The G20 agenda and the road ahead

A view from Africa

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Finance ministers, central bankers, and heads of state from twenty of the world’s largest economies are set to gather for the G20 Summit in London on 2 April, as TNI goes to press. Around the globe, many are looking towards this meeting as a critical opportunity for economic heads of states to design strategies that will prevent an international financial crisis such as that of the 1930s. What outcome they produce will have important implications around the world, from regional to local levels. To get the developing country perspective on the Summit’s agenda, the financial crisis, and the road ahead, Trade Negotiations Insights sat down with Mr Alan Hirsch, Deputy Head, Policy Co-ordination and Advisory Services, the Presidency of South Africa.

TNI: What concerns and priorities does Africa share with other countries of the G20?

Alan Hirsch: I think the concerns and priorities can be divided into short and long term issues. The fundamental short term issue is that although African countries generally haven’t been responsible for the current international financial crisis, they will potentially be quite badly damaged. African exports, like the exports of all countries, are falling very sharply. In some countries in the last quarter, trade has fallen already between 15% and 30%. The big problem is how will they finance their continued growth and sustain programmes already underway. And like many other developing countries, especially the smaller developing countries in the G20, African countries generally don’t have very large foreign reserves or large budget surpluses. They also don’t have a strong ability to attract loan capital to finance their deficits in these difficult periods. So the fundamental question is how can they engage in counter cyclical fiscal policies to keep their countries running, to keep the programmes that they have planned in their budget on track, and to compensate for the decline in international trade?

TNI: Do countries, for example in Asia, suffer from the drop in exports in the same way? Do you think they will be following similar policy remedies?

AH: Some Asian countries have large reserves and quite significant domestic savings. In this way, it’s probably a little easier for them. Obviously a country like China and some of the traditionally big exporters have buttresses, whereas the African countries generally have lesser defences. They also lack strong credit ratings and developed domestic capital markets. Thus in the short term, the issue is probably more serious for African countries. But I think that there are probably a number of smaller Asian and Latin American countries that are in the same boat.

The longer term issues relate to the question of what kind of role they have in engaging the crisis. For instance, is there a forum where an African voice can effectively be represented? The G20 itself has place for only one African country—South Africa. And officially, South Africa isn’t representing other African countries, though they obviously make an effort to get some sort of an unofficial mandate when it comes to G20 meetings. But, this is minimal representation.

Finance ministers, central bankers, and heads of state from twenty of the world’s largest economies are set to gather for the G20 Summit in London on 2 April, as TNI goes to press. Around the globe, many are looking towards this meeting as a critical opportunity for economic heads of states to design strategies that will prevent an international financial crisis such as that of the 1930s. What outcome they produce will have important implications around the world, from regional to local levels. To get the developing country perspective on the Summit’s agenda, the financial crisis, and the road ahead, Trade Negotiations Insights sat down with Mr Alan Hirsch, Deputy Head, Policy Co-ordination and Advisory Services, the Presidency of South Africa.

TNI: What concerns and priorities does Africa share with other countries of the G20?

AH: I think the concerns and priorities can be divided into short and long term issues. The fundamental short term issue is that although African countries generally haven’t been responsible for the current international financial crisis, they will potentially be quite badly damaged. African exports, like the exports of all countries, are falling very sharply. In some countries in the last quarter, trade has fallen already between 15% and 30%. The big problem is how will they finance their continued growth and sustain programmes already underway. And like many other developing countries, especially the smaller developing countries in the G20, African countries generally don’t have very large foreign reserves or large budget surpluses. They also don’t have a strong ability to attract loan capital to finance their deficits in these difficult periods. So the fundamental question is how can they engage in counter cyclical fiscal policies to keep their countries running, to keep the programmes that they have planned in their budget on track, and to compensate for the decline in international trade?

TNI: Do countries, for example in Asia, suffer from the drop in exports in the same way? Do you think they will be following similar policy remedies?