BUSINESS Oil- importing countries will benefit from the lower petroleum prices, but most of these will go to cover the shortfall caused by the earlier very high prices. The current low oil prices mean that a number of multinationals have suspended their exploration activities. Others are having a rethink about the viability of developing new fields in parts of the Gulf of Guinea or East Africa. There has been a steep decline in the value of African commodities, which is a serious issue for a continent that depends on the exports of its primary commodities; these form nearly 80% of its total exports. The price of copper for example, fell from US$ 8,454 per tonne in the second quarter of 2008 to the current US$ 4,000; nickel has plunged from a peak of US$ 37,136 per tonne in 2007 to US$ 15,494 mid- October 2008. Aluminum, tin, zinc, lead and iron have all seen dramatic falls in prices. China, one of Africa's most important trading partners, is also feeling the heat. As its primary export markets in the US and Europe shrink, so does its demand for both hard and soft commodities from Africa. The silver lining is that domestic growth is becoming as significant for the Chinese economy as exports, so it will continue to source products from Africa. However, Chinese companies are now demanding large discounts for commodities such as iron and coal. Remittances from Africans living abroad are a critical source of income for most African countries. In 2007, the UN estimated that over US$ 20 billion was sent to Africa as remittances. In some countries, remittances make up 20% of the gross national product. As the economies of the US, Canada and Europe either stagnate or decline, Africans living and working there do not have any cash left over to send back home. Kenyan authorities say that by August last year, remittances had fallen from around US$ 100 million to just about US$ 36 million. Remittances to Uganda, which comprise 7% of GDP, have declined by half. How can Africa ride out the storm? There is little that Africa can do to influence external realities. However, massive measures taken by some of the world's biggest economies to prevent a 1929- style depression will hopefully work over the next two years and growth will resume both in the West and Asia. This will impact favourably on Africa. The current downturn will mean that property prices are likely to drop. This will enable many first time buyers to take their first step on the property ladder if they can obtain the initial deposits. African lending institutions are in a fairly good position to continue providing mortgages in countries like Kenya, South Africa, Botswana and Namibia. The squeeze on exports could have the effect of making African countries more self- sufficient, producing for their own domestic markets and exporting and importing within Africa. Despite the fairly gloomy projection for 2009, Africa is in a much stronger position today than it was, say five years ago, and is likely to weather the storm. There is an increased volume of trade between African countries and if this continues or increases, the impact on the general population may not be so severe. 124 msafiri Exchange rates for African currencies have taken a sharp knock over recent months. By November last year, rates had fallen by 56%, 24%, 22% and 20% respectively in South Africa, Kenya, Ghana, Zambia and the CFA zone but they had remained steady in the major oil exporters Nigeria and Angola. The credit squeeze and stringent lending policies in the developed world are most likely to curtail the level and volume of foreign direct investment. In 2007, Africa attracted US$ 53 billion of FDI but inflows in 2009 will be lower. Portfolio investments in Africa which rose rapidly over the last three years, are likely to reverse as investors seek safety in US and European government bonds. An interesting offshoot of the squeeze on exports is that the cost of shipping bulk items such as iron ore and so on has plummeted 92% over a seven- month period ( May to November) in 2008. While this is welcome news to those African exporters who can still find markets for their products, the major problem over the next year will be in continuing to find those markets
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