Module Code: - BSS000-6 Module Name: - Applied Management Project (AMP)

MAIN DISSERTATION REPORT

On Topic: - The Global Economic Crisis and Its Impact on AFRICA Student Name: - AMIT KUMAR Student ID Number: - 0923679

Acknowledgement

It has been a great pleasure and privilege to conduct the arduous and challenging (AMP) dissertation project. I personally thank my team members who supported me throughout the dissertation. Their cooperation and patience helped me in completing my project on time. My deep gratitude and my sincere thanks to all of them for their excellent support, effective guidance and spirit of team work during AMP week. Their constant encouragement and criticism gave me full confidence and motivation to complete my project work effectively and efficiently.

Table of contents
Contents Page no. 5 7 7 7 8 11 12 13 14 15 16 16 17 18 18 19 19 20 22 Central Growth to Banks Policies poverty inflation and for Estate and Agricultural Telecom Stabilization Sector Sector

1) Executive Summary 2) Aim and Objectives of the Report

2.1)Aim of Report 2.2)Objectives of the Report

3) Introduction 4) Impacts of Global Economic Crisis on AFRICA 4.1) 4.2) 4.3) 4.4) 4.5) 4.6) 4.7) 4.8) 4.9) 4.10) 4.11) 4.12)
Economic Growth International Trade Migrant Remittances Millennium Development Goals Official Development Assistance Infants Death Rate Capital Flows Political Stability Foreign Direct Investment Weaker Health System Commodity prices and Trade Export Revenue and Industries

5) Challenges Posed by Global Economic Crisis 5.1)

23 Challenge Manage 23 Challenge 24 Manage 24 Flexibility 24 Challenge 25 Real 25 to the

5.2) 5.3) 5.4) 5.5) 5.6) 5.7)

5.8)
26

Unemployment Challenge 26 Manage 26 Social Challenges 28 Manage 29 Gross 29 for Industrial African Production Domestic Development and to Stock Development Sector Market Challenges Bank Demand Product

5.9) 5.10) 5.11)

28

5.12) 5.13) 5.14)

6)Policy responses to Crisis 6.1)Interest rate 6.2)Liquidity Injections 6.3)Recapitalization of Banks and regulatory changes 6.4)Trade policy measures 6.5)Fiscal measures 6.6)Liquidity support 6.7)Research support 7) Business Strategies to Cope Various Challenges

30 30 30 31 31 31 32 32 33 33 33 33 34 34 34 35 35 36 36 36

6.1) 6.2) 6.3) 6.4) 6.5) 6.6) 6.7) 6.8) 6.9) 6.10) 6.11)

Exporting Strategy Social Strategy Sound Supervision Macroeconomic Policies Fiscal Policy strategy Management strategy Devaluation of Currencies Stock Market Investing Strategy Reduction in prices Innovative strategies

6.12)
6.13)

Development strategies Growth Strategy

37 37 39 40 40 40 40 41 41 41 41 41 42 42 42 42 42 43

7)Conclusion 8)Recommendations

8.1) 8.2) 8.3) 8.4) 8.5) 8.6) 8.7) 8.8) 8.9) 8.10) 8.11) 8.12) 8.13)

Analytical tools More focus on Domestic region Organization Commitments Flexibility Creating retail financial instruments Reduction in prices More focus on retail and private sector Manage supervision More productivity Manage Prioritization Supervisory regimes Structural reforms Official development assistance

9)References

Executive Summary
This report critically evaluates the current global crisis and its impact on African countries. It also analyzes the various challenges posed by global crisis on African economy and finally recommending various business strategies that can overcome the financial and economic crisis in Africa. Impact of global economic crisis in the first half was very less as Africa has very weak integration with rest of the world but Africa did not remain isolated from the crunch of crisis. Later in second half of 2008, it had worsening effects of crisis on its economy because Africa is very poor country and it mainly depends upon developed countries like US and Europe where the crisis began in 2007-2008. Due to financial crisis, there were problems related to trade credit financing. The immediate decline in commodity prices has deteriorated the market for finance and it is the biggest declined over the last 80 years due to decrease in price of currency, decrease in trade volumes and commodities

In terms of currency, Africa faced depreciation against US dollar. The currency of South Africa Rand depreciated in its value against US dollar. Education and health is yet another major sector where the influence of crisis has been felt. The education system of Africa was already very orthodox and the crisis took it to another extent. People of Africa became very poor and do not have sufficient funds to support their education. So they remain illiterate. Similarly health system was poorly affected and many more diseases came into existence. People in Africa suffered from poor health systems and could not cure them as they dont have sufficient funds. The continuous economic slowdown raised the risk probabilities both in domestic and foreign financial sectors which resulted in constant falling of consumer incomes and debt serving capabilities. This economy slowdown depreciated the prices of assets increasing the cost of capital. These consequences further reduced the production in mining and agricultural industries shutting the doors for funds. As us dollar is very strong currency and South Africas currency also use to hold some position in global graph but in this reverse situation the currency of South Africa, Rand reduces its value against the US dollar in 2008. These goals were set for the economic development of Africa but the crisis put its adverse effects on these goals as well. Various low income countries of Africa suffering from high debt burden and facing high dump in export revenues caused government budgets to delay. No funds led any procurement of these goals which means the development of Africa is in vein as there are no funds available with African government to accomplish these committed goals for their betterment. Ultimately the situation gets more worsened as illiteracy rate goes high and employment, hunger and poverty level below the average. Due to low investments, shortage of liquidity and the health problems, Africa suffered a lot during crisis. After throwing light on all these impacts and challenges, at end section of this report, have discussed various recommendations of businesses strategies that easily manages with the challenges and also leading way to resolves the economic crisis. It explains

how government can handle the business during impacts of crisis. Strategies have been discussed to face challenges like poverty alleviation, increasing exports, investments, remittances so that large amount of finances comes in to region to face the challenges To survive with economic crisis, African governments have to setup some macroeconomic and fiscal policies to deal with the impact of crisis. Also the policies of multilateral organizations like IMF, World Bank, and African Development Bank (AfDB) should have some weight age to influence the impact of the crisis which is possible through creation of various new facilities and fulfilling the commitments made to the success of development of emerging economies. This project report also analyzes Africas exposure to the global crisis and potential implications for economic growth, developmental policies, foreign aid, political stability, poverty alleviation and fiscal balances. This report also explicit how impacts of economic crisis are affecting African countries and how various strategies will help African government to take corrective measures to bring their economy back on the growth track.

Aim and Objectives of the Report Aim of report: The main aim of the report is to critically analyses the impacts and challenges posed by the current global economic crisis on African countries and to recommend various business strategies to overcome these challenges. Objectives of report: In this report, the most important objectives of the report are as follows which plays a significant role in the preparation of the final report; 1. Examine major impacts of the current global economic crisis on Africa and

African economies.

1. Analyzes the various major challenges which occurred due to worsening impacts of global economic crisis. 2. Recommending suitable international business strategies to cope up with the existing global challenges.

Introduction
Global Economic Crisis hit the world in summer 2007 where many leading banks in US and Europe collapsed in the value of mortgage backed securities which they had themselves been responsible for packaging. Crisis occurs due to bad policies and poor governance. The critical of the policies of government for increasing exports undermining the process of development by destroying agricultural producers incentives. The bad policies of government figures out overvaluing of national currencies, excessive state intervention, neglect of peasant agriculture and protecting the manufacturing industries heavily leads to credit crunch. The good policies that would have rescue sub-Saharan Africa from the disaster of crisis includes devaluating the substantial currency, price incentives for agricultural production

and exports and also privatizing public enterprise both in context of industrial sector and in provision of social services.

Crisis also occurs due to external shocks like Deteriorating terms of trade for primary products Growing protectionism of wealthy countries Soaring interest rates Growing debt service commitments[2] [4] The main problem behind the crisis breakdown in US lies in their banking system. Banks including Citigroup, HSBC, Barclays and Deutsche bank had taken lot of debt and put forward other people money against poor collateral. The interest rates were inched up in the last quarter of 2006 and in early 2007 to trigger the credit crunch leading the failure of several large mortgage brokers in march 2007. it was the Deutsche bank first caught by the crisis. Us treasury encountered Mewil Lynch,

Major Stanley and Bank of America(known as Wall Street Largest Banks) to raise funds up to 70 billion to fight against threatened assets. However it did not work.[3]

Analysts complained the path they have taken of skim off the cream from the top doesnt resolve the fact that there is poison at the bottom. Despite of various corrective measures and effective actions by US government, the recession in US was imminent. It welcomed almost all parts of the world causing a global credit crunch and an economic downfall. Initially it was estimated that the Africa may be least affected by the financial crisis as African economy holds least level of integration with rest of the world. It represents only 3% of world stock market capitalization, only .2% of debt securities and 0.8% of bank assets. It has been rightly said by Graham Watson Leader of the ALDE Group, European parliament they say good judgment comes from experience and experience comes from bad judgment[5] In African continent, the countries like South Africa, Angola, Algeria, Egypt, Botswana taste the crisis to a little extent due to which their growth rate enjoyed a downfall. Not only the growth rate, there are various other factors that are badly affected by crisis. For example the fluctuate currencies rate of African countries results in diminishing cash flows ultimately leading to less exports earnings. This further caused financial instability in economy giving rise to several problems like unemployment, increase in poverty level and loss of human resources. Reason for crisis in Africa with respect to political, economic, social and cultural systems[6] Colonial experience: many countries of Africa experienced 50-100 years of alien colonial rule. It impacted political, economic, cultural and social system. 1) Political system: over development of security institutions like police and army, creation of new borders that created divide and rule policies, presence of weak

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institutions and instruments and absence of democratic traditions due to poor governance, all these factors are responsible for outbreak of crisis in Africa. [6] 2) Economic system: this is yet another major reason for this crisis. Due to little or no investment in domestic infrastructure, Africa is distorted from its economic growth. After the colonial war, there was no diversification in agricultural sector. There were limited productions of goods for exports from Africa. At times forced labor that was also exploited cheaply forced Africa to welcome the crisis in its countries. [6] 3) Social system: during colonial ages, African people used to migrate to other countries for work to earn living for their family. Male labor sends remittances to their family members for their food, education and health. Poor living standards forced male labor to live separate from their families to make their living better. Unstructured social systems and degradation of family structure is also responsible for crisis to prevail in Africa. [6] 4) Cultural system: the culture of Africa is different in its different countries. Prevalence of disparity in languages and traditions. The people of Africa led very miserable lives and they hold different beliefs and views about their own cultures. Due to ambiguous impact of formal education people in Africa is very illiterate and have little knowledge to solve their problems. When crisis hit the Africa, due to illiteracy among African people, they did nothing to deal with it. [6] IMPACT OF GLOBAL CRISIS ON AFRICA As we are now much familiar with the statement that global financial crisis was due to banking system of US liquidity downfall. It caused global recession in stock markets and collapse of financial markets. The global crisis mainly worsened the developing and underdeveloped countries. It proved that no country is strong enough whether developed or developing to stop crisis to enter into its economy. Many suggest that worse is not yet over. Stock markets went down by 40% from their recent highs, investment banks have had collapsed, rescue packages are drawn up involving more than a trillion US dollar and interest rates have been cut around the whole world in what looks like a coordinated response leading indication of global economic activity such as

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shipping rates declined at alarming rates. In terms of currency, Africa faced depreciation against US dollar. The currency of South Africa Rand depreciated in its value against US dollar It has worst effects on all economies and even more worsening on African countries. [8] Africa constitutes 54 countries out of which South Africa, Nigeria, Algeria, Ghana has been affected less and faced a sluggish growth rate. It is so because these countries have limited integration with global world that comprises of 1.3 percent of world market stock capitalization, 0.8 percent of bank assets and 0.2 percent of debt securities. That is why at first the African countries suffered very less due to their weak connections with rest of the world but crisis didnt spare anyone untouched. In second half of 2008 Africa was completely covered by crisis from all its boundaries. In Africa mainly in Sub Saharan Africa banks are largely financed and do not rely upon external financing help. But the effect of crisis has spread through various channels and the channels include downfall in foreign direct investments, particularly in resource sector and decline of commodity prices made scarcity of finance resulting in cancellation or delay in many projects. Secondly drop in global trade, falling remittances from overseas workers which is the main income for households and major source of foreign exchange for governments contracted after the years of rapid growth. African countries also rely for balance of payments and budget support on donors and foreign aid and it become challenge for donors to raise their aid to fulfill their commitments. These mechanisms are largely connected to Africas real economy rather than its financial sector. These consequences led Africa under intense fiscal pressure. [9] In 2008 alone, the commodity prices declined by about15%. The commodities like cocoa, coffee and cotton declined in their prices and hurts the consumer spending. For countries like Ghana and Kenya, it becomes difficult for them in offering sovereign bond offerings to raise capital on time. Citing the case of Malawi, a Malawi farmer said that our economy depends upon agriculture mainly on tobacco. Malawi is one of the poor countries of Africa and what effects rest of the world will affect Malawi too.

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The other major sectors affected by crunch of global crisis are Economic growth: The Gross Domestic Product (GDP) of any country depicts its growth rate. The currency of a country holds a handsome position in depicting the position of a country on a global scale. Sudden fall in currency rate during the crisis explicit a weak economy with respect to other countries. African economy is a good example citing the weaker economy from others. Sudden fall in currency rate, decline in exports, less government revenues leads to less GDP. The economic growth in African countries began to decrease in almost second half of the 2008 with the estimated average growth falling from 7% in 2008 to under 5.5% in 2009. [5] The foremost countries to feel the effect of crisis were South Africa and Nigeria with relatively developed financial markets. Average economic growth in Africa would plunge from 6.5% as projected by IMF. Or we can say that per capita average GDP in Africa was projected to decline by nearly 1% in 2009. Similarly some observers argue that most African economies average growth will be minor compared to other regions. [5] Figure 1 Relative changes in Gross Domestic Product

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Source: IMF Sub-Saharan Africa Regional Economic Outlook Database, April 2009. The oil exporting countries in Africa are Angola, Republic of Congo, Chad, Cameroon, Gabon and Nigeria. This graph clearly shows the pattern of growth of Sub Saharan Africa since 1997. The increase in export of oil every year yields an increase in economic growth. But when the crisis hit the Africa, export of oil was affected to the extent. The decrease in demand of oil and fuel energy started from second half of 2008 and continues long. This decrease resulted in downward economic trend in Sub Saharan Africa as it is the main exporter of oil to rest of the world. And its economy totally rests upon the export revenues collected from the exports. Thus its economy got surrounded by negative waves. Large economies of Sub Saharan Africa like South Africa, Algeria, and Egypt were the first countries to be hit by crisis. These are the main exporters of the fuels and commodity products. Decline in fuel and product demands leads to low prices of commodities, diminishing trade, less government revenues, job and income losses, unemployment. These factors further cause poverty, weaker health systems, low standard of living, high inflation rate ultimately resulting in less Economic growth of a country. International trade: World trade was projected to be shrinking by 11% in 2009 but the situation was much more horribly bad. As Africa holds a small share of global trade even less than 2% so it has been collapsed by less when crisis hit the level of international trade. However many African economies depend on exports of primary commodities and its main exporters are US, European Union and china. Due to crisis the prices of primary commodities had declined drastically on world market. The price slump for oil, minerals and precious stones that constitutes 68%, 14% and 4%respectively for African trade leads to a downfall in export of these commodities. This resulted in poor conditions of Africa as downfall in trade caused reduction in revenues which is the main source of development and growth. Moreover no or less trade constitutes less production that means job losses and unemployment increased at a much faster rate. [21]

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Migrant Remittances: Remittances is the sum of money sent at a distance in payment for goods or services or as a gift to someone. Tightening of immigration restrictions by destination countries due to economic troubles led remittances level fall during economic crisis. According to World Bank, the estimated Global remittance level were $305 billion but it was projected a downfall of 5-8% in 2009. Similarly, the same picture was showed by Africas remittances level, it was a 4.4% fall in 2009. The decline in remittances directly causes adverse effects on managing food, education and health. African living abroad was the major source of collection of remittances but due to credit crunch all over the world the level of remittances slowed down. The Africans have failed to provide remittances which are estimated to be $10 billion per annum. Africans living abroad also suffered a lot as they also had to face serious contractions in economies prevailing all over the world[23] According to their view major depletion in remittances was due to crisis in USA and Europe which were the strong economies and the source of income for many Africans. Nigeria used to receive major part of remittances as compared to other countries like Sub Saharan Africa, Egypt and Ghana. Statistics that follows were approximate $3.3 billion in 2007, that of Kenya is $1.3 billion and Senegal with a figure of $0.9 billion. Fewer remittances from Africans living overseas suffered serious contractions in funds flow giving rise to poverty and hunger in Sub-Saharan African economies.[10]

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Source: http://siteresources.worldbank.org/NEWS/Resources/swimmingagainstthetidemarch2009.pdf With the help of graph one can clearly say about the remittance level affected during crisis. Earlier during the rapid growth in developed and developing countries, the remittance level was too high. Migrants use to send remittances to their household and are a source of foreign exchange for these countries. Year 2006 proved to be high remittance collection year but as the economy of US in 2007 fell down, the remittance level slowed down. It slowly came to the base line and in 2008, it crossed the base line and reached below average. This drastic change was due to the effects of crisis. Millennium development goals: there is no doubt that one of the consequences of global financial crisis is that it affected both internal and external finance. The drying up of financial sources diminishes the way of boosting economic growth and to achieve millennium development goals. The crunching of fiscal space due to drying up of funding sources make it more difficult for Africa to regain the pace of its economic

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growth and to fund health, education, and infrastructural programs. As African countries are dependent upon aid-funded programs, slight reduction in aid could affect poor considerably. This will ultimately lead to increase its vulnerability. This time, volunteer donors are required so that African government could help its vulnerable citizens and prevent falling its people under poverty line The financial crisis has made the outlook for the 2015 goals more worrisome than ever, said Zia Qureshi, lead author of the report[19] Official development assistance: to finance government programs, many African countries depend upon official development assistance (ODA). Since Monterrey consensus was adopted in 2002, there has been an increase in ODA flows to Africa from 21 billion in 2002 to 38.7 billion in 2007. It was expected that donors will reduce ODA flows to Africa after crisis. Yet there is no such evidence about donors, but history and econometric evidence suggests pro-cyclical trend which means flows has to decline. Moreover pressures in recapitalizing banking sector and providing support to industries forced developed countries to cut down ODA flows to Africa. Infants Death Rate: The consequences of current global financial crisis on humans are presumed to be severe yet some authors have quantified such impact. The additional number of infant death rate is likely due to crisis in Africa. Lack of nutritional food and poor health conditions of pregnant women leads to over pregnancy or under pregnancy due to which there was an increase in number of infants death rate. The new baby born was either weak or has some type of malfunctioning. Such babies either die at the time of their born or after some months as they suffer from some disorders in their system. They pool dataset from all Demographic and Health Surveys in Sub Saharan African Nations. The statistics show that the data set 639,000 births to 264,000 women in 30 countries. Infants more likelihood of deaths is a function of fluctuations in National Income and is proved by some Regression Models. Stock market have shown greater downfall since May 2008. share prices in USA, UK, Japan tumble between 12-19% whereas stock market index in south Africa, Brazil, India and China fell to 23%.[1]

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Capital Flows: As Africa is not insulated from the global crisis. Crisis affected Africa terribly in terms of financial, investment, and capital flows. One of the key channels of transmission of crisis from developed countries to developing countries is capital flows. As foreign ownership of banks in developing countries sometimes proved to be strength but in some cases it has shown a source of fragility. The reason behind, as these banks refuses to lend their subsidiaries to developing countries mainly to Sub-Saharan Africa. This weakened the financial sector of Africa which is the main sector of every economy. Decline in private capital flows and fund flows delayed the accomplishment of many development goals which were essential for infrastructure and economy of Africa. Financial market of Africa also suffered large contractions as they also rely upon capital flows and foreign investments. Inflow of large portfolio capital has been affected on similar terms. For example sovereign bond issues of Kenya and Ghana have postponed which worth $800 billion. [22] The Bank lending also affected financial sector as finance lend to people caused bad impression on financial sector due to high debt rate and people fail to return their loans. This collapsed many banks. Lehman Brothers is the best example. Several least developed and developing countries borrow finance from financial institutions and refusal of lending affected their financial system. Now its been a great problem for many African countries to arrange funds and capital to set up their short term policies to resist the threat of crisis. [24] African Development Bank and the African Union were the main and major source of funds for African countries to solve their problems and complete their projects. But as several investors withdraw their capitals and funds, the undergoing projects were stopped there. They get postponed and delayed due to non availability of funds to complete them. For example in 2008, a gas project in North Africa got delayed due to shortage of funds. However many infrastructural projects were canceled due to crisis as it rely upon the provision of funds from AfDB. [22] .

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Political Stability: Optimists believe that global economic crisis have implications for Africas political stability. As people lose their confidence on Government, the numbers of protestors are more likely to increase when rising political unrest in many African countries. Tensions from the crisis created unrest among people, government instability and income inequality. This resulted in increasing number of riots within the countries. Their observed hike in corruption level as people started stealing things. Without money and job no one can survive and where government is also helpless to help its people. To live and to earn their living they have to do such violent things. This is a symbol of political instability and is very difficult to stable it. Because once indulge into riots and corruption, it became difficult to bring it back to its normal position. Poverty and unemployment forced people to indulge into such things; they become aggressive and started fighting with each other. This political unrest strongly influenced the economic disaster of Africa. Foreign Direct Investment: Investment of funds or capital directly by a company on a global basis is known as Foreign Direct Investment (FDI). The investment can be in any sector either is it in manufacturing or mining industry or it is in agricultural sector. Developing countries always look forward for such companies as they proved to be beneficial to them in terms of trade and employment. After the crisis, many developed countries who paved the source for investment in many African industries refused to put forward their investments as they themselves hold insufficient funds to save their economic growth. The impact of financial and global economic crisis caused reduction in foreign direct investment resulting in less private capital flows and investments in Africa. The developed and the emerging economies like US and India started investing in their domestic region to get a strong hold on their origin and domestic market. [9] Foreign Direct Investment flows expected to decline from US $1.8 trillion in 2007 to about US $1.6 trillion in 2008 globally, mainly due to the current global financial crisis, which representing a 10 per cent decrease publication by the Third World Economics.

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Africa represents 4 percent share of the Foreign Direct Investment on the global scale which means a resource rich continent. Minerals and other commodities are in abundance but Africa lacks in Funds or finance to support its economy. The main source of funds in Africa is investment by developed countries to keep political, economic, and social system in progress. But crisis disturbed all the three sectors ultimately causing no or less investments, disturbing financial system and less revenue for growth. [8] Weaker Health System: the impact of crisis on health system in African countries made it difficult for many Africans to survive. There is an existence of HIV/AIDS in some of the African countries which is very harmful disease. The person suffering from such disease needs proper care and a healthy environment. But the outburst of crisis imbalanced the level of funds that was maintained for procuring health systems. Except North Africa, almost all the countries of Africa are poor and after crisis they used all their available funds for health in economic growth of Africa. This led the weaker health environment as African countries has to cut down their health budgets to maintain their living standards and to cover their country from worsening effects of crisis. [15] Commodity prices and trade: the financial crisis has its adverse effects on commodity prices and trade of Africa. There is a significant decline in prices of key commodities since second half of 2008. The major decline is in crude oil prices and it shows a downward trend since 2008. Crude oil prices experienced 50 percent decline in between February 2008 to February 2009. The other commodity prices also get declined by 20 percent. Figure: Trends in price indices of major commodity groups

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Source: IMF online Database As the graph shows major declines in fuel, metal and food prices in second half of 2008 as this was the time when everyone was shocked with the sudden outbreak of global crisis. As these commodities were the main source of income for African countries, the reduction in prices caused reduction in their incomes and government funds. Before the crisis everything was going smooth but this crisis laid down the lives of many people all around the world. Rural inhabitants totally depend upon the agricultural outcomes as most of them are farmers. Less demand of goods in foreign market and low prices of commodities in domestic region yield no incomes to these farmers. They become helpless as they even cant seek any help from government as government itself is seeking help from other strong countries but no one is ready to help because every country in world whether developed or developing was affected by the crunch of crisis. Export revenue and industries: Decrease demand for African commodities due to decline in global industries lead to downfall of export revenues. Export revenues are directly associated with the government revenues which already worsened the fiscal position in many African countries.

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The share of oil and fuel in export revenue is 53% and that of products is nearly 23%. Decline in demand of oil and fuel subsequently brought oil based African countries to their worst positions. This situation leads to reduction in prices of these export commodities. Africas exports suffered huge losses due to crisis in Us and Europe as these countries were the major exporters of African products. It caused huge declines in export trades approximate 42% in 2009 and 43% in 2010. [2] Nigeria suffered a lot during crisis as Nigerian economy almost depends upon the government revenue which has direct link with export commodities. Less exports means less government revenues. Kasekende an African Development Bank economist said, The recession in developed countries may eventually weaken the demand for African exports, suggesting that the continent may suffer the second round effects of the crisis.
[3]

The above words has been rightly said by kasekende as Africas exports depends upon developed countries like US, China who imports raw material and food for their countries resulting in an healthy economic and political affairs in Africa. Due to credit crunch in developed and developing countries, world trade slowed down resulting in an economic downturn in Africa.

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Challenges posed by global economic crisis What we have been seeing the global economy is unprecedented over the last few decades. The Gross Domestic Product is falling consistently. The major contractions are happening in industrialized economies like Japan, United States, and the European Union. In Africa almost 30 countries out of 50 are suffering from poverty, hunger, infants death rate and corruption. Almost 50 percent are illiterate and unemployed due to distorted growth of Africa during and after crisis that hit the world in 2008. It had its worsening impacts both on developed and developing countries. As stated earlier it started from US hitting badly its economy but more badly to African countries. US is a strong economy having advance technologies as compared to Africa which is a poor country with no or less technologies. Crisis affected Africa in terms of growth, development, exports, infrastructure, productivity, foreign direct investment, foreign aid etc. these are the challenges posed by crisis on Africa. The government of Africa didnt used the right policies at right time that is why Africa suffered a lot as compared to other countries. At earlier stages optimists believed that Africa will be safe as on terms of global interaction Africa is far away but as its oil and other commodities were exported to countries like US and Europe where the crisis first came into global world, Africa also came into its boundary. Later Africa became the major hit region on global scale and suffered major challenges. Maathai, W (2009) analyzes Main Challenges for AFRICA roadblocks to development, including the absence of peace and security, the lack of technological developments, and the absence of fair international trade, population pressures and enduring hunger, the silencing of native languages and the evisceration of traditional cultures; and the dearth of genuine political and economic leadership [12] African developing countries have to face the challenge to manage or pursue the policies which can expand critical expenditures & infrastructure with fewer resources. This can be mainly complicated for Least Integrated and poor Countries because of their slow growth rate, debt burden and increase in poverty rate, economic volatility due to global economic crisis. Various developing countries depend upon foreign aid &

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investment of developed & emerging countries which also now are facing difficulties to their own country fiscal and monetary challenges. Some of major significant challenges existed due to economic crisis impacts are as follows Challenge to Central Banks: In emerging markets, the central bank has to overcome the main challenge posed by the globalization in pursuit of price stability. The central bank uses to manage the resources and funds and provides the poor nations with financial help. The financial position of central bank was adhered to the impacts posed by crisis. Crisis disturbed the budget of central bank itself. But the situation can be managed by addressing the monetary policy framework and allowing central banks to pay close attention to financial stability. The next question that arises is that how an African export led growth can be transferred to a more balanced growth. Such an activity requires redirection of Africas export demand to domestic consumption and investment. It can be turned into more productive investment if the financial system of an African economy is strengthened. [13] Manage the Growth Policies: Growth policy is the policy management and the pursuance of policy that enhances flexibility in the economic system. Disciplined policy reduces the risk of an internally induced crisis due to policy error and provides the authorities with greater room and flexibility to deal with unexpected events or shocks. Policy discipline relates closely to decisions that are made with a long term perspectives. Lack of discipline reflects the short-term outcomes that in turn reduce volatility. While on the other hand long term policies perspectives lessen the risk of volatility and put some effects on economic welfare. Manage Inflation: Inflation in Africa declined in second half of 2008 due to drop in prices of oil and domestic products on the world market affair. The other factors responsible for inflation to taste the downfall are the poor transportation infrastructure that limited the pass thru of lower global prices products to domestic markets. Acc to FAO, there were 20 countries in Africa suffering from food crisis.

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Flexibility and stabilization: the impact of economic crisis was so worsening that it shakes the political, social and economic stability of Africa. The effects were so breath taking that economy of all African countries burst out. To make their attempts against the crisis, African countries undergone high debt burdens. They suffered both internal and external shocks. Internal shocks for example low prices of commodities, less spending power of African people, distorted economy, non availability of funds, less or no hold over domestic market and unstructured policies. External shocks viz. less exports, trade contractions, no foreign direct investments, poor financial help from financial institutions like International Monetary Fund, World Bank, tourism industry, low remittances etc. The challenge African government has to face is to stabilize its economy by reforming efficient short term and long term policies under proper guidance. These policies should be flexible enough to use at spot without any difficulties. Thus by choosing right policy at right time, government can stabilize its economy in terms of political, social and economic behavior. Challenge for Agriculture sector: The main prospects of the government to invest N95, 000 billion in agricultural program is a great challenge. This is because of the reduced foreign exchange earnings from oil and other exporting goods. The reason for the contraction in export depends upon the demand of such products in foreign market. The distorted business of importing countries forced them to invest in their own domestic region and call for capital flows to flow in their own country to increase the strength of economy. Africas main importers were US and EU and due to hit in market, the demand of African goods slowed down due to which the foreign exchange earnings showed a downward fall. As foreign exchange earnings calls for government revenues and in turn it helps in attaining the substantial growth in development and infrastructure. But this whole process was affected by crisis and many projects remain incomplete. For example Nigerias oil and gas projects may now take longer terms to complete as they are now at risk. [16] Real estate and telecom sector: outbreak of crisis caused many unfavorable conditions in African countries. Almost all the sectors flavored the crunch of crisis. Real

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estate and telecom sector are also one of the major sources of income for Africa. The housing industry in US collapsed causing low value in prices of houses and other estate properties. Major African countries like Uganda, South Africa, Egypt, Algeria etc having high value prices estates and other assets also became the low value estate sectors. Initially the attempt of crisis in Africa was less but later when the impact spread globally, it affected African countries too. Likewise real estate, the telecom sector was also the main source of growth for Africa but due to weakening of African economy, the telecom sector also felt its effects. Telecom sector usually act as a better and favorable source of funds for Africa as all the businesses rely upon telecom sectors. The telephonic calls and pagers give business to organizations which produces revenues and generates capital. Less demand caused low production means no business to telecom sector which means the source of funds screwed up. Unemployment: crisis put an unemployment challenge as well to Africa. Almost all the countries of Africa is hit by financial and economic crisis that affected small and large scale industries. These firms and organizations were the source of incomes for the African people. Due to less demand of goods in foreign market, the business here in Africa gets into losses. Less demand means less number of productions which in turn requires less number of people on job. Cost cutting of people caused no incomes for them that means increase in unemployment rate in Africa. The other challenge for Africa is to give their people income or jobs. Poor countries become poorer, the corruption rate increased too much, there were no jobs, no money, insufficient food for the whole family, people used to suffer from food and hunger. All these factors were susceptible to slowdown of political, economic and social activities of African economy. Challenge to Development sector: development is an ongoing process for every country. If a country needs to progress, it has to follow the path of developments. Africa is a poor country so its developing power is less in comparison with other developing countries. But the crisis put a break on its development speed. Development of a country is directly linked to its growth so it is clear to mention that African crisis resulted

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in its poor economic growth. Reduction in trade goods, exports, agricultural production, increase in poverty and unemployment all are the impacts of financial crisis. These all are the hindrances in path of sustainable growth of African continent. Due to internal threats the related external threats also came to crunch African economy more badly. On the other hand, rural inhabitants are almost farmers depending upon agricultural farming but reduction in resources and minerals deteriorates the agricultural output. The growth in population is responsible for depletion of environment, greenery and natural resources. Poverty: Africa is already a poor country. The food is less and hunger is more in Africa. The people of Africa like to live overseas than to lead a miserable life in their own country. They have to starve for food and money and family needs remain unfulfilled. It is already below the poverty line and crisis added much more spice into it. It raised the level of poverty much more high making it more difficult for Africa to cope up with this challenge. The cycle below explains how crisis added a challenge of poverty to African countries. [23] Manage stock market: The crisis led the whole economy of Africa down. One of the factors affected by the crisis is stock market. Its volatility has increased and wealth losses have been observed in major stock changes. Kenya, Zambia, Botswana has also suffered with significant wealth losses. The stock market is the mainframe of market capitalization and investing in stock market is the best way for savings. The crisis led all its investors to draw their money and it became for companies to find their new investors as no one was ready to invest in drowning economy. There were n numbers of sellers but very few buyers. Due to this the company lost its capital and businesses drop down. The challenge of stock market faced by Africa led its economy face a downward trend. Social Challenges: There are various social challenges Africa has to face. The drying up of funds and natural resources diminishes the growth level and led the incompletion of millennium development goals. This made it more difficult for African countries to

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source their funds, education, health and nutritional programs. The main challenge posed by crisis was drying up of traditional sources due to decline in fiscal space. As Africa is a very poor continent, its countries have terrible corruption. Every year the number of patients suffering from HIV and AIDS, Malaria and Tuberculosis increase at much faster rate. On global comparison Africa has the maximum number of patients affected from these infectious diseases. [4] Agriculture sector is the main sector of Africa where people and government both rely for their incomes and expenses. Increasing investments in agricultural sector proves to be boom for African countries as agriculture of Africa holds the potential to decrease poverty in its countries. But reduction in production demand and decreasing importance of agricultural sector leads its potential to go in vein. Decrease in wages of workers and farmers were due to decrease in employment sector of Africa. Employment sector was also affected by increasing number of population in Africa per year. There is high rate of growth of population in Africa which is increasing by 2.4% every year. The countries like Libyan Arab Jamahiriya, Mozambique, Western Africa Niger, Malawi, Gambia, Uganda, and Angola have high population rates. In these countries each women have 7-8 children on an average. According to census, the predicted data shows that the population of Africa was nearly 267 million in 1999 and it is expected to double in 2035. [2] The health and the nutritional problems that prevail in Africa is also due to poor health and diet conditions in Africa. In terms of US dollar, there are n numbers of people in Africa who are living even less than US $1 per day. Almost one third of population of Africa is starving and has negligible nutritional dietary consumption. Except North Africa, all other countries face same problems. The diseases like malaria, Dengue, tuberculosis comes from unhealthy environment neglecting the importance of clean surroundings. The stagnation of water and other dumps welcome the outbreak of malaria and dengue fever and people may die due to these diseases. Clean and safe drinking water is also important to save ones life but as Africa is known as poor continent, it is useless to think of hygienic conditions in Africa. Due to all these factors Africa failed to achieve the MDG targets which were really important for the social development of Africa and its countries.

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Challenges for African Development Bank: The main challenge for African Development Bank is to provide funds to its developing and emerging economies and to tackle other challenges posed by global crisis like foreign aid, financial instability, remittances and price stability. Monetary policy framework focuses on price stability and exchange rate whereas ADB has to focus on financial stability as well. Successful handling of exports and domestic demand will reduce the risk and threat to price stability. This transition requires redirection of economic incentives from exports to domestic consumption and investment. Further financial stability can be more strengthened when there will be efficient intermediation of resources into productive investments. In the present context of crisis in Africa, there is imbalance between the export led growth and domestic demand of the origin. African development bank should reform such policies to support both factors in adequate manner so that neither of both exports revenues or domestic market should suffer. Manage industrial production and demand: Due to credit crunch, the industrial production decreased by 20% globally and much more disaster happened in Developing countries which has a giant share in global trade. But it affected the production in African countries as they are much more dependent on their exporters. Export goods like minerals, oil and fuel, and raw materials were exported to countries like US; Europe and export revenues had been collected in handsome amount. The recent economic crisis caused reduction in export revenues as the importers then continued to origin their domestic market to make funds flow in their country only which is helpful to gain control over their economy in such tough times. But the consequences of this were mostly suffered by African countries like South Africa, Algeria and Egypt who were the main exporters of goods.

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Gross Domestic Product: Figure1. Global Gross Domestic Product (GDP) Growth Quarter-over-quarter percentage change, annualized

Henry Broadman Managing Director and Chief Economist, Albright Capital Impact of Global Economic Crisis on Africa Would Have Been Stronger if African Economies Had Not Been Growing So Fast. Appropriate Policy Responses Are Critical To Address Continuing Economic Risks: Sound Principles, Transparency, and Putting African Countries in the Drivers Seat. Undoubtedly, Africa is an innocent victim of this global financial tsunami. It did not make the mistakes like other economies did. It has a strong financial system and maintained prudent microeconomic policies. The commodity prices were high, boomed international trade. Overall there prevailed a favorable external environment to African countries. But due to the burst out of global financial crisis in 2008, the bad luck for Africa came into existence. Firstly fuel and commodity prices fell down, then came the global financial crisis. It was not severe earlier but later on the crisis keeps on strengthening. The crisis 30

led unprecedented collapse in world trade especially on Africas trade as the main exporters of Africa were USA and Europe. [8]

Policy responses to the crisis

The devastating effects of crisis led African countries to take several corrective measures to mitigate the impact of financial unrest among their economies including, interest rate reductions, fiscal stimulus packages, increasing liquidity to banks and firms,, trade policy changes, recapitalization of financial institutions and regulatory reforms. These measures adopted for a country depends upon its available fiscal space and the depth of the crisis in that particular country. For example oil-exporting countries have more fiscal space as they got more foreign reserves during the piece hikes of the oil. Whereas on the other hand non oil exporting countries have less fiscal space to conduct cyclical processes. [26]

Interest rate: Since the outbreak of the crisis, almost 18 countries have reduced their interest rate by a handsome amount. For example in Botswana the central banks have reduced interest rates to 50 basis points. Many other countries Central Bank like Kenya, Mauritius have also cut down their interest rate in order to fight with the condition of country. The Central Bank of Nigeria also reduced its interest rate from 10.25 to 9.25 which falls under the ambit of Central Bank of Africa. Where these countries were reducing their interest rates, the Democratic Republic of Congo were increasing their policy rate in order to fight inflation. Liquidity injections Many countries have taken several steps to increase liquidity in their banking system. The countries like Niger and Togo, Benin injects liquidity on daily basis in their regional market. In Cameroon and Liberia, the funding system of central bank has made new credit and deposit system to increase the flow of funds into bank and to increase the liquidity in the country.

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Recapitalization of banks and regulatory changes Recapitalization is yet another process to increase domestic investments in the country. The central bank in Tunisia doubled the capital to help boost small and medium sized enterprises to increase the volume of investments within the country. The commercial banks have been given instructions from Algerian Credit and Council to increase their capital from 2.5 billion dinars to minimum of 10 billion dinars. A number of reforms have been made by council to strengthen the financial system. The Government of Kenya put forward a legislation that would increase the mimimum capital requirement of banks from 250 shillings to 1 billion shillings by 2012. Trade Policy measures Boosting the economic growth of a country through trade proves a helpful resource to a maximum extent. Cameroon has reduced import taxes on import of research and oil exploration goods. The government of Madagascar devalued the local currency to restore favorable export surroundings. In Kenya, the trade tariffs has been reduced to support the trade and to increase the allotments of trade Business travels. The President of Liberia has introduced measures to refund gold mining companies the import duty and value added tax. It yet also decided to launch a drive to boost the exports graph. Fiscal measures Fiscal stimulus packages helps cushioning the effects of the crisis and boosting growth. In Cape Verde, 2009 projects a stimulus increase of 17 percent in spending power of people to raise their economy. 15 percent Egyptian pounds have been announced to raise fiscal measures. Countries like Nigeria, Tunisia, Namibia, and South Africa have also adopted fiscal stimulus packages. The main emphasize of these responses is on infrastructure. South Africa stimulus plan is quite broad and has four aspects: expansion of public sector employment opportunities, focus on retail sector, increase in social spending and assistance to public investments. Morocco adopted fiscal plans that include improvement in credit, taxes, vocational training for workers, incentives, and reducing corruption.

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Regional responses: Liquidity Support African countries are facing difficulties in accessing international financial market due to credit crunch and increasing risk premiums. African Development Bank has taken many corrective measures to improve the finance for countries like South Africa, Ghana, Nigeria etc. The government of Africa has raised nearly 1.5 billion emergency credit to provide fast and economic help to eligible countries. To improve trade, $1 billion has been raised to support finance trade. Some short term measures have also taken to seek extra funds for restructuring of portfolios and pipelines, review of trust funds to have direct activities and funds towards countries in need, and establishment of trust funds to relocate the existing resources.

Research support Economic Commisssion for Africa has been providing technical, economical and research support to implement and design effective policy responses. They have played an important role in facilitating African consensus on crisis by organizing high level meetings to support African regions. The Ten Ministers and Governors of Central Banks also seeks support from the AfDB, AUC, and ECA. These technical support and advice helps implementing effective measures to support African countries ensuring a better and healthy future.

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Business strategies to cope up with various challenges

Exporting strategy: exporting is the key factor of selling and shipping goods/services to the foreign market. Businesses need to access appropriate information before making decisions about exporting. The organization should have appropriate resources like human, capital, financial capacity and equipments. Exporters need to access the marketplace first to target the customers. It means process of getting its products and services within reach of customers. Elements included in it are custom clearance, transport, warehousing, distribution and marketing. African exporters should make an exporting plan as it is the key to acquire finance and to develop the production capacity. The potential export path follows the four key steps: considering the concept, gathering intelligence on the opportunity, developing the prototype, completing a risk analysis. By following the export path process Africa can generate the export revenues for its economic development. [17] Social strategy: to overcome the social challenges like poverty and unemployment, social entrepreneurs of Africa should construct enterprises both profit and non-profit to address these issues. Government should have legislated regulations to guide businesses on sharing wealth and corporate social responsibility. Surprisingly, South African Broad Based Black Economic Empowerment (BBBEE) codes have transformed into a conductive and progressive business framework. The seven codes of BBBEE constitute social development, enterprise development, procurement, skills development, employment equity, management control, and ownership. And this strategy should be applied to all other African countries as well. [17] Sound supervision: a clear purpose of waywardness in managing the financial crisis underscores the importance of sound supervision and regulation of the financial sector. Proper monitoring by financial institutions like International Monetary Fund, African Development Bank, World Trade Organization and World Bank is required as weaknesses in real economy can lead to loan default further giving rise to fragility of the financial sector. The managerial supervision by these institutions can restore the

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financial position, risk management and governance of African continent that is disturbed by global economic crisis. [17] Macroeconomic policies: macroeconomic policies are used to strengthen the resilience of external shocks. Implementation of macroeconomic reforms could help Africa to improve their economic performance. Adding awareness of macroeconomic policies among African government helps in generating funds and resources. Sustaining these macroeconomic reforms will add global cooperation and coordination in setting regulatory standards. [18] Fiscal policies strategy: majority of Africa and underdeveloped countries lacks in fiscal space to pursue fiscal policies. Large foreign reserves have seen depleting rapidly in wake of high oil and food prices. Due to depletion of reserves, the growth graph showed a downward pattern which means unfulfillment of commitments contained in Millennium Development Goals. African government should take measures to support commitments contained in Monterrey consensus, Brussels Declaration, Millennium Declaration and various G8 summits. Reforming global financial system to overcome the financial instabilities is yet another strategy to provide needed impetus to global economy. Resisting the temptation to resort to protectionist policies is crucial and will not only benefit to Africa and least developed countries but also developed countries at large. Concluding the Doha Development Round, with a development agenda, is another step in right direction. [17] Management strategy: a company should think in a perspective that it is leading in such a diverse context. So the managers in Africa should generate a sense of social responsibility that goes hand in hand with a vision of generating good business. It is immaterial to be sustainable and profit driven on this continent. However a manager needs to deal with the extent of poverty, unemployment and HIV/AIDS as attempting to eradicate these issues will help in generating good business and economy growth at large. As all businesses hold diversification so it is very sensitive to hold diversity at superficial level where leaders of Africa need to work upon their operation. [17]

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Devaluation of currency: due to crisis the value of economy went so down due to which the value of currency also diminished. Devaluating the price of currency helps in raising the standard of African countries. Currency exchange is used to expand the export revenues as well as to boost foreign direct investment and foreign trade. This strategy will help raising the funds in Africa without any occurrence of financial problems. Stock market: African stock market suffered a sudden price shock. The reason behind one is political and the other is market driven. Many stocks prices especially in banks fell down and market participants ready to sell their shares and there were few buyers. This creates uncertainty. Thus it can be concluded that share market is a channel for serving better into the wider economy. With a strong saving in share market, the economic performance and market capitalization can be isolated from each other. The strength of an economy rely upon the market performance since the expansion of companies based upon demand for their products and individuals or investors have to be financially buoyant to buy shares.

http://www.afribiz.net/insightareas/capital-markets

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Investing strategy: Africa is the mainstream for investment. The oil and natural resource companies located in Africa are the main attraction for foreign investors. Due to crisis its economy decreased and the foreign direct investment contracted but as a whole before crisis, Africa was enjoying esteem position in terms of foreign investment. Investors of Africa should follow the long term versus short term strategy to make most of the African opportunity. The African market provides its investors with special offerings with an ability to invest with smaller amounts and being able to buy and sell shares more cost effectively. There are approximately 13 liquid markets in Africa e.g. South Africa, Nigeria, Ghana, Egypt and Kenya and by adopting the right policies to invest in Africa, the business of African countries can boom and can save its economy from the crunch of financial crisis. [18] Reduction in prices: African government should reduce the tariffs and trade barriers to run their trade business smoothly. As exporting goods bring revenues so price reduction and tariff reduction is necessary to create hold on foreign and domestic market. It helps in creating Africas own niche in foreign market. Low prices will attract more customers, and more consumers mean more business. Low prices in fuel, oil and minerals will leave a positive impact on importers and will generate more export revenues essential for development and infrastructure. During food crisis, reduction in food prices proves to be healthy and secure food environment. Innovative strategies: innovation means generation of new ideas, new thoughts and new business strategies. This strategy can prove useful to African business as it will lead to generation of new ideas, new policies and reforms to increase the strength of business and new patterns of achieving goals and objectives all in a healthy and safe manner. "Innovation is not the product of logical thought, although the result is tied to logical structure." - Albert Einstein. Innovation is not changing the world but changing our thinking to see the world. It is basically modifying our way of thinking, reacting and performing accordingly. This strategy leads to optimum use of resources and helps in improving the standards of

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business. African countries should adopt this strategy to fight against the challenges posed by financial crisis and generates business to stabilize its economy and infrastructure. [14] Development strategy: development strategies are related to formulation of plans and policies to complete pending projects and goals. Due to outbreak of crisis in Africa many committed goals remain unattended like Millennium Development Goals, Monterrey consensus and many G8 summits. These all goals and commitments were made for the development of African economy and to raise its standards. With the crisis the economy of Africa went so down that to bring it back on same level and higher, strong efforts to put forward the development goals are necessary. Fighting against HIV/AIDS will increase the health systems which in turn lead to healthy environment. Goals to eradicate poverty, hunger and diseases will bring peace and sense of living in Africa. More investors will explore Africa if healthy surroundings will prevail in it. Regional Integration is a compliment to national development programs, says the World Banks Regional Integration Department Director African development Bank should also take corrective measures to change infrastructure and development by adopting development strategies. This is possible when AfDB will provide aid to its countries in terms of finance and resources to strengthen the regional integration cooperation with other private sectors that will increase sustainability and vulnerability of investments for development. Development can be done in various sectors such as trade, exports, health, and tourism. Development in tourism industry will attract foreign tourists to explore Africa and will bring along the foreign currencies. A good hospitality and a warm welcome to foreigners will make Africa a tourist spot and will generate revenues for more developments. Growth strategy: during worse time of economic downturn African governments have to various corrective measures to bring back its economy back on normal position. For this African government has to follow some growth strategies, growth in terms of trade, business, tourism, export etc. Through expansions, diversification, mergers and

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acquisitions can bring internal growth to business and organizations. Selling the firms and land under losses and constructing new buildings will help business to grow. Restructuring and reforming of policies and objectives of a firm will increase its performance level. Motivating employees, giving more incentives and bonus will increase their interest level and involvement and they will work with zeal and enthusiasm which is quite essential for a business to boom. Friendly environment with better opportunities to grow and progress will bring out the quality work both from employees and company.

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Conclusion
The conclusion is the main section of the report in which the whole topic is summarized in an effective manner. I conclude my report by throwing light on topic of my report . Before the credit crunch in 2008, the global economy was doing well in different prospects. The economy of developed and developing countries was stable before the crisis but after the second phase of 2008 the condition was much more severe as was expected. It started in US and Europe where the economy was so strong but the crisis effects were much stronger to shake their economies. Earlier it was projected that Africa would be safe from the point of view of weak connections in global interactions but laterally Africa was the only major and worst hit country by crisis. It affected its growth rate, monetary and macroeconomic policies, foreign aid, trade goods, remittances, inflation rate, poverty sector, real estate sector, health systems and last but not the least infrastructure. This hampered the political and financial stability of Africa. The whole scenario was changed. The rate of conflicts in financial sector raised enormously giving rise to financial contagion, unemployment, poverty and high debt burden. Poor countries like Ghana, Botswana etc became poorer. Decline in foreign direct investment and foreign trade in countries like Uganda, Nigeria, South Africa and Kenya affected their Gross Domestic product. Rise in prices of fuel and oil hampered the export revenues percentage as these goods were the main source of revenue collection. Poor countries like Malawi, Ghana, Rwanda, Zambia and more others looking for financial aid from various domestic as well as multilateral assistance institutions which also should have strong supremacy and management and countries. The impact of crisis together with the challenges posed by it made it more difficult for Africa to survive under such conditions. The small scale and large scale industries suffered a lot in between the fight of crisis with country and its growth. Business should use some useful strategies to overcome the effect of crisis on business. Strategies viz. monetary policy, disciplinary actions, growth and innovative, fiscal and economic policies and development should be made to minimize the risk and to handle the business efficiently during tough times. Various recommendations can be put forward for betterment of African economy. There are various analytical tools that can help removing recession from Africa. The corrective measures viz. reduction in prices of oil

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and minerals, more focus on retail sector, prioritizing domestic market over foreign market, flexible policies and many more should be undertaken by government of Africa to help remove recession from its countries.

Recommendations
Recommendations are the possible solutions of a problem. Problem can be dealt in many ways but the best solution has to be made to remedy it. This report is basically about the impacts and challenges posed by global economic crisis on developed and developing countries. Here are some recommendations that can help African countries to take some corrective measures to fight against the crisis and to resolve their problems with better solutions. Analytical tools: African government should use different analytical tools to analyze the pro and cons of crisis and to remedy it in effective manner. With the effective use of these tools government of Africa can easily determine their current economic growth rate. Moreover these tools can also help Africa to take effective measures to improve their political, economic and social systems. More focus on domestic origins: African countries suffered with the crisis mainly due to their more dependence upon exporting goods rather than working upon their domestic holds. The foreign demand of fuel, minerals and raw materials made African industries more diverged towards foreign demand instead of taking care of their own origins. Reduction in demand from importing countries made African industries suffered a lot ultimately causing hamper in economic growth of Africa. Organization Commitments: Government of Africa, African Development Bank, major regional organizations and many other funding institutes should make faithful commitments in providing financial help and effective supervision to their developing and poor countries whenever required. This would further help them to fight against crisis and to preserve their financial stability and growth.

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Flexibility: The policies should be made flexible enough to change when it is required. The government should reform such policies that can easily be alter during time of political disturbances, instability and adverse situation of crisis to safeguard their country and people. Flexibility in financial system is must as restructuring of policies at time or after is of no use or of very limited use and country suffers a lot in this situation. Creating retail financial instruments: the retail instruments like home equity insurance, workout mortgages should work better and hard to provide its consumers greater security. The main and the highly exposure asset in a real estate is a home and the standard mortgages provides no protection against difficulties in repaying to the lender due to uneven changes in marketplace. So the mortgages should be designed to help homeowners against this major risk and non homeowners from economic contractions. Reduction in prices: during crisis, the prices of primary and secondary products reached at a height which is bane for a country. Hike in prices affected the inflation rate which in turn increased the poverty and unemployment. Reduction in prices of fuel and oil will increase the funds as these are the main exporting goods. More funds can then be utilizing in development of a country or can be invested in improving infrastructure. More focus on private and retail sector: The main focus of government should be on retail and private sector as this sector gains much attraction from its customers. More customers means more business that increases market share and funds flow also rises within a country. These actions within a country raise its standards and its currency also gains much of value. Manage supervision: proper and strong supervision is necessary for African government in allocating the funds and resources for their proper use. To gain more profits and to increase the flow of capital within the country a check on trade and export policies is required. This can be done through proper positioning of people on their right

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place. Right judgments and right decisions will help government to perform in a better way. More productivity: small scale and large scale industries should work together to increase their productivity. High productivity leads to more revenues and incomes. Firms and organizations policies should be stable and flexible to make optimum use of its resources and people. This will help in economic growth of a country and it will lead to progression. Prioritization: government should have full knowledge of prioritizing the things on time otherwise it worsens the situation to depth. Prioritizing the policies is important as some policies have short term effect and some policies have long term effect. So with prioritization government can take best possible use of its policies and in an effective manner too. Supervisory regimes: For further improvement in some identified areas of African countries, there arises need of reviewing the regulatory and supervisory regimes. To avoid excessive risk-taking by financial institutions, proper regulation of all the sectors of finance industry is important. Macroeconomic policy measures aimed at financial stability and restoring growth of a country; these policies measures minimizes the potential negative social impact of the crisis in poor countries. Priority should be given to social protection and pro-poor expenditures in this regard. Structural reforms and macroeconomic policies implemented in Africa over the last two decades have served Africa well. However the improper use of such policies increases the effects of crisis. However there is need to structure and deepen economic reforms further. This would help remove or minimize the effects of the crisis and lay the foundation for economic growth and stability in the region. Official development assistance: ODA plays an important role in augmenting shrinking domestic resource bases arising from falling foreign aid, remittance, exports,

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foreign direct investment, capital flows and tourists receipts. In particular, donors must increase aid to Africa as committed in Monterrey consensus and G-8 Summits. BIBLIOGRAPHY 1) Friedman, Jed Arnold and Schady, Norbert, How Many More Infants are Likely to Die in Africa as a Result of the Global Financial Crisis ? (August 1, 2009). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2009. 2)WORLD ECONOMIC OUTLOOK (2009) Crisis and Recovery [Online], Available at http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/text.pdf (Accessed April 2009) 3)Bank crisis impact limited in Africa (2008) [Online], Available at http://www.alertnet.org/thenews/newsdesk/LP429148.html (Accessed 25 September 2008) 4)World Economic Outlook Update, International Monetary Fund, January28, 2009 5)Reuters, (2008) Global Financial Crisis [Online], Available at http://www.globalissues.org (Accessed 25th July 2009) 6)http://www.afribiz.info/content/nigerias-economic-climate-before-the-global-crisis-andnow 7)http://www.imf.org/external/np/speeches/2009/051909.htm 8)Source: http://www.un.org/regionalcommissions/crisis/ecaway.pdf 9)Nwakego Linda Eyisi, (2009) Five Effects of the Global Recession on Africa [Online], Available at http://www.afribiz.info/?p=2400 (Accessed 27th December 2009) 10) Marilou Uy, (2008) How will the financial crisis affect remittances to Africa?

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