Fragile development gains in danger
Credit lines from Europe are seizing up, trade financing has become punitively expensive, and a source of longer-term funds that was just opening to Africa's larger economies as the crisis hit, the international bond market, is also closing its doors.
In recent months, Ghana has cancelled a $300m bond issue. Kenya, Tanzania and Uganda have all shelved planned Eurobond debuts and Nigeria has postponed issuing a naira-denominated bond.
Mr. Manuel says this is because of the huge borrowing demands of the rich world which alongside, shifting perceptions of risk, are pricing African and other developing countries out of the markets.
China, whose expanding trading relationship with Africa has played a big part in reviving confidence in the continent"s future, appears committed to continued investment in infrastructure and other projects in return for access to African minerals oil and other resources.
But with a balance of payment crisis looming in many states, African leaders are turning to a more traditional source of income: western aid.
Within a month of Samsung and other companies slashing mobile phone production at factories in coastal China's last December, cobalt mines were closing in the Democratic Republic of Congo at the cost of thousands of jobs.
China suspended orders for the metal used in mobile phone batteries, prices slipped to $14 a pound from $49 a year before and the Chinese traders who kept the production chain moving from one side of the world to the other melted away.
For most of the commodity exports that provide the lifeblood of sub-Saharan African economies, the story has been similar
When demand was rising simultaneously in Asia, Europe and the Americas, African revenues surged. But the same expanding trade ties that have helped spur the longest period of economic growth on the continent for generations, have transmitted the withering effects of the global slump just as efficiently.
Today many of sub-Saharan Africa"s 47 states are seeing their incomes evaporate, leaving holes in national budgets and foreign reserves as wide as the pits from which their resources have been extracted.
Without urgent measures to limit the damage, fragile recent development gains could be swept away, conflicts will reignite and more states will fail, warns Meles Zenawi, Ethiopia's prime minister, who is represented Africa at the summit of the Group of 20 nations in London.
"The recovery was … at a very early stage of paying dividends,” he said in an interview with the FT. "That is one of the biggest tragedies. Africa was beginning to stand up and now it is being knocked down again by a crisis which is not of Africa"s making.”
The speed with which the downturn is now taking hold is dramatic. Average growth is expected to dip to about 2.5 per cent, below population increases for the first time in a decade.
The African Development Bank estimates that export revenues will decline by 40 per cent this year for the continent as a whole, leading to shortfalls of $251bn in 2009 and $277bn in 2010 with oil exporters suffering the biggest losses.
Capital inflows, tourism receipts and remittances are all declining in parallel, and trade financing is drying up. Foreign reserves in the worst hit countries, among them Congo, are down to only a few weeks of import cover. Nor is it only the mineral and oil rich that are under pressure.
In past global downturns, the severity of the impact on Africa varied considerably from state to state. This downturn is washing up on all of the continent's shores, cramping both the formal and informal sectors as currencies lose value, the cost of imports rise, and living standards fall.
As the big engines of regional growth have slowed - South Africa in the south, Nigeria in the west, and Kenya in the east - the contagion has spread to poorer countries in the landlocked interior.
Economists, investment analysts and policymakers were all slow to see this coming. Until late last year, many believed that the poorest continent would escape relatively unscathed from the gathering storms. This was partly because African banks were not exposed to the toxic assets eating away at Wall Street and the City of London.
It also resulted from the belief that the continent's strengthening economic performance has been the result of interwoven trends, not just the commodity boom. These included improved macro-economic management in most countries, rising domestic demand for goods and services, and increased investment in social and physical infrastructure.
As the recovery gathered pace, a steady stream of African professionals working abroad had begun to return to jobs back home, raising the prospect that a chronic skills shortage might begin to ease. In parallel, capital flight which has robbed the continent of hundreds of billions of dollars over the decades, showed signs of slowing.
More African money, ill-gotten gains included, was being invested at home as local stock markets soared and a wider range of businesses became viable.Nevertheless, it now seems painfully obvious just how vulnerable this emerging recovery was likely to be, given its roots in world trade and a relatively narrow base of exports.
"The notion that, because you don't have a large financial market your banks are not in trouble appears to have allowed some analysts to push the question of Africa on to the back burner,” says Trevor Manuel, South Africa's finance minister, adding that: “Whereas generally in large parts of the G7 [industrialised nations] it is the financial markets spilling over into the real economy, everywhere else it is the real economy spilling over into the financial markets.”
In Africa this is blunting another promising by-product of resurgent growth. The expansion of banks from Nigeria, South Africa and, among others, Kenya had begun to transform the financial landscape, spreading their reach both regionally and into business sectors as well as parts of society that were previously un-banked.
The AfDB estimates that, to offset the combined impact of the crisis and sustain growth would require an injection of at least $50bn this year, and more next, on top of existing aid flows. To accelerate progress towards eradicating poverty in line with the Millennium Development Goals set for 2015 would require more than twice that.
The sums involved would mark a big leap from existing levels of aid. But as Mr. Zenawi argued at the G20 meeting, to rescue an entire continent will still cost less than resuscitating some individual banks, and for Africa it is a matter of life and death.
Brendan Cox, the Africa adviser to Gordon Brown, Britain's prime minister, expressed confidence ahead of the G-20 meeting that a substantial stimulus package for the developing world will be made available, largely through the World Bank and International Monetary Fund.
But Donald Kaberuka, president of the AfDB, fears that this will come with so many conditions attached that the continent will be in financial ruin by the time the money is disbursed. He and other African leaders are pushing for more flexibility in the way multilateral institutions manage their resources, and more equal global representation on their boards.
It is an emerging irony of the crisis of confidence in global financial architecture: African countries which spent years being told how to manage their economies by the World Bank and IMF, are now at the forefront of those arguing for those institutions themselves to be reformed.
FT, with additional agency files