The steep decline in capital flow including the private capital in addition to the falling commodities prices will severely undermine Africa’s growth going forward. We have to keep in mind that a major portion of Africa’s capital flow in the past came from Asian countries China being at the forefront of it. Asian’s FDI flow to Africa has been a major contributor to the rapid growth and economic expansion of African economies. In trade terms Africa’s exports to Asia which consists of commodities, including oil, non-oil minerals, metals, and agricultural raw materials, now accounts for 86% of its total exports to Asia. Besides China and India Africa’s export to five ASEAN countries (Indonesia, Malaysia, Singapore, Philippines and Thailand) have grown by over 70% and stood at around US$ 44 billion (approx ). Based on the recent data Asia is now Africa’s biggest trading partner.
Africa is now very interlinked with Asian economies so it’s safe to assume that without a recovery in Asia we won’t see a recovery in Africa. Also going forward the ability of African companies and the Governments to attract capital from international markets will be severely undermined for a simple reason that they are now having to compete for the same capital with European and US governments who are also in the market raising capital very aggressively. The expectation is that Asian economies (excluding Japan ) will probably recover faster then US or EU which will obviously benefit Africa.
The African business leaders and politicians should work closely with their Asian counterparts to make sure they are able to quickly tap into the recovery in Asia without any time lag. This is the time for Africa to work on setting a stage for a sustainable future growth.