EAST AFRICA WILL WEATHER WORLD ECONOMIC MELTDOWN

THE NEW VISION
Monday, 27th April, 2009
The New Vision Editorial

Seldom has economic thinking been turned on its head so dramatically as in the last few months. Barely a year ago, cash economies were bound to remain backward and poor. You had to have access to credit to develop and grow.

No longer. Ever since the global financial crisis struck six months ago, ‘all you need is cash’ has become the new credo.

As the leading magazine The Economist put it: ‘Since then, the guiding principle for managers everywhere has been to gather up whatever cash they can find, and then do their damnedest to keep as much of it as possible for as long as possible.’

Consequently, African countries like Uganda, where the banking system is still at its infant stage and credit is unaffordable for the majority, find themselves spared the disastrous effects of the credit crunch.

Similarly, the general belief in the past was that you had to trade with the world to climb out of the spiral of poverty and conflict. The more countries were integrated in the global economy, the faster they would develop and grow, experts predicted.

The global crisis has turned this theory, too, upside down. Oil and mineral rich countries in Africa are hit hardest by the credit crunch, while countries who do not solely depend on rich countries’ markets are weathering the storm relatively well.

As a result, East African states, which are primarily trading among themselves, are set to reach the highest economic growth this year in Africa, and, indeed, the whole world.

While the great industrial powers, Japan, the US and Europe, are forecast to register negative growth, East Africa is predicted to achieve a positive growth of 5.5%.

Moreover, contrary to other African countries which have no grip over the factors that determine their future, East African politicians have the advantage that they largely control the course of their economies.

The more reason they should strive to maintain peace and cordial relations, cooperate on security issues and establish conflict resolution mechanisms in the region. The way the Migingo Island dispute is being handled can serve as a litmus test.