Countries in the Southern African region are still expected to take some more pinches from the effects of the global financial crisis and the ongoing economic meltdown before things could get better, as investors continue to drag feet with regard to doing new business in the region.
This emerged at a 2 day SADC Employers Group workshop on mitigating the impact of the global economic crisis sponsored by the International Labour Organization (ILO), which was held at the Balalaika Hotel in Johannesburg , South Africa from 9-10 December, 2009.
Dr Mills Soko, Associate Professor at the University of Cape Town , has said that findings of surveys conducted in selected countries reveal that the region has suffered from a severe contraction of exports that mattered much in the national economies.
In the case of Botswana that means weakened prospects for diamonds and other minerals such as Copper nickel, and Mozambique’s market for fish, gas aluminum and cashew has also diminished whereas as Swaziland’s major exporter Sappi has reportedly announced its intention to close business in January 2010 resulting in loss of 4000 jobs in that country .
Some of the common features in all the countries surveyed were a cut back in terms of the provision of social services and benefits to workers in order to reduce their exposure as a result of the crisis, as well as the downscaling of operations by firms.
“And for countries such as Mozambique and Malawi , whose revenues depended largely on donor money, the contraction of exports means they got double blows” posited the Soko.
The consultant, intimated that another concern emanating from the findings, is that “Even though financial and banking institutions in the region are not linked to the international financial markets they have been affected,” said the Consultant.
Confirming the Consultant’s presentations, executives of employers’ federations and chambers of commerce who participated in the discussions acknowledged the adverse experiences of their constituency deriving from what they described as banks’ “resultant conservative attitude”.
“Banks now take much longer to consider applications for credit guarantees,” said one of the participants, adding that consequently businesses end up having to either consider cutting down on costs including by reducing the workforce or closing business because their sustainability stood to be imperiled.
Again, it was revealed that banks are now re-evaluating the risk in their lending portfolios which is naturally expected to lead to a further limited access to credit finance.
One of the effects of this has been a scenario where, whilst banks on the one hand remained uncertain about the prospects of success for new enterprises in view of the economic crisis and therefore reluctance to finance them, investors have developed cold feet in relation to reinvesting their finances.
Against that background, the rapid assessment study further indicated that in some countries, governments were able to put some intervention measures in place, as a way of ameliorating the effects of the crisis on the lives of their citizens, as well as reducing poverty.
This was especially necessitated by the growing rate of unemployment following the crisis.
In the case of Botswana , Government introduced some labour intensive programmes in various parts of the country, with a view to ensuring that families have something to put on the table.
To this end, Vic Van Vuuren, Director of the ILO, based in Pretoria who made a brief presentation at the workshop, has in an interview, “It is however crucial that any such projects must also be value adding to the economy.”
The meeting which featured representatives from trade union federations across the SADC region was unanimous on the need for both employers and labour to find common ground to avert unnecessary escalation of the crisis, at the national level and come up with a collective strategy for mitigating the impact of the recession.
