WIDER Panel: Africa and the Triple Crisis

Elizabeth Asiedu - FDI to the Rescue?
Fantu Cheru
Augustin Fosu
Steve Kayizzi-Mugerwa

Elizabeth Asiedu - FDI to the Rescue?
FDI flows are mostly in natural resources in Africa. Natural resources and good governance do not go hand in hand. FDI could help or hurt
Increase in natural resource FDI from: 1) more demand for resource 2) commodity price boom 3) More profitable (2% to 6%)
African FDI is highly concentrated in a few countries and largely for extractive industries. Increases employment, but not much for developm

Fantu Cheru -
Governments have learned how to talk right and walk left, so look closely to know what is really going on.
Crisis affects Africa in 4 ways: decline in private financial flows (uncertainty), change terms of trade, [and two I couldn't make out]
How have Africa gov responded? doing well at giving assistance to particular sectors
Need to 1 - Minimize exposure to risk. 2 - Agricultural transformation. Needs a strong, enabling state to respond. 3 - expand public investment. 4 - harness new technologies

Augustin Fosu -
Economic crisis just as economic growth was being positive in Africa. Same percent of poverty in 1981 as in 2005, though lower in 05 than 96
South Asia poverty down 20% and 15% in India by $1.25 standard. By $2.50 standard, less poverty in Afr than Asia or India (80% vs 94 or 86)
Other factors also looking up, including higher financial reserves in Africa. In the past, however, Afr has had growth collapse w/ econ crisis

Steve Kayizzi-Mugerwa
Size of task/effort (small, large) vs. Speed of reform (slow, fast)
Slow small - stalemate
fast small - path of least resistance
slow large- breaking resistance
fast large - fully-fledged
Identifies: Rwanda and Liberia in stalemate. Zambia and Nigeria breaking resistance. Uganda and Zimbabwe fully fledged (at times).
Just before crisis, Rwanda declared most business friendly in continent. Nigeria down to path of least resistance.
Many countries returning to de facto governance that international community doesn't know what to do with.
Countries that were fully fledged have done relatively well during crisis. Slower reformers have been hit harder.

Discussion
Q: It sounds like Africa is over the worst of the financial crisis. Is that the panel's feeling, or is there something looming? And has it worsened the link between growth and reduced poverty rates?
Q: 1 - Africa should be part of the new financial architecture. 2 - Reforms does not mean growth, employment, or reduced poverty.
Q: There are two Africas. All suffered from food crisis, but only some from financial crisis. Some benefited. The rest have no funds to diversify.
Q: Was it orthodox or heterodex policies that mattered more?
Q: What can we do to mitigate resource curse part of FDI?
Q: We need more focus on intra-Africa FDI.

A: We are not over the crisis. This recovery is fragile with a backlog of unanswered issues. 'countries talk right and walking left' means they are learning heterodox policies. We have to go back to basics: ag, infrastructure, etc
A: We are not over the crisis