the world in the hereafter, as the theme suggested, for they were deeply mired in the here and now. The usual search for consensus was non-existent at the forum, having being replaced by the search for scapegoats - and they were many.

The forum was characterised by uncertainty, anger, fear and recriminations. Russia blamed the US for the global economic woes, the US blamed China for investing heavily in its (US) bonds and almost all blamed the few bankers who were in attendance for the current financial crisis.

Not even Barack ObamaBarack Obama’s election as president could have assuaged criticism of the US policies. Economists punched holes into Obama’s $819 billion stimulus plan and questioned why he did not have a separate rescue package for banks and they made a fuss about the escalating national debt.

At the end of the forum, the world was and is still in its darkest economic upheaval since the great depression, and more alarming is that no one really knows where it is going. No one can claim to have taken command and control in guiding the world away from the global financial black hole. As things are, the world economic crisis is dangerously in auto pilot mode while political leaders, e.g in the US, are bickering and dithering about rescue packages based on their different partisan interests.

The question that comes to mind is where does Africa find itself in this whole disaster? African political and financial leaders did not attend the World Economic Forum with the exception of South Africa and some African Development Bank officials.

It is shameful that African political and business leaders mostly shied away from this year’s World Economic Forum when their countries are the ones likely to be worst hit by the current economic crisis.

African presidents, finance ministers, central bank governors and business leaders should have taken the opportunity to attend the World Economic Forum in order to get first hand information on the grim view of the current global economic affairs, articulate themselves on African economic matters and ensure that their continent is prominently represented and fairly considered in any recovery plan.

The non-attendance of the World Economic Forum by most African leaders simply shows their passive recipient and therefore dependant mentality and lack of proactive and confident leadership to take the initiative to brainstorm together with other world leaders in the quest for solutions to the current global crisis.

Unless I missed it, I have not heard of a concerned group of African political, financial and economic brains that came together to assess the impact of the current global economic crisis on Africa to find solutions to save their continent. Instead African presidents recently met to toy around with the idea of a United States of Africa and elected an attention seeking megalomaniac of note from the Libyan desert as their chairman. What about the current global economic crisis that threatens Africa’s export and aid dependent economy?

The bad news from Davos to African presidents is that begging at 10 Downing Street where the British Prime Minister’s residence is located in London, 1600 Pennsylvania Avenue where the White House is located in Washington and 55 Rue du Faubourg where the Elysees Palace is located in Paris may soon be a thing of the past due to the tough financial climate that these countries are facing. So tough that they will soon have no change left for African presidents moonlighting as beggars in the major financial capitals of the developed world.

Protectionism, a dirty word in most third world countries, is a likely threat to Africa in light of the global economic meltdown. Major economic powers of the world such as the US, the UK, France, Germany and Japan who are also major financial donors to African countries may shutdown their charitable contributions, direct investment and trade in Africa in order to concentrate on putting their own houses in order. The old adage “Charity begins at home” may soon be the catchphrase in these donor countries.

Why should the US, the UK or any other donor country give money to African countries when they are also cash-strapped? There is no doubt that, faced with the current gloomy economic situation, all donor countries will forget about Africa and concentrate on providing for their own citizens.

Take a poor country like Malawi as an example. Like many African countries, Malawi may find itself without financial aid from the UK, Japan, US, Germany etc. Moreover, Malawi may start getting less and less trade from China.

African countries must seriously start setting up effective economic contingency measures to alleviate the brunt of the global economic crisis because it has become clear from the World Economic Forum that the only support third world countries will get from developed nations going forward is rhetorical.

Markets such as China on which most African countries, including Malawi, have recently become dependant for the exports are growing at half the pace than at the time the billion dollar trade deals were signed. Slow growth translates into slow demand for African raw materials.

The Democratic Republic of Congo (DRC) is one African country that is already hard hit by the global economic crisis. Some mines operated by China as a direct investment in that country have been forced to close down as a result of the slowdown in economic growth in China.

Other African countries, seemingly oblivious to the underlying cause, have started grumbling and blaming China for not honouring their direct investment and trade agreements.

African countries must work hard for their own survival and stop hopping that the billions of dollars being pumped to stimulate Western economies will normalise things and make it possible for these countries to continue donating money to them. It may take two to five years or longer before the ailing Western economies get back on their feet. Till then, Africa must brace itself for the so called “everyone for himself” or dog eat dog type of economic playfield.