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Daily reports from activists school on “The Global Financial and Economic crises and Africa”

EJN Seminar on Economic Partnership Agreementss Ends in Accra

ACCRA, Ghana(TWN-Af)--The Economic Justice Network(EJN) of Ghana closed a one-day workshop on the Economic Partnership Agreement (EPA) for around 25 EJN members and the media at Coconut Grove Regency Hotel, with a call to members to “re-orient” at a “critical time” when the Europe is going through a financial crisis.

Opening the discussions, Gyekye Tanoh of TWN-Africa stated that there is “evidence of resistance [to the EPAs]” and it is possible. The question is on what civil society organisations can do even better at a time that the EU is much weaker and going through a crisis of its own with its economic and monetary union.

Edward Kareweh, deputy general secretary of the General Agricultural Workers' Union (GAWU) of the Ghana Trade Unions Congress., shed some light on the extent to which ECOWAS’ position had worsened by 2007. He explained that there were three elements leading to the deterioration: the first was the role of Nigeria and how it had said no to the EPAs; secondly, the role of Ghana in initialing the interim EPA, and how that was an entry point for Europe to get to the rest of Anglophone Africa; and finally, Cote d’Ivoire, which had actually signed an interim EPA. In his view, these three major points had all contributed to a general breakdown of ECOWAS’ position on the EPAs.

To shore up ECOWAS’ position, Ibrahim Akalbila of the Ghana Trades and Livelihood Coalition (GTLC) called on Ghana to negotiate as part of the sub-regional bloc of ECOWAS and not as an individual member country.

Head of Programmes of TWN-Africa Tetteh Hormeku said that “governments have abdicated the responsibility to formulate their own policies…and that is the challenge for the EPAs.”Hormeku suggested that in order to move forward, there should be an “audit of constituencies” to build a programme for mobilization, and this includes the media, as well as a range of economic sectors. The mandate of EJN, he continued, would need to be expanded from trade to incomes and livelihoods.

Suggestions from other participants included the establishment of a dedicated press corps on the EPAs, with a specific proposal for the Institute of Financial and Economic Journalists (IFEJ) taking the lead on this group. Another proposal, by CIVIC Response, was for a more long-term approach on the EPAs so that it would move away from the point where only a few individuals had mastery of the subject, but to a stage where there could be a critical mass of understanding on the subject

Closing the meeting, Programme Officer of TWN-Africa Sylvester Bagooro argued that the civil society networking of the EJN group would be re-launched with a defined agenda and an action plan, and that they needed to develop an approach on development issues and key moments, including capitalizing on moments like the regional integration month that had been launched by the Ministry of Foreign Affairs and Regional Integration to better-explain and spread the word on the EPAs.

The EPA is a trade pact that is being negotiated between ECOWAS and the European Union (EU). The objective of the workshop was two-fold: first, to update participants on the current debate on the EPA negotiations that will have serious implications on Ghana’s industrial development and the entire life of the Ghanaian economy. Secondly, it sought to explain the dynamics for the African continent with regards to trade and development, and what Ghana and other African countries should be looking for.

The EJN is a coalition of Ghanaian civil society organisations fighting for economic justice. TWN-Africa is the interim secretariat


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 DAY 1, August 23, 2010

A five-day workshop on the global financial and economic crises is underway in Accra, Ghana. Welcoming participants, Dr. Yao Graham, Co-ordinator TWN-Africa, said the global crises have legitimized even more strongly analyses of many of the participants and their organizations and constituencies they represent.

He said these crises have also, more poignantly, exposed the underlying structural and systemic cracks in Africa’s economy and its vulnerability to external shocks.

The workshop, Graham said is expected to yield common lines of understanding the trajectory and dynamics of contemporary crisis of the global financial system in the world and Africa, the character of Africa’s integration in the global economy, the resultant peculiarities of boom and bust in Africa and its vulnerabilities as well as strengthen engagement.

Tanoh said African governments’ analyses and responses to the ongoing global crises are both inadequate and ineffectual adding that apart from telecommunications and financial sectors, all other productive sectors of the African economy have sharply shrunk.

The African Union’s analysis for example merely rationalizes the global crisis as a temporary blip and not systemic. In effect, it assumes that Africa’s challenge in the midst of the worst economic depression since the Great Depression of the 1930s is a financing gap.

On Africa’s productive sector, Tanoh said, the amount of banking finance going to agriculture for example has dwindled across Africa by 45 per cent and 55 per cent for industry over the last two decades to make the continent even more vulnerable and susceptible to external shocks at the same time that African states’ ability to address these issues have been wrestled out of African hands by the combined force of neo-liberalism, namely international financial institutions, multinational corporations and rich country governments.

A senior fellow at the Centre for Southern African Studies, Dot Keet, speaking on the “Impact of the Global Crisis on African Countries – Transmission Mechanisms, Evolution and Effects” said “what we face (in Africa) is a systemic crisis of the capitalist system”, adding that, the crisis has also exacerbated sectoral and class systems, relations and processes across the continent.

These crises will continue for some time, she said, adding that Africa faces a long period of hardship, instability and deepening levels of poverty.

University of Cambridge’s Gabriel Palma who spoke on the topic “New Trends in the World Economy: Finance and Financialisation of Commodities” said financialisation, loosely defined as an economic system or process which reduces all value that is exchanged – be it tangible, intangible, present or future promises – either into a financial instrument or a derivative of a financial instrument, happened much faster in developing countries and peripheral European Union states (such as Greece, Iceland, Ireland and Portugal) hence the severity of the crisis on these countries including African states.

He said recent dramatic price changes “did not and do not reflect real demand and supply imbalances”, adding that the major force pulling commodity prices up and down is speculation”.

Palma also pointed out there is a real threat of “stagflation” far worse than that of the 1970s which was associated with cost-push factors.

DAY 2, August 24, 2010

Day two zeroed in on Africa’s Political Economy and its Specific Vulnerabilities in the Global Crisis

Speaking on the Key Features of the Financial System and Financial Services in Africa”, Tanoh, noted that the corporate sector of Sub-Saharan Africa which is more closely connected to the global economy is disconnected from the larger local economy of the countries in which they operate.

Tanoh, programme officer at TWN-Africa, said Africa is connected to the global economy, contrary to IFIs and donor analyses. But even more importantly, he added, Africa was wrongly linked to the global economy and that to a substantial degree explains the severe effect the global crisis is inflicting so much pain across the continent.

He said financialisation has restricted African states’ ability to direct credit and other forms of assistance to important sectors as such agriculture and manufacturing, leading to deindustrialization and the continent’s over reliance on imports of agricultural products.

Tanoh also dismissed IMF-World Bank and African government claims that Africa escaped the worst effects of the sub-prime crisis, citing the case of Angola in which the oil-rich country’s largest bank lost US$ 16 billion in the last quarter of 2009 due to financialisation.

University of the Witwatersrand’s Nicolas Pons-Vignon speaking on “Financing Development in a Primary Commodity Dependent Economy”, said foreign aid has been an important instrument for accelerated development in Europe and Asia.

However in the case of Africa, aid has served as a very critical tool to de-build the state, thus weakening the capacity of African nations to pursue home-grown and independent progressive policies. More bluntly, he said, “aid has not promoted development” as state de-building has had a huge negative impact on the state’s ability of these countries mobilize domestic resources.

Pons-Vignon said the increasing IFIs’ determination to reduce African governments to poverty alleviation is closely tied to the neo-liberal agenda of driving the state away from its traditional responsibilities to its population and to further entrench donor-driven ownership of African economies and systems for the benefit of transnational corporate.

Speaking on the topic “The Washington Consensus, Market Liberalisation and Export-Led Growth in Africa”, Prof. Adebayo Olukoshi dismissed claims attributed to the Bretton Woods institutions, western and some African governments that the impact of the global financial and economic crises on Africa has been mediated by so-called prudent economic policies forced on African countries over the last three decades.

Olukoshi observed that what these World Bank-IMF-donor driven laissez fair policies have done has been to severely constrain African countries from responding adequately and responsibly to a crisis which takes its origin from the United States and other developed economies.

Prof. Olukoshi said all the promises of growth under the discredited Structural Adjust Programmes (SAPs) failed to materialize.

“African countries resumed growth (from 2001 to early 2008) only because of the new commodity boom. It had absolutely nothing to do with the implementation of the macro-economic policies of the Washington Consensus”, the Executive Secretary of the Council for the Development of Social Science Research in Africa (CODESRIA) added.

The social costs of the policies themselves have been so heavy, most gains made after independence were lost and Africa de-industrialization. All of these have made it even more difficult, he said, for the purveyors of limited role for the state under the Washington Consensus to continue business as usual.

The pretence that you can create an “agency of external restraint” as the American economist Paul Collier puts it, “that will hold down the hands of African governments and discipline the state through right-sizing and down-sizing in other that the masses could have a free reign to enjoy themselves is completely false’, he noted.

He also cautioned participants against allowing the causes for which they fight for to be conflated with agendas “that sometimes we do not fully understand”, emphasizing the that “our struggles for change in our countries cannot be underwritten for us by anybody outside of our countries, no matter what their goodwill maybe”.

DAY 4, August 26, 2010

Day four focused on the Minerals Economy in Africa.

Abdulai Darimani, programme officer at TWN-Africa speaking on the theme “Manifestations of Global Financial Crisis in Africa’s Mineral Economy” pointed out the worrying retreat of strategic mineral-rich countries including Tanzania and Zambia, from progressive policies and regimes introduced to maximize returns and check the worst forms of mining  in the wake of the financial crisis.

He said in response to the crises mineral-rich African countries have also introduced new measures and policies which intensify orthodox economic policies. Other manifestations of the global crisis include loss of thousands of jobs, collapse of mining companies, deepening environmental deterioration triggered by the sudden evaporation of some major mining conglomerates without carrying out their environmental responsibilities such as rehabilitating already mined concessions.

Speaking on the “Issues and Trends in International Minerals Markets and Trade”, Dr. Yao Graham, Co-ordinator of TWN-Africa said mineral prices, which have since made some recovery from the massive slump in 2008 and 2009, will continue to be relatively high in the foreseeable future.

He attributed this in part to the development curve of countries such as China and India in response to local demand as well as market speculation and dwindling global reserves of important minerals. In spite of the rise of China and India as major consumers of minerals, Europe, United States and Japan remain the key consumers of Africa’s mineral resources.

Graham said the mining corporate world is evolving quickly especially in Africa. Multinational mining corporations have a much higher presence in Africa than anywhere else in the world and this partly explains the weak regimes and the unduly extensive reach of US-EU led international institutions such as the IMF, World Bank and the World Trade Organisation in designing and monitoring economic and social policies implemented especially in mineral rich African countries.

In Asia, he said, state-mining companies remain very critical to the extent that the Bretton Woods institutions, especially the World Bank are contemplating a strategy to respond to the challenge these companies pose to the IFIs’ hegemony in global policy making and implementation.

Graham said Botswana which for many years was held up as an example of a successful mineral dependent country suffered perhaps the most from as commodity prices came crashing in the wake of the financial and economic depression.

Within weeks in 2008, Graham added, diamond prices fell by as much as 90 per cent leading to a 10 per cent slump in Botswana’s GDP to drive the Southern African country into the chilly arms of the IMF for over US$1.5 billion. This makes the pin-up model country Botswana also a “pin-up” model of the worst impacts of the financial and economic crises.

Prof. Ray Bush of Leeds University on the topic “The New Scramble for Africa” observed that all of sub-Saharan Africa’s GDP is equal to Turkey’s and lower than that of Australia. He also noted that Africans are poorer today than they were two decades ago. Up to 45 per cent of Africa’s population lives on just about US$1 a day. This has been worsened by the ongoing financial and economic depression.

The relatively small size and precarious state of African economies opens them up to substantially high corporate bully as many of some of the largest mining and oil companies are several times worthier. ExxonMobil, the American oil giant’s net profit in 2008 for example was US$ 45 billion and US$ 2.3 billion for Anglo American mining company compared to an average of less than US$5 billion of GDP in SSA.

He said the new scramble for Africa is also reflected in the increasing interest in Africa’s oil reserves, both proven and potential by the developed countries and now China, India and other emerging economies. He cited the particular interest of the United States, EU and their transnational corporation’s keen interest in offshore. This is increasingly replicating offshore the enclave nature of the mineral mining sector onshore in Africa where the extraction of these non-renewable natural resources are delinked from the local or national economies.

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