Upon these restless shoulders
Lies a heavy head
With so many thoughts
Thoughts of failed dreams
Thoughts of loosing a brother
Thoughts of being betrayed
Thoughts that have disconnected me from people
And yet nobody cares
The depth of my thoughts scares me
Do I ignore or keep them?

At times my head hurts so badly
Hurts from trying to take control of my thoughts
Hurts from trying to keep my thoughts from wandering off
Hurts from trying not to dwell on the past

Sometimes I think I have made progress
But alas I’m still standing in the same place
Feeling the rhythm of my heart beat slow and fast
Everyone keep telling me its going to be okay
But that’s a lie

I am always lonely
With just my thoughts
No matter how large the crowd is
No matter how much I fake the biggest and loudest laughter
The truth is
I am lonely and hurt
With nobody to talk to

Dear racing thoughts,
When are you going to reach the finish line?
This race is draining me and yet no answers
Oh how I wish I could pen down these thoughts
But I don’t these thoughts can be translated to English
So how then do I expect others to even listen?
Or understand?

This is where I am….
My racing thoughts…..


The Aid for Trade Initiative and Africa; Malawi a case study

For more than half a century, countries in Africa have been overstocked with billions of foreign aid. However the growth and development of the continent are sill very sluggish with a few economies experiencing significant growths. The GDP per capita income in some Sub Sahara African countries is either motionless or declining. Subsequently trade has been identified as a potential tool for economic growth and development over the years, but the process of connecting to this potential tool has been difficult for many developing countries especially the least developed ones. These difficulties have been due to the lack of infrastructures, policies, institutions, effective procedures that would integrate them into the world trading system.

Due to this view, the Aid for trade initiative was launched in 2005 with the aim of using aid as an investment for trade. This initiative is all about helping developing countries and least developed countries to actively participate in the world trading system by overcoming those structural and capacity limitations that serve as a hindrance to them maximizing the remunerations from trade opportunities. So, this initiative is carried out by; making some trade policies reforms, economic infrastructures, trade related adjustments, and the building of productive capacity of the developing and Least developed countries.

  1. Africa and foreign aid

In more than five decades, African countries have been overstocked with billions of foreign aid flowing from both International Organizations, private donors and Non-governmental Organizations. But however the growth and developmental level of the continent is still not so good, with the GDP per capita income in some Sub Sahara African countries is either motionless or declining and a few numbers of economies showing signs of growth at he margin. And to top it up the continent has consistently been under-performing both in International Trade and Economic growth in comparisons to other regions of the world.

The theory of foreign aid has been hailed over the years as a solution to end world poverty. The theory states that all forms of aids are beneficial to any country, despite the situation or circumstances. (Abuzeid, 2009) Foreign Aid, for the benefit of this paper  refers to all official Devlopment Assistances (ODA). ODAs are flows of official finance to the developing or as some may call it “third world” in the form of grants and loans. They are generally administered with the aim and objective of promoting economic development and growth of developing and least developing countries. They comprise of both Multilateral aid, which flow via intermediate lending institutions like the World Bank and IMF, and Bilateral aid flowing directly from donors to recipient countries.

Development economists have argued that foreign aid is an instrument in overcoming the saving gap in developing and least developed countries. They assumed that since the third world is staggering in poverty, they are unable to make income generating investments, so foreign aid should be that savior in closing that financing gap that is causing extreme poverty. But the case of South Sahara Africa makes this argument only valid on paper. SSA has been washed in over a whopping 1 trillion dollars in foreign aid the last 50 years, but besides a few growing economies, the continent remains staggering in poverty and slow growth.  More than a quarter of the SSA countries remain poorer than they were in 1960, with absolutely no implications that foreign aid can take them out of the poverty zone. An example of the failures of foreign aid could be my country Liberia. The country has benefitted from enormous foreign aid since its recovery from the 14years of armed conflict that it suffered. The OECD stated that in 2011 the Liberian government benefitted from a total ODA of 765$ million, which amounted up to 73% of its GNI. But all those aid failed to provide a decent education to the Liberian students, given that all students failed the entrance exams to the University of Liberia in 2013. The issue of extreme poverty and massive corruption still remains a challenge for the country despite enormous foreign aid.

Beside the example of Liberia, James Peron in his 2001 article, cited so many instances of failed aid in Africa. Beginning with the failure of the Norwegian aid agencies in achieving their goal of employing northern Keyans to their newly constructed fish freezing plant. Subsequently, in Tanzania, a 10$ million was spent to build a cashew-processing plant, but this project failed due to poor evaluation of donors. The plant had the capacity of three times more than the entire country cashew production, meaning that the cost was so so high than donors expected. 2$ million was donated to South Africa to aid in the awareness of AIDS in the country. But the funds was misused into buying a model bus to parade actors and actresses that would have helped in the awareness of HIV/AIDS. And also in Zimbabwe the government has received aid for the promotion of land reform. But for 20 years, these reformed lands were being misused by the elites of the ruling party.  Congo also sold all donated food supplies and used the funds in purchasing arms factory from Italy. (Peron, 2001)

With all these debacles, the African governments an even donors have come to a realization that Trade not aid is the solution of African problem. Taking the examples of Asian countries who receive a little aid as the diagram above portrays, but yet were able to emerge a huge number of its population from poverty through trade.\

2. Africa Trade Tragedy over the years

Africa have been actively participating in a long distance specified international trade  for decades, beginning from trading along the Nile river. Although the European early exploration of the continent was due to its riches in natural resources, but also to expand the continent trading opportunities. A key trade route fro the continent at the time was the trans-Sahara trade route where goods were moved by camels from the coast of north Africa up to the Mediterranean and across the Sahara dessert to the West coast. African early traded salt, gold, and salves, with Ghana, Mali and Mauritania the main trading centers. But however the continent position in the multilateral trading system has worn out over the past 50 years.

Most literatures of the 1980s argued that the cause of Africa trade decline in the past 50 years was probably due to its 1960s and 70s policy of import substitution that most countries adopted during those periods. (Karingi & Leyaro 2009) This import substitution policy resulted in a tighten trade restriction and uneven exchanged rates. Domestic policy misrepresentations like high tariff barriers also raised the cost of international trade along with budgets and balance of payments deficits.

But quite recently, literatures dating from the mid 1990s brought a shift in the argument of Africa’s poor trading performance. Judging from the experience of many Asian economies that chased outward oriented strategies, plus export led growth and achieve a positive result, arguments have shifted that Africa’s poor trade performance is due to non-export led growth strategies and its inward oriented strategies. Dollar et al in their 2003 paper argues that if Africa should pursue a more outward and export-led strategy, they have to work on those constraints that would put them at a disadvantage in trading in the multilateral trading system. Some of the constraints he addressed were; poor infrastructures that support trade, low productivity of public investment, low human capital development, lack of technological know how, and even structural factors such natural barriers to trade hence higher trading costs. (Dollar et al, 2003) other reasons stated are unfair global rules which put the continent at a disadvantage, domestic competitiveness, and weakening terms of trade.

With the level of resources that the continent possesses, it is possible that they can be a central player and partner in the global economy. But in order for them to be a key participant in the multilateral trading system benefiting from globalization, they have to address its more binding trade constraints. And this is where the aid for trade initiative comes in.

3. The Aid for Trade Initiative

The Aid for trade is an initiative that was launched in 2005 at the Hong Kong ministerial conference to help developing and especially least developing countries to overcome those structural constraints that serves as a hindrance to their active participation in the global trading system. The OECD defines Aid for trade as “Assisting developing countries to increase exports of goods and services, to integrate into the multilateral trading system, and to benefit from liberalized trade and increase market access”. (OECD, 2006)

This structural adjustment process will be carried out by reforming the trade related capacity, such as; trade policy reforms and regulations, trade related institutions and infrastructure,  productive capacity building, and trade related adjustment. The global aid for Trade initiative aims at interconnecting aid and trade policies in quest of raising living standard and decreasing global poverty.

Statistics shows that Aid for Trade has gradually increased over the years along with its donors. The diagram above shows the growth in the initiative over the years. In 2007, the graph indicates that aid for trade grew more than 20%  and followed by an additional 35% increase in 2008. With the largest share of aid for trade  flowing to Asian countries at 44% and Africa at 35%.

4. The importance of Aid for trade to Devloped and Least Developed Countries

In addressing the issue of trade openness, there have been a vast body of proof  that gives a positive feedback as to the link between the openness of trade and economic performance depending on the speed or form of growth. This is evident in most developing countries that have thrived in getting their rewards from the expansion of the global market. A rapid reduction in trade barriers, for the most fact in manufactured goods has been a stepping stone for these countries to effectively integrate into the global trading system via an export led industrialization process.

Although opening trade up to enhance world market access may not be sufficient, in an effort to enable LDCs effectively participate and reap all necessary benefits of trade liberalization, these LDCs needs help in building their trade related capacities. Aid for trade provides a rational outline for supporting these broad objectives, that is by helping DCs and LDCs grow with the implementation of comprehensive export led strategies that could be very beneficiary to the poor.

But it has been almost 8 years since the 2005 WTO Hong Kong ministerial conference, and we can’t dispute the fact that aid for trade has risen in the discourse of International Trade and Development. Just as its fundings and donors are increasing, so are questions as to its impacts and effectiveness over the years.

  1. Why Malawi as a case study?

Of all African countries why did I choose Malawi as a case for measuring the effectiveness of aid for trade? Below are some justification of using Malawi as my case study in effectively analyzing the impact of aid for trade.

  • Landlocked – being landlocked possess a serious threat to the country’s economic growth. That is higher transport costs, delays at border crossing thus leading to less trade. Being landlocked has been identified by the world bank as one reason that 16 of the worlds 31 landlocked LDC and DC are among the poorest in the world. Because their goods take twice a long to exist neighboring ports.
  • Least Developed – ranked 153 of 169 countries of the United Nations Program (UNDP) in 2010 human development report. The country is one of the world most densely populated countries with a population of 17.4 million people with a land space of just 45,745 sq mi as of 2014 estimates. And most of three quarters of the population lives on Agriculture and lives in rural areas. Almost 75% of Malawians earn not more than 1.25 United states dollars.
  • Beneficiary of development assistance or Aid – Malawi has lengthily been a beneficiary of many development assistance or foreign aids. Tracing back to the 1980s and 1990s Malawi total ODA rose to about 28% of its GDP, in 1994 39%.

5.1 Aid for Trade and Malawi

Malawi’s economic growth has been closely interrelated with its export performance. But in terms of GDP, the country stands at number 10 of the African economies with the lowest GDP. One key factor in the country’s failure to raise its GDP per capita has been related to the issue of low human capacity and fast population growth in the country. As small as the country is, they have been noted as being one of the Worlds’s most densely populated economies, with a population of 16,362,567 people as of 2013. (Malawi, 2013) The World Bank report indicates that in 2009, of the entire population, only 24% had attained secondary education. All these had a direct influence on the private sector by limiting its ability to effectively trade. Beside the private sector, it also had a huge impact on the government and civil societies in establishing a conducive environment for the development of the private sector.

Amidst all these difficulties, the country’s economy and development still have a heavy reliance on trade. And Aid that supports export-led growth potentially has a direct impact on economic growth and thus reducing poverty. The 2006 revised version of the Malawi growth and development strategy mentions trade as a key objective, but failed to specify how trade will be mainstream into its policy. (Malawi MDG, 2006-2011)

Malawi focus on trade related aid effectively can be traced back to the WTO integrated framework in 2001, though the AFT concept was initiated in 2005. In 2004, the government of Malawi approved a Diagnostic Trade Integration study (DTIS) to develop effective recommendations for those programmes and policies that Malawi and its development partners follow that could enhance the country trading performance. The main trading and developmental challenges were restructured in 2006.  But policy recommendations from the DTIS were not mainstream into the MGDS. But in 2006, the Malawi Ministry of Industry and Trade attempted a process of mainstreaming  trade into sectoral strategies.

The OECD creditor reporting system reveals that of the 772 million of flows of ODA to Malawi in 2009, 5.0% of its GDP can be attributed to aid for trade. The table below shows the number of active aid for trade projects through Malawi through the years.

Amount of Aid for Trade in various sectors of Malawi economy through the years










All projects 2002-2010
Trade Policy and Regulations 1 2 2 2 5 3 5 2 2 8
Trade Development 2 3 13 22 24 26 27 33 44 72
Trade Infrastructure 3 10 17 20 26 30 26 24 26 56
Building Productive Capacity 4 5 15 26 34 51 44 43 60 111
Institutional Framework 5 2 17 21 28 36 32 33 36 77
Policy,and Development 1&2 5 15 27 29 29 32 35 46 80
Policy, Develop & Infrastructure 1,2&3 15 32 47 55 59 58 59 72 136
All aid for trade excluding Instit. Framework 1,2,3 &4 20 47 73 89 110 102 102 132 247
All aid for trade 1 to 5 22 64 94 117 146 134 135 168 324
South-South loans 2 4 4 5 5 4 7 7 15

Source: Government of Malawi’s project database, Compile by the Author

The table above shows the growth of the aft initiative through the years in Malawi. The figure equally distributes the projects by the type of aft initiative it falls under. Those figures portray he number of active projects in succeeding years. From 2010, there were just two active trade policy and regulation projects and 44 active development projects. Of which 25 were formed in the agriculture sector, involving the provision of extended services or attempted to promote the development of a Subsector within the agriculture sector. Four of these projects were focused on improving the access of firms to credits, another four addressed the government capacity to improve trade, and six other projects were mainly private sector development which included the World Bank technical assistance program and Business environment strengthening program.

One of the success stories in Malawi was that, the National Working Group on Trade Policy in coordination with a trade consultative forum that involved the public sector, a minimum portion of the private sector, the academia and the civil society were all able to organize a Malawian Trade Connection event in Edinburgh in 2007. This event was a part of a three-year Scotland-Malawi Trade Partnership (SMTP) project that was funded by the Scottish Government and was also meant to showcase the best of a diversity of Malawian products already introduced and available in the Scottish market.  A number of deals for Malawian products were agreed as a result of the event. The SMTP project, which is managed by Imani Development is helping a great deal in the building of efficient export capacity in Malawi and is also facilitating exports to Europe in general and in particular to Scotland. And this project also led to the formation of the Exporters Association of Malawi that has been very active in the consolidation of exports for small and medium enterprises that do not have the capacity to export on their own.

 6. Findings

Although Aid for Trade is a very good initiative that,if directed properly can be the best tool of settling some of Africa’s trade constraint problems, and help them to reap some benefits of international trade. But there are some issues that I found not quite suitable for the initiative.

  1. The situation of Insufficient trade mainstreaming in national development strategies of beneficiary countries.
  2. Private sectors are not given the chance to actively participate in identifying the dying trade needs of the economy.
  3. Many beneficiaries have complained about the Insufficient resources for infrastructure and productive capacity building.
  4. The lack of data on how and to what extend that the initiative have impacted the levels of poverty
  5. Lack of proper guidelines on how to measure the effectiveness of aid for trade
  • Policy Recommendation

In order for Aid for Trade to be effective in other parts of the continent where they are implementing projects, there need to be certain adjustments in the reform process.

  1. “Trade policy Regulations” : under this reform, I suggest that countries should have trade embedded in their domestic strategy and policy papers like the MDG, PRS and others. This was one reason that caused Malawi to benefit from the Aid for Trade Initiative. Since they already had Trade as a major tenant of their MDGS. So under this category, I will recommend that the Aid for initiative Ensures clear linkages and connections that exists between a country’s trade agenda and the broader national development agenda. The donors should  Support failed trade policy, analyzing better options and effectively identify how changes in trade will impact different economic and social groups. My last concern has to with the involvement of the local stakeholder in the process of reforming these trade policies and regulations.
  1. “Trade related infrastructure reform” these reforms in trade related infrastructures, hardwares and even softwares (not forgetting transport and telecommunications) are all necessary to the domestic economy as well. So my recommendation is that Donors should include poorer trading groups like, SMEs, micro enterprises, informal traders, and local women.
  1. Conclusion

The AFT initiative has been successful in mobilizing the available amount of funds to carry out these transformations. But as for the impact on recipient countries, there are few to speak of. Malawi, Botswana, Mozambique, Kenya and few other African countries have benefited through one way or the other from the implementation of the project in their countries. Aft is an effective tool in helping developing countries, particularly LDCs to fully benefit from trade liberalization and WTO agreements. Success stories have been cited from both African and also other countries which gives the indication that the AfT initiative is assisting some countries to fully participate and take advantage of market access opportunities available through the Multilateral Trading Sysytem. The WTO and the OECD together, put in place a monitoring and evaluating mechanism as to know the extend to which the initiative had gotten successful or unsuccessful in certain projects.

Aid for trade has been able to some extent change the minds of our African leaders on foreign aid, since these aids are being used for investment that would lead to increase in trade. From all the above factors, it is vibrant that the success of any Aid for trade initiative depends on the coordination that exists between different stakeholders but in particular donors and the recipient countries.. If proper sustainable systems and mechanisms are not put in place, AfT projects could end up as isolated events instead of well-coordinated projects that are meant to assist a country in market access opportunities and overall economic development.

  1. References


  1. Peron, James “The Sorry Record of Foreign Aid in Africa: African Governments Are Destroying Their Countries with Aid from the West” August 2001. Can be found here
  1. Karingi, Stephen N, and Leyaro Vincent “Monitoring Aid for Trade in Africa:An assessment of the effectiveness of Aid for Trade” African Trade Policy Center ATC no. 83, April 2009 
  1. OECD “Measuring Aid 50 Years Of Dac Statistics 1961-2011April 2011 can be found here  
  1. Country’s Economies  
  1. (2011). “Aid-for-trade statistical queries”. Website. Organisation for Economic Cooperation and Development, Paris. Available at:,3746,en_2649_34665_43230357_1_1_1_1,00.html  
  1. (n.d.). “Calculation of the Grant Element”. Organisation for Economic Cooperation and Development, Paris. Available at:  
  1. Waldman, Linda “The United Nations and the Malawian Growth and Development Strategy Paper: Process, Content and Outcomes amid Changes in the Architecture of Aid” Institute of Development Studies, University of Sussex
  1. 2010 Malawi Millennium Development Goals Report
  1. Malawi Growth and Development Strategy “From Poverty to Prosperity 2006-2011”

Holding International Organizations Responsible for the Violation of Human Rights.

Since the end of the second World War have indeed reflected a trend towards strengthening and extending International cooperation in this era of globalization, we have thus seen a rapid increase in the role played by International Organizations in our day to day lives. Their many roles have reach into particularly human rights profound areas like peacekeeping, which involves the maintenance of security and peace, International Standard setting and Policy making, the fight against the global horror (Terrorism), and the supervision of territories. Due to the expansion of these roles, their work has gained more impacts on the lives of people globally, which have then open a comprehensive gap, for possible human rights violations.

As mention above, the direct participation of International organizations in the process of peace-keeping, peace building or military operations have given rise to a number of question by many states, individuals and organizations as to how to hold these International Organizations accountable for allegedly violating human rights.

Take for instance in 2009, the United Nations Peacekeepers that were bases in the eastern region of the Democratic Republic of Congo, carried out a joint operation with the Congolese army which included the provision of food and other strategic support to the army for them to engage in combat with the militias that were based in the Jungle. Although the goal of this support was credible, but on the other hand this support was also benefitting some Congolese human right abusers troops that were engaged in murder, rape and pillaging. Another instance could be the case of Somalia, where the UN has been accuse of channeling millions of dollars to the African Union Force whom have allegedly marginalized the lives of civilians with complete exemption in its fight against Somalia Insurgents. Other cases where the UN allegedly support these kinds of happenings were; in Cote d’Ivoire, south Sudan, Guinea, and Libya. Moreover, besides their support to army troops, the United Nations have also been accused of the commitment of sexual exploitation and abuse by most peacekeepers.  Also in their supervision of territories, which is a typical governmental function may also affect the citizens human rights in numerous of ways. Take for example, the United Nations administration of East Timor, even Cambodia, or portion of the former Yugoslavia, have constantly triggered more human right challenges.

Thus, with the increase of power of International Institutions, to be specific in human rights sensitive areas, the more there should be efficient mechanisms put in place to hold them accountable for their violations. As the London International Law Association rightly said, power demands accountability. Meaning that, power comes with the duty to account for its use. So when International Organizations have been granted extensive capabilities, there need to be a provision made for suitable mechanisms of control through International Law. Moreover, making sure that International Organizations respect human rights raises the trust of the people for the organization, which will then facilitate its effectiveness. In contrast, the increase in the allegation of the people of violations of human rights by these Organizations, definitely have the potential to reduce the credibility of International Organization.

This entry was posted on May 14, 2015. 2 Comments

How financial crises have seemed to become more frequent and less severe in the recent past (post Bretton Woods) as compared to those that occurred in early 20th century?

The era of economic globalization has led to a rapid change in the global economic environment. These changes have resulted to capital movements becoming higher thus becoming less governable. All these changes were followed by a period of rapid increase in the number of financial crisis in the international scene. These crises have been in the form of Banking, twin crisis, currency crisis, and debt crisis since 1880 to late 20th century and even early 21st century. Banking crisis referred to bank runs or banking failures while currency crises refers to the forceful change in parity and the abandonment of a peg exchange rate system.

Diagram indicating the frequency of financial crisis from 1880-1997.


                                                                      Source: Bordo et al, 2001, p.56

Bordo and others portrays the frequency of financial crisis ranging from Banking, currency and twin currency in the graph above. They computed the number of crisis divided by the number of country minus the year of observations. Thus, indicating that the issues of financial crisis have ascended since the year 1973.This is clearly shown in the vertical line on the far right, it depicts a frequency of 12.2% for 56 sample countries post 1972 making it nearly 2 ½ times the period of 1880-1913.(Bordo et al, 2001)

Since it has been clearly indicated from the above diagram that the issue of financial crisis seems to be more frequent in post Bretton wood era, but then are they any less severe than those of the early 20th century? To answer this question, this paper is aimed at doing a comparative analysis of the early 20th century major financial crisis to that of the post Bretton wood era major financial crisis and its impact and severity on the global economy. The comparison will be done by placing emphasis on the great depression of 1929 and the East Asian financial crisis of 1997. Taking into account the duration of both crises, how long did it take for countries to recover and what were the major losses indicating the various GDP after the crises.

The early 20th century major financial crisis

The issue of financial crisis was very visible during the 19th and early 20th century. Though some were more severe than others, but they all followed almost the same pattern as previous crisis. A misfortune of a projecting speculator will destabilize public confidence in the financial system. Since it wasn’t rare for speculations to double as bank officials, many concerned depositors will run to pull out their savings from any speculative associated banking institution. Since there were actually no federal insurance until late 1933, if a bank failed, concerned depositors had little or no hope of ever seeing their money again. With a lesser regulation by government of the financial system then we have today, many people were victims when a financial crisis took place.

Early 20th century experienced various crises ranging from the stock market crash of 1901, the panic of 1907, and the great depression of 1929. Following the economic panic of 1907, the great depression of 1929 was said to be the deadliest of crisis in modern history, given its length and severity. The depression which started as a decline in aggregate demand in the US (decline in consumer spending) due to the US tight monetary policy subsequently led to a fall in the production of goods as producers saw an unplanned rise in inventories. (Nicholas &Fearon, 2010) An economic shock of this decline was quickly transmitted to most countries through the gold standard. Investors begin liquidating their holdings due to the decline in prices, so by October 1929, the US stock market had crashed by 33% and higher interest rates were destabilizing both the domestic and international economy. (Romer, 2003) The stock market crash was followed by numerous of banking panics in fall of 1930.

Severity and Duration of the great depression

Measuring the severity of the crisis, I have taken into account its duration as well as the percentage of decline in various economies. The depression affected nearly every country in the world, table 1 indicates the dates the depression started in each country and the dates those countries started recovery since the great depression dates and severity fluctuates amongst nations. Table 2 on the other hand points to the decline in yearly industrial production during the crisis among states.

Table 1 – The duration of the crisis across economies

 Country          Depression Began       Recovery Began      

 United States   –  1929:3                           1933:2

 Great Britain       1930:1                           1932:4

 Germany             1928:1                           1932:3

 France                 1930:2                           1932:3

 Canada               1929:2                            1933:2

 Switzerland        1929:4                            1933:1

 Czechoslovakia 1929:4                            1933:2

 Italy                    1929:3                            1933:1

 Belgium              1929:3                            1932:4

 Netherlands         1929:4                            1933:2

 Sweden                1930:2                           1932:3

 Denmark              1930:4                           1933:2

 Poland                  1929:1                           1933:2

 Argentina             1929:2                           1932:1

 Brazil                   1928:3                            1931:4

 Japan                    1930:1                           1932:3

 India                     1929:4                           1931:4

South Africa         1930:1                           1933:1



 Table 2 – the severity of the crisis across economies


Country             Decline

  Unites States      46.8 %

 Great Britain      16.2 %

 Germany            41.8 %

 France                31.3 %

 Canada               42.4 %

 Czechoslovakia  40.4 %

 Italy                     33.0 %

 Belgium               30.6 %

 Netherlands         37.4 %

 Sweden               10.3 %

 Denmark             16.5 %

 Poland                46.6 %

 Argentina           17.0 %

 Brazil                 7.0 %

 Japan                  8.5 %

 The US had a decline in industrial production of 47 percent leading to a fall in GDP by 30% during the period of 1929-1933. (Romer, 2003) The severity of the great depression cannot be fully discussed without mentioning the high rate of unemployment in concern countries. The unemployment rate in the US gallop from 2.9 in 1929 to a whopping 22.9 in 1932. (Nicholas & Fearon, 2010) The sudden loss of income and the uncertainty of employment subsequently reduce consumer spending.

Great Britain entered the depression in 1930 and had a decline in its growth of almost one third of what the US had. France experience was a bit short in the early 190s given that their recovery process started by 1932 and 1933. Prices fell and industrial production subsequently fell in France by 1933-1936. But this was not the case with Germany who slipped early 1928 and its decline was similarly equal to that of the United States. Many Latin Americans countries fell into the depression late 1928 and early 1929, faintly before the US decline in output.

The duration of recovery among countries varies greatly. The British started their recovery in September 1931 after the end of the abandonment of the gold standard. Many Latin American countries started their recovery process in late 1931 and early 1932. Seemingly Germany and Japan started recovery in the fall of 1932 followed by Canada and many other European countries which started the recovery process the same 1933 as the US.

Financial Crisis of the recent past (Post Bretton woods era)

The rise in frequency of financial crisis in the post Bretton wood era has been quite alarming. Equally so, although these crisis have risen in number, but it don’t necessarily mean that they have become more severe than those of the early 20th century. There have been series of crisis ranging from the OPEC nations oil price shock of 1973, the Latin American debt crisis of 1980s, the 1989 US savings and Loan crisis, the Japanese asset bubble collapse of 1990, the European exchange rate crisis of 1992, the east Asian financial crisis of 1997 and the Brazilian financial crisis of 1998.

Although before the crisis, many East Asian countries had pegged their currencies to the US dollar and ran current account deficits which subsequently had a downward pressure on their currencies. Till July 2, 1997 when the Thai baht was attacked by speculators by selling off its assets. Leading to the withdrawal of foreign investors dollar-dominated loans in institutions. The Thai government forcefully let the currency peg system go by devaluating its currency. Thailand had previously acquired a huge burden of foreign debts that had caused them to go bankrupt even before the crisis has spark up. The following year of 1998, financial contagion had spread to other East Asian countries like Malaysia, Indonesia, Philippians, Hong Kong, Korea and others.


 Severity and duration of the crisis

As compare to the great depression which lasted for almost a decade, the East Asian financial crises lasted for just 3 years, from 1997-1999. South Korea, Indonesia and Thailand were the countries that mostly felt the severity of the crisis. By any measure, Indonesia was the hardest hit by the 1997 crisis. The reversal of growth from positive 7.8 percent in 1996 to -13 percent in 1998 is a level of decline few countries ever experience. Increased in unemployment and inflation, and eventually, poverty was the after math of the crisis in Indonesia. Estimation shows that 2.75 million students in primary and junior secondary school dropped out. Poverty increase from 11% in 1996 to 18.9% 1998 and unemployment also rose from 4% in 1996 10.7% in 1998. (Corsetti, 1999)


Unemployment rate across countries %


source: : PROF. M RAMESH, 2009

The crisis affected Thailand severely, next only to Indonesia in severity. The greatest impact of the crisis was in the form of increased unemployment, which rose from 1.5% in 1996 to 4.5% and a much higher under-employment in 1998. Prices of foreign and local pharmaceuticals rose by 51 and 43 percent respectively Poverty rose from 9.8% in 1996 to 12.9% in 1998

Data from the CIA World Factbook indicates that per capita income (measured by purchasing power parity) in Thailand declined from $8,800 to $8,300 between 1997 and 2005; in Indonesia it declined from $4,600 to $3,700; in Malaysia it declined from $11,100 to $10,400. Over the same period, world per capita income rose from $6,500 to $9,300.

The nominal GDP of ASEAN in U.S. dollars fell by US$9.2 billion in 1997 and approximately $218.2 billion (31.7%) in the year 1998. South Korea on the other hand, noticed a fall of $170.9 billion fall in 1998 which was equal to 33.1% of the 1997 GDP.

There was also a prompt rise in interest rates among these Asian countries, Philippians notice a rate of 32% rise in interest rate in mid-1997, and in Indonesia 65% in the heat of the crisis 1998, along with the depreciation of their local currencies,  as South Korea Thailand and Malaysia whose interest rates was well below 20% during the crisis.


In previous financial crisis of the 1970s and 1890s, the GDP had return to its pre-crisis level in a period of 5 years’ time. But this was not the case with the great depression, the GDP of countries were still below its pre-crisis status even a decade later. This was how severe the crisis was.  As compare to the East Asian crisis which the highest rate of unemployment across nations was 10.1 and that was in the Philippians, and the highest rate of unemployment across countries was 22.9 and that was experience by the US economy.

In summary, the severity in the early 20th century financial crisis can be attributed to the issues of extreme manufacturing/productions, excessive buildings and excessive financial speculations. And the frequency of financial crisis in recent post Bretton woods era can be attributed to the danger of financial liberalization of markets and the openness of capital accounts. So the Neoliberal theory of the post Bretton wood economies caused financial crisis to be more frequent and less severe.


  1. Michael Bordo, Barry Eichengreen, Daniela Klingebiel, Maria Soledad Martinez-Periaand Andrew K. Rose, “Is the crisis problem growing more severe”, Economic Policy, Vol. 16, No. 32 (Apr., 2001), pp. 51+53-82

  1. Barry Eichengreen and Michael Bordo, “Crisis now and then; What Lessons from the Last Era of Financial Globalization?” November 2001, pp. 24-26


  1. Nicholas Crafts and Peter Fearon, “Lessons learn from the Great Depression” Oxford Review of Economic Policy, Volume 26, Number 3, 2010, pp. 285–317

  1. Pablo, Bustelo “The East Asian Financial Crisis: An Analytical survey” October 1998,


  1. Christina D. Romer “Great Depression” December 20, 2003, pp. 21

 6. Corsetti, Giancarlo “What caused the Asian currency and financial crisis” April 1999,

The Great Recession and its impact on Africa: Focus on Ghana and South Africa

 By: Faith L. Morlu


The world observed the deadliest financial crisis since the great depression of the 1930s in 2008. The signs of a financial crisis started becoming visible in the mid 2007 and early 2008 by the demise of stock markets, the failures of big financial institutions in the United States and parts of Europe. Given that banks play a key role in our modern market system  due to globalization, the crisis quickly swelled through the whole real economy, which turned a financial crisis of the United states into a global economic crisis. The crisis affected many regions of the world in different ways due to their diverse interaction with the United States. In this paper, I examined the effect of the crisis in Africa more precisely Ghana and South Africa. The impact was analyzed with regards to the performance of Gross Domestic Product, Balance of Payments, Fiscal Deficits, Net Investment Levels, Inflation indices and the Trade statistics of the both countries. 


  1. The great recession of 2007—————————–2
    • Background to the crisis—————————–2
    • The Crisis in brief————————————2


  1. The Impact of the crisis on Africa———————-3
    • Africa before the Crisis——————————3-4
    • Impact of the Crisis———————————-4
    • Why Ghana and South Africa?——————–5


  1. Impact of the Crisis in Ghana-————————-6
    • Trends before the Crisis—————————-6-7
    • The impact of the Crisis—————————-8-9


  1. Impact of the Crisis on South Africa——————10
    • Trends before the Crisis—————————-10
    • Impact of the Crisis———————————11-12


  1. Conclusions———————————————–13


  1. References————————————————-14
  1. The great recession of 2007

1.1 Background to the Crisis

The years preceding 2007 are often been referred to by economists as the years of the Great Moderation, since these were years advanced economies witnessed stable growth rate, and  vast macroeconomic stability. In 2001 the US Fed lowered the interest (The Fed fund rate) rate from 6.5% to a drooling 1.75% (Singh, 2011). Thus creating a flood of liquidity in the economy. Bankers and reckless borrowers who didn’t have a permanent income or job came seeking credits due to the overflowing of cheap money. These so-called subprime borrowers came for these loans with the minds of achieving their dreams of owning a home. So, as subprime borrowers increased, so did the prices of homes. This new development made Investment in higher acquiescent subprime mortgages seem like a new gold mine.

In 2003 the Fed brought interest rate down to 1%. Leading to bankers repackaging mortgages into Collateral Debt obligations (CDOs)  and selling them off. Subsequently leading to the development of a large subordinate market for the distribution of subprime loans. And then the Security Exchange commission of the US went on minimizing the Net Capital Requirement of the five big investment banks in 2007. Thus making these investment banks to Leverage 30 or 40 times their original investments.

1.2 The Crisis

As of June 2004, the Fed started immensely raising interest rates so much that by June 2006 interest rates had peaked 5.25%. (IMF, 2009) This vastly increased in interest rates led to the start of borrowers defaulting on their loans. Causing a bad start of the year 2007 with so many subprime lenders claiming bankruptcy.  According to Singh (Singh, 2011), hedge funds and some financial firms held more than 1 trillion in securities that were backed by these failing subprime mortgages, making the situation alarming enough to start a global financial crisis if more and more borrowers kept defaulting.

August 2007 came with the clarity that the subprime crisis could not be solved single handed by the US financial markets, and soon the crisis started spreading beyond the borders of the US. Then came the freezing of the inter-bank market, due to speculations among other banks. The Fed came into the situation by the slashing of the Fed funds rate as well as the discount rate in an effort to solve the problem, but the worst kept happening.  The worst started by the filing of bankruptcy by Lehman Brothers, followed by  collapsing of Indymac bank, the acquisition of Bear Stearns by JP Morgan Chase, the selling of Merrill Lynch to Bank of America, and the US Federal government controlling of Fannie Mae and Freddie Mac.

By October 2008, the cross border spill over had deepened in many regions of the world due to inter-linkage of markets and financial institutions with the high correlation of risks. During which time the US Fed reduced the funds and discount  rates  to 1% and 1.75%. Bigger economies Central Banks like China, England, Canada, Switzerland, Sweden, and the European Central bank took measures to help the global economy from further crashing by cutting down their rates. But the cutting down of rates alone was insufficient to halt such extensive global financial collapse.


  1. The Impact of the crisis on Africa

2.1 Africa Before the Crisis

Granted that Africa is indeed a diverse region and that, not necessarily all economies have coped well. But prior to the 2007 recession, Africa economies were generally flourishing, they grew at an average of approximately 6%,  inflation collapsed into a single digit level and a built-up reserve. This was before the food and fuel price shock of 2008 (IMF, 2009). These positive growth was attributed to the favourability of the external environment, strong macroeconomic policies, the rise in commodity prices from 2002-2007, and the massive inflows of grant/AIDS and debt reliefs from the international community.

Figure 1. SSA GDP and Exports growth in percentage before the Crisis

Source: IMF data, Author’s accumulation

The graph portrays that the region experience economic growth at an average of 6.5% per year amid 2002 and 2007. The increase in the demand for Africa primary commodities such as natural resources, particularly oil and minerals was a key drive to the growth of the continent between these periods. This excess demand was encouraged by the growth in industrialized countries and the rise of emerging market

economies like china and India.  Granted that Africa growth during that period was driven by commodity boom, but many other factors such as; increase in FDI, Net private capital flow, portfolio flows, remittances, was anticipated to have expanded between the years. (UNCTAD, 2009)  In many other African countries, there was an increase in productivity and domestic demand in terms of telecommunications, as the use of mobile phone and internet services grew from 2002-2008. All these trends were aided by enhanced economic governance, fiscal restraint, efficient banking policies, International debt relief programs, and the decline in the number of civil war and insurgences made the continent quite striking for foreign investments.

 2.2  Impact of the Crisis on Africa

The recession that started in the US financial markets was a bit slower in affecting African economies, but it gradually did. Right after the fuel and food price shock of 2008, the hard sustained economic gains that Africa had managed to sustain over the years were at risk. Just as in other parts of the world, Africa started experiencing the waves of the financial crisis in 2009. The continent saw a great decrease in the demand of its export, decrease in commodity prices,  and the flow of remittances to the continent also started declining. As the situation got at its height, International trade got more costly, foreign direct investors got frightened leading to a fall in FDI, and a tighter international investor and credit risk aversion led to the reversal of portfolio flows. Even fragile states like Liberia, Guinea-Bissau and Burundi whose social and political situation at the time were vulnerable, felt the impact of the crisis due to their dependence on concessional financing. (Bourdin, 2009)

Figure 2.  Percentage of SSA Real GDP, Exports, Imports and Current Account Balance

Source: IMF data, Author’s accumulation

Granting that Africa is the least assimilated region in the world in terms of global trade, but it was unable to drift away from the effect of the global economic crisis. Despite the continent low contribution of approximately 2% to global trade, but the majority of its economies depend on the export of  their primary commodities for survival. Figure 2 shows a decline from 5.4% in 2008 to 1.3% in 2009 in the total real GDP of South Sahara Africa. Imports, which the continent depends on heavily due to their poor production and manufacturing activities fell from 8% in 2008 to -4% in 2009 due to the decline in global productions. Due to the continent exposure to industrialized economies, there was a decrease in the demand for African exports leading to exports falling from 8% in 2007 to -0.071% in 2008, and -5.6% in 2009.

The IMF data indicates a general fall in Africa’s economic growth by nearly 4% percentage in 2009. The mixture of poor export demand, the decline in private capital flows, worse commodity prices, decrease in remittances, the cutting down in tourism revenues, and fragile government revenues were all reasons that the continent economic growth fell by close to four percentage in 2009. The continent emerging markets or middle income countries, that were more assimilated into the global markets were the hardest hit: with growth slipping by about 4.5% in 2009. But in the normal course of events, disparities in economic growth across sub-Saharan Africa is intensely connected with eccentric shocks which was also a reason for the fall in the continent growth. What started with the decline of commodity prices and in some countries affecting the wages of the workforce and even farmers, quickly led to a exist for a total economic collapse and the intensification of the class struggle.

  • Why Ghana and South Africa?

I choose Ghana and South Africa because they are both growing economies or emerging markets in Africa. And these economies with financially developed markets were the first to feel the effects of the global financial crisis because they were more assimilated into the global financial market by the connection of capital flows, exchange rates and stock market investors. Given that the first four economies that were hit by the crisis in Africa are; Nigeria, South Africa, Ghana and Kenya, which led to capital flow reversals, a fall in their equity markets, and exchange rate compression, I decided to analyze the Ghanian economy being from the west, and the South African economy being from the South.

  1. Ghana and the Global Financial Crisis

3.1 Trends before the Crisis

There have been a lot of changes in the Ghanian economy since their independence from the British in 1957.  Their economy has gone through so many changes ranging from the poor economic performance from the 1980s that was marked by the coup and lack of market principles in the National economic policy.  For the most fact, before the economy started enjoying a period of strong economic growth, they struggled with the issues of low productivity, high interest rates, high and volatile prices, and high interest rates thus leading to a very abnormal growth during those years. These issues lead to many difficulties such as: limited access to Internationl Credit, reduction in foreign direct investment, declining exchange rate and International trade.

The country came back on the track of unprecedented economic growth in the early 1990s, when they took up the multi party, the neo-liberal project of the IMF and World Bank, and constitutional rule. This return was marked by an increase in the prices of the Ghanian traditional products (Cocoa and Gold) compiled with a series of market reforms which enable the environment for the growth of the private sector. With the improvements in both the microeconomics and the political conditions, the country has been standing firm on the grounds of a solid economic performance over the past years.

Figure 3. Ghana growth measure by the percentage change and real GDP and Inflation

Source: IMF data, Author’s accumulation

The world bank data show a growth rate of about 5% per year in the Ghanian economy over the last 20 years. Within the last few years, the country has been pursuing a more outward trade policy that recognizes export as a key engine for economic growth and prosperity. In figure 3, we see that the period after 2003 was a very spectacular one with a GDP growth rate averaging approximately 5.9% from 2003 to 2007. The proper implementation of macroeconomics policies leads to Inflation staying below an average of 15% throughout these years of boom.

The government of Ghana principal objective from 2000, was to reduce its domestic debts and stabilized the balance in terms of GDP performance. This objective was realized between 2001-2005, as a gradual improvement was seen in the overall performance of the budget balance. But as for fiscal deficits, it was very low due to the new measure of improvement in revenue expansion, economic expansion, and debt from the heavily indebted poor countries.

But with all the improved growth level in the Ghanaian economy, the Current Account balance did speak an actual different story. Figure 4, indicates a current account deficit that kept growing from 2002 to 2007. An economy that is being run on a current account deficit is due to the increase in the value of imports of goods, investment, services, than that of the value of exports. It is sometimes referred to as a trade deficit.

Figure 4. Inflow of FDI as percentage of GDP and C/A balance as percentage of GDP

Source: IMF & ITC data, Author’s accumulation

And this was the case of Ghana during these years, Ackah et al, in their 2009 paper reveals that during 2003-2007 imports increased from $3232.8 million to $8073.57 million. While exports increase just from $2562.4 million in 2003 to $4194.7 million in 2007. (Ackah et al, 2009) But the issue of low export during these years cannot only be attributed to the economy huge dependence on primary commodities. But I can argue that it was attributed to the economy’s heavy dependence on a constricted range of primary commodities without diversification, just like other African economies. I argue this because, Ghana primary commodity in International trade that constitute approximately 60% of its exports is largely Cocoa and gold. See figure 5 below.

      Figure 5. Ghana Trade statistics, Imports and Exports as a percentage of GDP over the years

Source: World’s Bank data, Author’s accumulation

3.2       The impact of the Crisis

Due to the country’s past 25 years of aggressive exports led industrialization, and their enactment of the IMF and World Bank neoliberal policies, they became significantly integrated into the global economy in terms of international trade. So they were not spared from the external shocks of the crisis. Figure 5, shows an increase in Inflation from  in 2007 to 16.5% in 2008. This increase can be attributed on account of the external shocks and the strong domestic demand. Just after a brief fall, to single-digits in 2006, inflation galloped in 2007–2008, which reflected the impact of the global food and fuel price shocks, marking the beginning of the global financial crisis late 2008, with the aftermath of strong domestic demand, and the pass through from currency depreciation. But the graph indicates that’s by January-May 2009, inflation did stabilized a bit by 20% percent that is it dropped from 16.5% in 2008 to 14.5% in 2009.

Figure 6. Real GDP (annual % change), FDI Inflow (% of GDP), C/A balance (% of GDP) and Inflation (Annual % change)

Source: IMF & ITC data, Author’s accumulation


The graph also shows the shifts in the flow of FDI in the economy from 2008-2010. FDI plays a key role in the Ghanan economy, by means of capital flows as well as employment generation. The decrease in FDI was due to the tension on global capital, by the crisis. This led to a fall in FDI from 9.5% in 2008 to 9.1% in 2009 and it further fell to 7.9% in 2010 (percentage of GDP). The fall in FDI can also be related to that of the decrease in aid/grants and remittances. As many of the industrialized nations that grant aids were pressed by the crisis, the number of aid flow into the economy rapidly decreased from 2007-2009. The crisis also had an impact on exchange rates. The Ghanaian cedis started depreciating against all other major currencies as of mid 2008.

As he global financial crisis brought a fall in the prices of commodities due to the fall in demand by international companies, the exports of concerned countries began falling. The bank of Ghana reported a fall in the price of the country’s main export which is gold in 2009. The price fell from $965.90 in 2008 to $803.91 in 2009. Gold wasn’t the only export that was affected, exports such as cocoa and other commodity prices as well started declining during the same period.  While there were continuous poor performance of exports during that period, Imports on the other hand was increasing due to the export led strategy that made it to produce what was not consumable and consume what was not produced in the economy. See figure 5.




  1. Impact of the crisis on South Africa

4.1       Trends before the Crisis

South Africa has been Africa’s wealthiest major economy for years, (until recently Nigeria took over) has been a key player in the role of emerging market economies that have helped transform the global economy over the years. Their growth trends started by their political transmission from the Apartheid regime up to the most peaceful political regime in Africa since early 1990s. An intense reformation of the economy did bear a successful fruit in the form of macro-economic stability, flourishing exports and improvement in  productivity in capital and labor. This transmission came along with vibrant economic growth that was sustained for almost a decade. The growth was due to the country’s record of a sustained macroeconomic farsightedness that was added to a supportive global environment. The country sustained a GDP growth at a stable pace until the global financial crisis of 2008 and 2009. The sustained GDP growth was also accompanied by the improvement in fiscal balances, leading to the decrease in the government gross debts. Due to the sound policies implemented, the collection of revenue quadrupled and the number of taxpayers increased fivefold between 1996 and 2007. (World Bank)

Figure 7. Real GDP (annual % change), FDI Inflow (% of GDP), C/A balance (% of GDP) and Inflation (Annual % change)

Source: IMF & ITC data, Author’s accumulation

Figure 7 indicates the growth trend in South Africa from 2002 to 2007. As shown in figure 7, South Africa’s real GDP rose by 3.6% in 2002, 3.1% in 2003, 4.8% in 2004, 4.9% in 2005, 5.3% in 2006, which has been cited as the highest 1981 and 5% in 2007.  This growth can be attributed to the effectiveness of the bold macroeconomic reforms that have enhanced competitiveness, employment creation  and opening South Africa to the multilateral trading system.  The country saw its inflation rate going down from 5.8% in 2003 to 1.3% in 2004 but peak again in 2005 to 3.3% which was due to the primary increase in food prices.  All these trends were driven by household consumption, private and public fixed investment on the demand side, financial and business services, construction, and wholesale years and retail trade on the supply side.

       Figure 8. South Africa Trade statistics, Imports and Exports as a percentage of GDP over the

Source: World’s Bank data, Author’s accumulation


After the country’s integration into the global economy, their trading statistics were subjected to enormous changes as figure 8 rightly portrays. Exports and Imports of South Africa started an actual boom from 2004 to 2008 given that exports rose by 26% in 2004, 27% in 2005, 30% in 2006, 31% in 2007 and 36% in 2008. Imports on the other hand, rose by 7% in 2004, 28% in 2005, 32% in 2006, 34% in 2007 and 30% in 2008. The change in the country’s volume of trade can be ascribed to those reforms that were mainly concerned with at achieving greater economic stability and liberalization. These reforms  increased the country’s productivity,  favoring trade, and foreign capital flows as never before in the economy.


4.2 Impact of the crisis on South Africa

The crisis made a severe impact on the South African economy, given that the economy suffered its first recession in 2008/2009 since 17years of economic growth and development. The year 2009 was marked as the largest slowdown in the South African economy, and its impact was even larger than that experienced by some industrialized and emerging economies. The financial crisis was said to have been transmitted into the economy primarily via the financial markets, tightening of bank lending standards and trade linkages due to their integration into the world economy. In South Africa, the financial sector experienced a failure of asset prices, intense increases in the cost of capital along with a severe contraction in loaning. Millions became jobless in 2009 as the result of the crisis. Besides the increase in unemployment, the effect of the crisis was also seen through the increase in consumer demand and consumer credit, the fall of imports and exports, and the sad story of net financial inflows turning into net financial outflow thus resulting in share prices dropping.

 Figure 9. Real GDP (annual % change), FDI Inflow (% of GDP), C/A balance (% of GDP) and Inflation (Annual % change)

Source: IMF & ITC data, Author’s accumulation

Figure 9, shows the impact of the crisis on the economy from 2008 to 2010. Real GDP was seen to drop from 3% in 2008 to -2.1% in 2009. The fall in the real GDP in 2009 was a bit narrower as compared to other emerging markets. The fall was quite lower because of the South African economy did not experience any major bank failures or bankruptcy, and the OECD proclaimed this declined to be counterbalanced by the strong growth in the construction industry and cheap oil prices during that period. (OECD, 2010) The graph also shows the impact of the crisis on the inflow of FDI in the economy. FDI fell from 3.6% in 2008 to 2.7% in 2009 because of the decrease in the level of confidence of investors. This decrease in the level of confidence of investors led to foreign portfolio investment flows to other emerging countries to be reversed. Additionally the impact of an unstable global capital market and a very poor investment or banking environment placed a downward pressure on the volumes of business and also had a negative effected on fee income. So investment income further dropped due to the poor performance of the global equity markets. Subsequently, the current account balance indicates a decrease in the trade deficit from -7.4% in 2008 to -4.9% in 2009. Inflation, on the other hand, as portray by the chart, fell from 11.5 in 2008 to 7.1 in 2009.

Just as International trade jumped during the global crisis, South African exports of goods (see figure 8 on pg. 11) and services fell sharply as a result. According to Kershoff (2009:8-9), South Africa was hit really hard by the drop in the international demand for vehicles and non-food commodities (industrial raw materials) mainly because these items dominate the country’s exports. Figure 11 shows a fall in exports from 36% in 2008 to 27% in 2009, and imports also fell from 39% in 2008 to 28 in 2009.

Another significant impact on the South African economy was the increased in the rate of Unemployment. The country had previously been suffering from the issue of unemployment and this crisis, unemployment only added up and intensified the existing regional economic inequalities. In mid 2009, South Africa labor force statistics reveals that there were 7 of the 9 provinces that unemployment rate had exceeded  the national rate of 24.3%, making it the highest in South Africa poorest provinces with a large rural population.


  1. Conclusion

With Africa least integration into the global economy, it was hit hard by the global economic crisis. The continent economic growth went from 5.2 percent in 2008 to 1.6 percent in 2009. Luckily, Africa responded by upholding those good policies that had brought some level of growth in the past, and they continent started recovering in 2010. Notwithstanding, with all the many challenges facing the continent, ranging from an enormous infrastructure deficit, weak initial conditions for the 2015 Millennium Development Goals, low agricultural productivity, and a very poor governance, but Africa’s performance has recently given us cause for optimism.

The 2008 financial crisis was more global than any other period of financial turmoil since the great depression. The degree and severity of the crisis echoe a combination of several factors, some of which are common to previous crises and others are new. In previous financial havoc, the pre-crisis period, was mainly considered by the surging asset prices proving unsustainable, an extended credit expansion that led to the increase in debt, marked by the beginning of new types of financial instruments and the failure of regulators to keep them up.

The slowdown in economic activity that came as a result of the great recession of 2009, left Ghana and South Africa under immense pressure to build their economy back to its pre crisis level. Many Corporations were affected directly through higher financing costs, as well as secondarily that is through the impact of the crisis on their customers and, their balance sheets. Exports were under pressure due to the decline in world trade, and many jobs were lost in some industries, and in other industries the pressure on wages combined with the costs of production remained high. Even though all financial crisis has similarities with previous crises (Great depression, amongst others)  in some features, but the effects or the impact of the global financial crisis of 2009 remains the worst ever experienced since the great depression and therefore it remains significantly different.

  1. References:
  1. Ackah, Godfred Chales, Dorku, Bortei Ellen, and Aryeetey, Ernest “Global Financial Crisis Discussion Series: Ghana”, May 2009, Overseas Development Institute 111 Westminster Bridge Road


  1. IMF, “Regional Economic Outlook Sub Sahara Africa, April 2009, Can be found here
  1. Otoo, Kwabena Nyarko, and Adjaye, Prince Asafu “The effects of the Global economic and Financial crisis on the Ghanian economy and Labour Market”, Labour Research and Policy institute November, 2009



  1. Paulo, Drummond and Gustavo Ramirez,“Spillovers from the rest of the World into Sub Sahara Countries”, IMF working paper 2009
  1. World Bank “Africa’s Paulse: An analyses of trends shaping Africa Economic feature” April 2010, can be found here
  1. World Bank “Overview of South Africa’s economy”
  1. IMF “Regional Economic Outlook, Sub-Shara Africa; Staying the course” October 2014
  1. N’zue, Felix Fofana “Impact of the Global Financial Crisis on Trade and Economic Policy Making in Africa” African center for economic transformation, 5th GTA report can be found here
  1. OECD “Economic Surveys: South Africa 2010” can be found here
  1. International Trade Center “Data and Statistics”