African leaders should not allow their respective economies to be continual victims of circum­stances. They should take charge of their destinies to alle­viate suffering and give people on the continent hope that the leadership is determined to and capable of changing the fate of the Africa and set it on a new path.

The challenge was made by Dr Nkosazana Dlamini-Zu­ma, AU Commission chairperson, in her address to the Ministerial Roundtable on the theme “Addressing the Impact of Drought, Floods and Declining Commodity Prices in Africa: What Coping Strategies and Capacities are required?”, on 3rd April 2016, jointly organized by the African Union Commission and the African Capacity Building Foundation (ACBF).

The event at the Conference Center of the United Nations Economic Commission for Africa (ECA) in Addis Ababa, Ethiopia was intended to tackle the issues of the drastic decline in demand for, and a sharp drop in the prices of, a wide range of commodities produced and exported by most African countries in recent months, causing adverse financial and economic effects on the continent. According to the organizers, this situation is worrisome in that most African economies are still heavily dependent on commodity exports. Rising United States interest rates have resulted in currencies depreciation and risen external indebtedness as well as mounting inflationary pressures.

The situation has been exacerbated by widespread and prolonged drought that has adversely affected agricultural production especially given that rain-fed agriculture remains the backbone of many African economies. Low river flows and drying reservoirs have rendered irrigation schemes inactive and led to increased hydro – power deficit. In a number of countries, floods have also been prevalent and have destroyed infrastructure, caused displacement of people and are leaving water borne diseases on their path.

As a consequence most African economies are navigating through stormy and rocky economic situations. Humanitarian, financial and macro-economic management as well as capacity challenges are immediate. Therefore the AUC-ACBF provided a platform for the participants to exchange views on effective mitigation measures and stimulus packages to urgently address these issues.

Dr Dlamini-Zuma said there was need for African leaders to “change our mindsets and believe in ourselves” if solu­tions were to be found to the challenges the continent was facing.

“The answers to these issues are critical, the practical solutions and actions we propose must alleviate suffering, but above all give our people hope that we are a leadership determined and capable to change the fate of Africa and set it on a new path, breaking the cycles of dependency and vulnerability,” she said.

She said since 2000, Africa had seen an impressive turn­around, with 5% average growth compared to about 2% during the ‘80’s and early ‘90’s. “We know that for this to be transformative, it has to be growth with industrialisa­tion, and transformation of agriculture and African labour markets.”

Dr. Dlamini-Zuma said among the lessons that had been learned from trying to meet the goals set in the MDGs was the fact that Africa’s growth could not be stable if it was not inclusive, its economies could not be resilient if they were not diversified, its products not competitive if not processed and business and trade could not thrive on a continent that is fragmented.

“Since we are so vulnerable to the fluctuations of commodity prices, what are the real explanations for the cyclical collapse in prices, and are they always linked to what happens in the real economy in the world? Why, despite the dire situation, are we still recording growth of above 3.5% and are still home to among the fastest growing economies in the world? What drives this growth?” she asked.

It is imperative that the African economy be analyzed to understand why it is still vulnerable to weather fluctuations, and what needs to be done to build resilience in Africa’s agricultural products so as to make them more competitive in the world market, she said.

She also noted however the negative effect of climate change such as the El Niño phenomenal on the African economy leading to recurring droughts and floods in some part of the continent, which she said calls for emergency action each time they arise including many other challenges Africa is facing.

She went on to ask about the impact of the fall in earnings from commodities on production and revenues, and on the population in terms of jobs, incomes, consumption and poverty.

“What has happened with our tax base, the state of our fiscal deficits and debt? What impact on investments, domestic and foreign, is this having? Is it inevitable that these recurring phenomena constitute emergencies each time they arise? Are our difficulties with managing emergencies inevitable or is it in our power to adapt and build resilience to withstand these occurrences because we know they will recur?”

She said it was Africans’ responses to these questions that would allow them to make progress on the conti­nent’s transformation agenda. “Africa must defend and expand investments in education, skills and science technology to further boost the economic growth of the continent,” she emphasized.

The ACBF’s executive secretary, Prof Emmanuel Nnadozie, noted the great significance of the ministerial round table discussion to the African Economy given that droughts, floods, and other hazards do have negative impacts on agriculture, food availability, infrastructure, assets, and productive capacity. Though studies over the past 20 years showed that Africa is the second fastest growing economy in the world, it is however witnessing a lot of issues related to Climate Change which also is the cause of droughts, floods and decline in commodity prices in Africa.

Professor Nnadozie highlighted that relatively low economic growth in the continent can partly be explained by the external environment, which is now becoming less supportive. He further explained that the impact of climate change is felt at all levels ranging from droughts and floods which also causes a decline in crops production which are an important source of revenue to many African countries, thereby worsening a situation that is already bad.

Meanwhile, the commodity index prices has declined from 210 in April 2011 to 90.73 in December 2015 signifying that more primarily commodities have to be produced for the same amount of revenue, reiterated Professor Nndozie. He added that the key challenge had been the lack of capacity to anticipate, prevent and mitigate these kinds of challenges facing the continent.

He said Africa’s vulnerability to sudden changes in commodity prices and external shocks is as a result of their heavy dependence on primary commodity export which also explains why in 2012/2013, out of 94 commodity dependent developing countries, 45 came from Africa with more than 60% of their exported merchandise made of primary commodities. It is important to mention that a decline in commodity price generally affects the pace of growth in household income, company profits and revenue for government.

Despite the negative impact of declining commodity prices and occurrence of droughts and floods in most parts of Africa, in some countries measures have been successfully developed to tackle the issues, he said.

“The issue of droughts, floods and decline in commodity prices can be addressed if Africa pays particular attention to the right policies and necessary capacities,” Professor Nnadozie concluded.

Water shortages

Giving country reports, a speaker from Lesotho lamented the shortage of water for the majority, at a time the com­modity was being exported to South Africa. “Infrastructur­al development is lacking to enable us to supply our people with the precious commodity, which is in abundance in our country,” he said.

A speaker from Liberia said his country needed to make massive investments in the road network and in energy. “We are aware of what needs to be done for our country to move forward, but are constrained on how we balance conflicting issues,” he said.

A speaker from Benin said his country had addressed the shortage of funding by floating social impact bonds to harness domestic and Diaspora investors.

“We have decided to promote small and medium enter­prises but have had to put in place the necessary infra­structure to enable them to operate. And we have seen an increase in our tax base as the SMEs are now part of the tax paying league,” he said.

“We convene this Roundtable to brainstorm what needs to be done, to defend the gains of the last decade, and cre­ate policy space to implement the ambitions programmes of transformation that we set for ourselves,” Dr Dlami­ni-Zuma said.

The event was attended by Dr. Ngozi Okonjo-Iweala, Economist and Former Finance Minister of Nigeria, Mr. Mohamed Beavogui, UN assistant Secretary General and Director of the African Risk Capacity, AUC Commissioners, Ministers and Representative from Member States as well as high level officials from various continental and international organisations.

With inputs from an article published in the African Development Week Roundup - Day 4 by IC Publications.