Africa squeezed by Asia's crisis

John Madeley reports on the dangers posed by the downturn in commodity prices
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TOBACCO growers in Zimbabwe had a shock recently on the first day of auctions in the capital, Harare: the tobacco price was 42 per cent lower than a year ago.

A number of factors lay behind the fall: tobacco output was higher, stocks were high, and sentiment was affected by the large amounts of money that US tobacco companies were paying out in legal settlements.

But there was another factor, affecting not only Zimbabwe's tobacco growers, but the majority of commodity producers in Africa. Asia's financial and economic crisis has lowered the continent's take-up of imported commodities, and caused a slowdown in the global economy that is feeding through to lower demand. Commodity prices have plummeted over the past six months, and the effects of this for the debt-burdened African economies could be dire.

Tobacco may have registered the biggest fall, but in the past six months the world price of both rubber and copper has fallen by around 20 per cent. Rubber earns foreign exchange for Liberia, the Ivory Coast, Nigeria, Cameroon and Congo DR (formerly Zaire), while copper revenues now account for more than 90 per cent of Zambia's foreign earnings.

Soft commodities, such as coffee, sugar and cotton, have also fallen in price over the past six months - and this is bad news for countries across the African continent. In addition to lower commodity prices, African countries face a squeeze on the development assistance they receive from Japan, one of the continent's largest donors. The World Bank's rescue effort for Asia could also affect Africa.

The World Bank, the world's largest multilateral aid donor, is diverting between $5bn (pounds 3bn) and $7bn more money to Asia this year. Aid for Africa will not be greatly affected as it comes mostly from another World Bank fund, said the bank's UK spokesman, Andrew Rogerson. But he admitted that because of increased funds for Asia, the amount of money the bank has for debt relief in Africa would come under pressure within two years.

The Heavily Indebted Poor Countries initiative of the World Bank and the International Monetary Fund aims to relieve $7.5bn of debts owed by 41 countries, 33 of them African.

"If the Asian crisis means that the World Bank has less money to help African countries with debt relief, it would be very serious," warned Andrew Simms of Christian Aid. Countries are having to divert money away from essential services, such as health care, to repay debt.

Mr Simms pointed out that the progress of the World Bank/IMF debt initiative "is already painful enough, anything that makes it harder could lead to widespread suffering".

Lower export earnings from commodities will make it harder for African countries to repay foreign debt. The debt issue is on the agenda of this week's G8 summit in Birmingham. This will show if donors are prepared to put money on the table to relieve Africa of a new burden, the Asian financial crisis.