Return to Transcripts main page
INSIDE AFRICA
How the Global Financial Crisis is Affecting Affrica's Largest Economies
Aired October 11, 2008 - 12:30:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JIM CLANCY, HOST: Hello, everyone, and welcome to INSIDE AFRICA. I'm Jim Clancy, in for Isha Sesay.
In the next 30 minutes, we're going to take you around the continent. As financial markets falter worldwide, we're going to look at the effects on three of Africa's largest economies.
Let's start in South Africa. It, of course, one of the engines of economic growth on the continent. The South African rand the most actively traded emerging market currency in the world. Predictably, it came under pressure this week. South Africa rich in mineral commodities, and it ranks as one of the world's largest exporters of gold and platinum. Many economists predict the country's robust financial system will fare much better than the rest of Africa, but how much is that really saying? Let's go to Johannesburg.
(BEGIN VIDEOTAPE)
ROBYN CURNOW, CNN CORRESPONDENT: Hi there. I'm Robyn Curnow in Johannesburg city center. Let's talk about how the global financial crisis is affecting ordinary South Africans. Many people I've spoken to say it doesn't affect them. It hasn't yet touched their lives. And that's because many people here are unemployed, one in four is the statistic.
Those that do earn a bit of money often just earn a little bit of cash by selling trinkets like this at market stores. In fact, the lady who owns this store tells me she doesn't even have a bank account, which is why the banking industry, the financial sector here has been largely protected from the fallout, because the financial sector doesn't give out bad loans. They're more risk-averse than, say, foreign banks, which is why South African banking sector has been quite robust over the past few weeks.
What does worry investors is the large amount of foreign capital that is literally being sucked out of this country in the last few days. In the last week, one report says that about nearly $400 million U.S. in foreign investments has been taken out of the country by foreign investors selling off South African stocks. That's a huge worry, and of course also concerns about the rand, South Africa's currency. It's tanking against the U.S. dollar, and of course that has huge implications for South Africa's long- term growth.
(END VIDEOTAPE)
CLANCY: All right, let's shift gears, go off to Nigeria now. That's another commodity-rich nation; oil its chief export. But like South Africa, it's been battling double-digit inflation. In the commercial capital of Lagos, land is limited, population growth surging. Nigeria may be a completely different model than Western states, where bad mortgages are blowing up, but it may have more painful problems. No mortgages, and no deeds either. Christian Purefoy has that story.
(BEGIN VIDEOTAPE)
CHRISTIAN PUREFOY, CNN CORRESPONDENT: Hi, I'm Christian Purefoy in Nigeria, the fifth largest supplier of oil to the United States, where the recent high oil prices and demand have collapsed under the global financial slowdown. That's good news for Nigerians at the pump, but bad news for an economy that depends on oil for 80 percent of its budgetary revenues.
But it's not all bad news. The Nigerian banks and stock markets have been relatively sheltered from the crisis, and the Nigerian housing market -- well, Lagos prices are as high as what London and New York used to be.
In these troubled times, if you can't afford to pay what it takes to hang on to your house, you could lose it -- literally. But while home owners in the West are worried about falling prices, the problem here in Lagos, Nigeria is that real estate prices are soaring. And many of those who can't afford to fight the system are being forced to make way for those who can.
Without warning, 62-year-old Deleka Koe (ph) came home to find his investment for his old age being demolished for a new housing estate.
It's all legal. Under the 1978 Land Use Act, the government retains ownership of virtually all the land and can do with it what it wants.
UNIDENTIFIED MALE: I'm getting old myself. What can I do again? Nothing. Apart from all my children can assist me, I can't do anything again.
PUREFOY: Houses priced in the millions of dollars are being constructed across the city. Editor of Nigeria's main real estate magazine took us on a tour of one property estimated at about $1.6 million.
DIPO DAVIES, CASTLE REAL ESTATE MAGAZINE: It's now required that (inaudible) bank or a multinational for instance who's Nigerian, it's almost expected that he should live in these areas.
PUREFOY: So big money driving out the little guy, and prices go up. But human rights activists argue Nigeria's 1978 Land Use Act is inherently unfair. With rights over all state land, activists say government's used the act to force people off their land and sell it at an inflated price.
Nigeria's 1978 Land Use Act gives Lagos-based (ph) government the legal right to knock down these houses, but the people who live here say implementation leaves them with very little compensation and nowhere else to live.
The Nigerian government had been working to reform land ownership, basing reform on Western mortgage models. But with the subprime mortgage mess plunging U.S. and British markets into chaos, that policy is being re- examined.
But Nigeria's leaders insist reform is still necessary.
JULIUS CHUKA ODOM, NIGERIAN MINISTER OF ENVIRONMENT AND HOUSING: The situation where less than 5 percent of the land mass in our urban centers are not (inaudible), and which means those lands are not documented. It's not good for our economic development.
PUREFOY: And there is a bright side. Without a Western-style mortgage market, developers say Nigeria's housing market will remain unaffected by the downturn in the rest of the world.
TOSIN ALATISHE, LAGOS DEVELOPERS ASSOCIATION: This I'm building with my own money. I'm not collecting (inaudible) on the bank. You are building your own without collecting a note (ph) from the bank. So (inaudible) bond market or whatever. It's none of your problem, it's none of my problem.
PUREFOY: But with the population of Lagos estimated to rise from 15 to 23 million people by 2015, the residents like Dele (ph), who don't own the land their houses are built on, their situation is untenable.
UNIDENTIFIED MALE: People that can do this to you are ready to kill you. Don't do anything or be ready to defend yourself. Kill before you are killed.
PUREFOY: But for now, he can only start to pick up the pieces.
But if you are thinking you'd rather rent than buy, you have to be prepared for equally high prices, and have to pay up to three years rent in advance, Jim.
(END VIDEOTAPE)
CLANCY: Still ahead, the big picture. The World Bank responds to financial fears in the developing world. One of the foremost voices in global economics joins INSIDE AFRICA next.
DAVID MCKENZIE, CNN CORRESPONDENT: I'm David McKenzie in a secondhand clothing market in Nairobi. Coming up on INSIDE AFRICA, we see if the credit crunch has affected small businesses here in Kenya.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You worried?
UNIDENTIFIED MALE: Yes, I'm worried. What is going to happen next year, baby, for us in terms of like I finished school this year and then I went out (ph). I'm going (inaudible). Is it going to be enough or how it's going to, like, affect my life?
(END VIDEO CLIP)
CLANCY: Hello, everyone, and welcome back to INSIDE AFRICA. Now, we just heard there from a South African reacting to global market worries and the impact it could have on Africa. We're looking at this in three of the continent's main economies, and next, despite its post-election violence, the World Economic Forum just ranked Kenya among the world's most competitive economies.
Now, that's not to say that there aren't challenges. Inflation is up, sharply. Projected economic growth down, sharply. But on that last note, take account the GDP rose to its highest levels in two decades last year.
So what are Kenya's long-term prospects? David McKenzie is there.
(BEGIN VIDEOTAPE)
MCKENZIE: I'm David McKenzie in Nairobi, Kenya. This is called the toy market, but in fact, it's for secondhand clothes. High-qualify clothes that are brought in from Europe and America and then bought by Kenyans and tourists alike. As you can see, it's quite a busy place.
Economists have said that developing economies like Kenya aren't really affected as much by the credit crunch, but we spoke to Francis, who's had a store here for 10 years, and he says that the economy is hurting because of spending power.
FRANCIS KYAIO, KENYAN SHOP OWNER: Nowadays, very tough. You know, it's like (inaudible) days, yes. That's the problem. Because to get money now is very difficult, yes. The customer come, we are (inaudible). You want to get some pants, yes? All day, I (inaudible) the price. And they can't get it. They can't afford to get it. (inaudible).
MCKENZIE: You know, it's not all doom and gloom here. In fact, this shirt, brand name shirt, cost less than $5, and business is still at times thriving here in Kenya. But there are two key factors -- foreign direct investment and tourism that might be affected by the global credit crunch, and people are worried that it will hurt business and trade here in Kenya.
(END VIDEOTAPE)
CLANCY: What will the global market meltdown mean for developing countries? Well, the best and brightest are frankly worried. World Bank President Robert Zoellick warning this could be, in his words, a tipping point. The current managing director of the World Bank, Dr. Ngozi Okonjo- Iweala, championed reform when she served as Nigeria's finance minister. She sat down and talked with INSIDE AFRICA relating deep concerns right now for the continent.
(BEGIN VIDEOTAPE)
DR. NGOZI OKONJO-IWEALA, MANAGING DIRECTOR, WORLD BANK: We are very concerned about the impact of the financial crisis. In fact, as Bob Zoellick, the World Bank president, said recently, we see that we are at a tipping point for many developing countries, because you have the triple whammy of the financial crisis, the food crisis, and the fuel crisis.
Recently, on my trips in several African countries -- Guinea-Bissau, Congo DRC, Angola, Nigeria and so on -- people were worried about food. You know, how are they going to feed their families? And you know, the cost of fuel. And the fact that they're still struggling to get basis services.
You know that food inflation in many of the countries like Liberia and Togo is at about 25 percent. So when you add the impact of the financial crisis, then we're really afraid that the most vulnerable people are going to be hit.
CLANCY: The U.N. high commissioner for refugees warns that this could actually lead to conflicts and more displaced people in Africa. Does it have to go that far?
OKONJO-IWEALA: Well, we would hope not. We would hope that countries will act in various ways, and that, you know, institutions like the World Bank and the developed country governments would also not forget, you know, the support for developing countries, even as we know they are struggling with their own crisis.
Let me also say that African countries are not without resources themselves, and we hope that they will also act to make sure that more food is available. We are supporting countries through a $1.2 billion fund to get fertilizer and seeds so that farms can plant and Africans can grow their own food.
CLANCY: What do African governments have to do? If they are to deal with this, they look on, it seems like a long way to wait, it isn't.
OKONJO-IWEALA: No, it is not. Let me say why it is not a long way away. You know, this crisis could impact African countries through, you know, a fall in the exports. You know, these countries, where do they export to? Getting to a deeper problem, they could reduce their demand for African imports. That could feed through into falling commodity prices. Even countries selling oil and other natural resources are not immune. If that's the case, then it means that, you know, there will be less revenue for government to carry out programs and provide basic services.
So what I think countries have to look first at what is the most critical problem that they are facing, and I come back again to the problem of food. Countries must work to make sure that they have enough food on the table for families, and they can do this by focusing on agriculture, on getting seeds, on getting fertilizer, on supporting their farmers, on getting credit to them so that they can plant and be able to feed their families, and sell the excess to those in the urban areas.
I think that's really critical.
CLANCY: Is there a need for African leaders to sit down and talk about this instead of waiting to see the effects as they ripple across their economies? OKONJO-IWEALA: Let me say that African leaders are already sitting down and talking. I don't think they are waiting. At the United Nations General Assembly meeting that was just held recently, leaders that I talked to were already concerned about what does this mean for their country and how they can get ahead.
So we have a new generation of leaders on the continent now who don't just wait.
(END VIDEOTAPE)
CLANCY: Our thanks to the World Bank's managing director, Dr. Ngozi Okonjo-Iweala for help understanding what's going on.
Coming up, it is a nation where the economy has been in shambles for years. Up next, a forbidden look behind Zimbabwe's media ban, how people there are really coping with financial disaster.
(COMMERCIAL BREAK)
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: Making business news in Africa -- echoing losses felt in markets abroad, Egypt's main stock exchange (ph) has declined almost 30 percent since September 21st. But Egypt's trade minister says stock losses are unjustified. He says the country's banks don't have significant investments in the U.S. and Europe, and that they remain strong.
Long considered a safe haven in times of economic uncertainty, gold stock prices are rising, and that's boosting some of Africa's largest gold producers. South African based mining corporations Goldfield and Harmony Gold are among the country's most actively traded stocks.
(END VIDEOTAPE)
CLANCY: Welcome back. You're with INSIDE AFRICA.
The global financial downturn is probably the least of many worries that are facing the people of Zimbabwe. Officials there are struggling to craft a power-sharing government; the economy has gone from crisis to outright collapse. Zimbabwe's inflation rate the highest in the world. Basic commodities in short supply.
The government refuses to allow CNN to go inside Zimbabwe and report, but our Nkepile Mabuse managed to cross the border. Just after she returned, she spoke to INSIDE AFRICA about her experience.
(BEGIN VIDEOTAPE)
NKEPILE MABUSE, CNN CORRESPONDENT: Jim, you know, what I witnessed inside Zimbabwe was a humanitarian catastrophe of tragic proportions. Of course, the food shortage is the one issue. The U.N. estimates that nearly half of Zimbabweans will be in need of food assistance by early next year.
But people are dying, Jim, because they cannot -- they do not have access to basic things such as clean running water.
The government of Robert Mugabe is so broke, they do not have the foreign currency required to buy the chemicals to clean water. So what they've done is they've simply stopped providing this essential, water, to people in Zimbabwe. In Harare, the capital city, there are people who haven't had water since October last year. We went to the surrounding areas, and people are getting water from contaminated sources, such as wells and streams, and people are getting sick. There is a huge outbreak of cholera because people can't get clean running water.
And of course, the hospitals can't help much, because the hospitals themselves have a chronic shortage of just about everything, from doctors to nurses, to drugs, to blood. And doctors tell us inside there that they are witnessing preventable deaths on a daily basis because they just don't have the resources to save people's lives.
And one other major issue is the Zim dollar. It's depreciating at a staggering rate. When I left Zimbabwe, one U.S. dollar was 5,000 Zim dollars. A day later, the rate had doubled.
So people, professionals, are being paid in food and fuel, because with Zim dollars, one can't really buy much.
So the situation there is really bad.
CLANCY: That's the macro level. When you look at the individual characters on stage in this tragedy, that must be a story in and of itself.
MABUSE: You know, Jim, I -- just before I left, I tipped a waiter $20, and this man started crying, because he said to me my $20 is going to help him achieve his goal of getting a passport to get out of the country. That's how bad the situation is.
The Zimbabwean government themselves, the people who are blamed for destroying the economy, want Zimbabweans to pay for passports in U.S. dollars. So this man has been saving up to get a passport so he can get out. That is just how tragic and how bad the situation is there in that country.
And I mean, I spoke to a teacher who is a physics teacher who could get a job in South Africa. And he said to me, you know, I don't want to leave. I'm not going to give ZANU-PF and Robert Mugabe the satisfaction of pushing out of my own country. Jim.
CLANCY: Is there any hope that the political deal could somehow yield some economic relief?
MABUSE: You know, Zimbabweans tell me, you know, their hopes have been raised so many times only to be dashed. And really, there is cautious optimism. They are desperate for their situation to change, but there really not a lot of people have faith in the political processes anymore, because they have been disappointed so many times.
So they are looking on, hoping. Really, they live in hope, but on a daily basis, what consumes most Zimbabweans is surviving today.
(END VIDEOTAPE)
CLANCY: Be sure to tune in next week to see much more of Nepal's look at the situation inside Zimbabwe. She's going to be hosting INSIDE AFRICA, in fact, from Johannesburg. That's next week right here on CNN.
Well, a Zambian radio station goes up in flames, and day turns to night in a Sudanese city. The best of a week in I-reports from Africa, up next.
(COMMERCIAL BREAK)
CLANCY: Welcome back to INSIDE AFRICA.
You know, it was a very exciting week on the continent for some of our I-reporters. Let me show you what I mean. Michael Timbo (ph) shot this video of a fire in Lusaka, Zambia. The part of the building that's in the flames was home to the popular radio Phoenix. Michael says that private- run station really acted as a forum for listeners of all backgrounds to call in and talk about their problems and their good ideas. But now they have to look for a new place to broadcast. He says by the time the firefighters were able to extinguish the blaze, the radio station was destroyed.
Abdurakhman Edris (ph) ran to the top of his building in Abdukhman (ph), Sudan, to capture video of an oncoming sand storm. Look at this one. He says the locals call these massive sand storms -- and we believe him -- haboobs (ph). Edris says that storms as big as this on only come about once a year, but there are plenty of smaller ones.
Share your corner of Africa with us. Send us your photos, videos and comments. Go to cnn.com/insideAfrica. Click on that I-report logo, or send your photos from your phone to ireport@cnn.com. Come on. Show us what you got.
That's all from INSIDE AFRICA for now. I'm Jim Clancy. We'll have a brand new edition coming for you next week. Check cnn.com/insideAfrica for a full list of air times. And thank you for being with us.
END
