Regulation Paying Off

While the rest of the world stumbles with bailout plans and sudden economic insecurity, Africa is benefiting from is isolation from the rest of the world. A recent article in The Economist highlights that despite many problems on the continent, optimism and confidence in the continent’s future is abound. Most African countries excluding Zimbabwe have been bringing inflation. GDP has been growing at 5% over the last five years and even with the current economic crisis it is predicted to grow at 6.6%. Africa is predicted to escape the current economy less battered than most places because of the very factors that damaged her in the past are now working in her favor. The African banking sector is excessively regulated, foreign exchange is heavily controlled to prevent heavy investment in Western financial instruments, and foreign ownership of banks is very limited. This de-linkage from the Western financial system has allowed African banks have almost no exposure to the subprime market wreaking havoc everywhere else in the world. Where Africa will be negatively affected by the current economic crisis is the decreasing demand for African commodities. Foreign capital and foreign aid will probably be in decline as well. How Africa will fair in regards to the financial crisis remains to be seen but everything is essentially “so far so good.”