caleb m fundanga : the effects of the crisis on africa remarks by dr caleb m fundanga, governor of the bank of zambia, at the african economic research consortium senior policy seminar ( sps xi ), lusaka, 6 april 2009. * * * the executive director, african economic research consortium ; government and central bank officials present ; distinguished participants ; members of the africa economic research consortium ; ladies and gentlemen. it is with great joy and gratitude that i welcome you all to zambia and to this seminar. i wish to extend a warm welcome to all the international participants. i hope you will have a good stay in our beautiful and friendly city of lusaka. i feel particularly honoured and grateful to officiate at this important seminar organized by the institution i am proud to be associated with, the africa economic research consortium ( aerc ). chairperson, let me begin by thanking you and aerc for choosing zambia to host this important seminar. i am aware that since its establishment in 1988, the aerc has played a pivotal role in developing and harnessing resources in africa both informational and human capital. research, workshops and seminars such as this one have helped to strengthen the capacity of undertaking policy – relevant research into the problems facing the management of economies in sub - saharan africa. it has, through these interventions, undoubtedly contributed to the positive strides african economies have scored in the last decade with regard to economic governance and development. aerc ’ s devotion to advanced policy research and training in the field of economics in africahas built capacity in many institutions of economic management and academia in many of our countries. today, there is no major economic and financial institution in africa that does not boast of an aerc alumni. this could not have been possible if individual institutions across africa were to pursue training on their own accord. this goes to show how important collaboration is in leveraging capabilities and realising the set objectives for african countries. once again aerc is showing its valuable existence by bringing together a panel of experts from all over the world to come and share ideas on how to address the causes of the global financial crisis, short, medium and long term consequences for the global economy, the impact of the crisis on african economies, implications for growth and development of the continent ’ s financial sector as well as policy options. ladies and gentlemen, this seminar could not have come at a more opportune time than when all our economies are faced with the challenges emanating from the impact of the global financial and

economic crisis. this seminar is unique in the sense that it has been organised to specifically address the effects of the crisis. we feel particularly honoured to host this important event. chairperson, the ongoing economic crisis is not of africa ’ s making but arose from advanced economies like the united states of america and united kingdom. however, there is a risk that african countries could become the biggest casualties of a crisis they did not create. the impact is already severe and has dealt a huge shock to our continent while posing a great threat of reversal to the hard earned social and economic gains that most of our economies had achieved in the recent past. ladies and gentlemen, for more than a decade, most african countries had continued to register unprecedented economic growth rates averaging 5 % and above. we saw a rise in income levels and a reduction in poverty among our peoples with improved education, health, water and infrastructure development. the continent also experienced a surge in investment flows in many sectors including mining, manufacturing, tourism, transport and construction. progress in governance and accountability had also been noted in most african countries. mr chairman, allow me without pre - empting the deliberations to mention some problems the global financial crisis has created for most african economies. commodity exporting countries have experienced a decline in their export receipts. this has been due to the decline in commodity prices reflecting the weak demand of such commodities arising from the scaled down output in industrialised and emerging market countries. the declining export earnings as well as changing investor sentiment toward investing in emerging markets, which has been reflected in the reversal of investment flows, have been exerting pressure on the exchange rates. the depreciation of the local currencies is creating additional inflationary pressures while fiscal operations have not been spared as the tax revenue from export earnings has been adversely affected. furthermore, the effects have quickly extended to the real economy, with serious consequences on jobs. in particular, manufacturing has been adversely affected because of its support to the primary industries on the continent. as extractive industries on the continent face depressed commodity prices, the demand for manufactured goods will continue to decline. this is expected to negatively affect africa ’ s manufacturing sector. the decline in the demand for finished goods in the advanced economies is also adversely affecting exports of our manufactured goods and thereby slowing down the manufacturing sector on our continent. tourism is also adversely affected as many foreign tourists postpone or reschedule their visits to our continent as they grapple with severe economic conditions in their