At a time when the developed world faces a recession that has baffled even their best  economists as not only to when, and how it could brought to an end, African leaders are as usual blaming these very countries for waves of the recession hitting African economies.

Their argument is that they need assistance to get out of the recession since it is not their making, smacks the very identity of such economies in the world setting and as usual, left to the mercy of developed economies which have no obligation in the management of ‘independent’ African economies.

That African economies are not fully integrated with developed economies is in itself a fundamental failure on the part of managers and entire political economy of these economies.

This simply signifies that, these economies are not part of the whole- world economy by virtue of backward economic structures that boost dismal GDPs (for instance Norway has a higher nominal value GDP than combined GDPs of Sub-Saharan Africa).

In today’s world where economic interest take precedent, a country is as relevant as the size of its economy. Nonetheless, this does not absolve managers of African economies of their full responsibility to manage the consequences of recession to their economies, even with simplistic measures possible.

African economies do not have the luxury of printing their currencies (as most western economies are doing as of now) to provide stimulus packages to their hard hit sectors especially the financial sector.

But as the report by The Economic Commission for Africa, puts it (and as pointed out in earlier articles) African economies have to turn inside during such a crisis, and capitalize on sectors which are not suspetible to external financial shocks and agro sector should take priority under current circumstances.

This sector not only has both forward and back ward linkages to local industries where these serve as output readily available for urban consumption, but also has a huge market potential for regional exports.

This feeds back into the rural sector by raising incomes of farmers who will then increase their output accordingly. But this will be possible if two main challenges are over come by African policy makers.

First is the problem of under investment in this sector which has been relegated to non- priority areas. The amount budgeted allocated to this sector is so dismal that, it can hardly make an impact.

The target set at 10% of the total budget to enable this sector play its vital role, has been met by few economies. Consequences of this under investments in agro sector has been to import food from other regions at cost that is sometimes 30% of GDP of some economies, which makes no economic sense in a continent that can and should feed its people.

Policy failure in agro sectors, like other sectors, has cost some economies up to 3% percentage points of foregone GDP, considering that, in most of these economies agro sectors accounts for as high as 40% of GDP.

The second and perhaps a major challenge that these countries will need to over come is status of agro industry. This sector is supposed to be an industry in its own right, where there are production and marketing channels so as to connect the supply side with the demand side of this very sector.

It is one sector/industry where supply does not create its demand. There have to be policies designed to absorb agro surplus if this occurs, so as to sell this in the period of deficit. As it is now, these structures are non-existent. This will limit the extent to which this sector can reach its potential optimality regardless of policies designed to boost the same.

However, the consequences of the current financial melt down will take toll on many a sector of developing countries in Africa, and what may be at stake most are the millennium development goals (MDGs) which may not be achieved as their financing will be constrained.

Fight over hunger and malnutrition, fight over HIV Aids, Malaria, child mortality etc which are costly to maintain even in the so called good times, are bound to get a fraction of their due financing which will expose our vulnerable people to suffering and high death tolls.

As argued in the previous article, we need to position our financial sector in perspective of our economy if such a sector is to play its development role unlike what we have had since independence.

Financial planning instead of financial reform should be the key word. This is because we reform what had been designed for a development purpose, but in our case this is not so.

Mainstream banking institutions we have in our economy are ideal profit making institutions and may not invest in areas even where common good supersedes their profit motive.

Financial experts (see Ezike, 1982) have maintained that, profitability per se should not be the sole criteria of branch net work planning of commercial banks.

In the medium to long-run there has to be some form of intermediaries, for instance development banks and co-operative banks that would tap the rural savings in the absence of mainstream banking institutions.

There may be situations where a loss, sustained from one rural branch, can be compensated by profits received from an urban branch.

In this case subsuming branch location wholly in the technical efficiency sense such as viability, tends to undermine the social objective of commercial banks in a developing economy like ours.

Khatkhate and Riechel (1980) emphasizes that if mainstream banks can not be relied upon to discharge their function of mobilization of savings and allocate these efficiently; as this will conflict with their profit maximization, then universal banks as those formed in Germany and to some extent in France in 19 century may be a financial model for developing countries.

This view is shared by Gockel (1995) who in his study of the role of the financial markets in the development of Ghana noted similar problems with regard to the extent to which commercial banks cannot be relied up on to mobilize mass savings pointing out that, given the African social setting which is well knit especially in the rural areas, Savings and Credit Co-operative Organizations (Saccos) and associations would be an ideal structure for mass savings mobilization.

This model assumes that, there is a link between these and other commercial banks especially co-operative bank (which we are yet to develop in Rwanda) which can provide intermediation role at the next pillar of financial service provision to these micro financial institutions.

In our case the idea of Umurenge Saccos fits in this setting, but this will need both forward and backward linkages to these and other second layer financial institutions.

Which necessitates setting up of second tier financial intermediary, such as a co-operative bank in which Umurenge Saccos will have to own shares.

Nevertheless, the preference of universal banks lies in the fact that, they issue long-term instruments such as bonds which are used to mobilize long-term savings.

This however presupposes the existence of a secondary bond market to facilitate liquidity so as to make these bonds more attractive.

Such financial development paradigm would have to be augmented by development banks which would target specific priority areas of agriculture development, tourism, education, health, and industrial development.

Such financial institution would them mobilize long-term savings and allocate these accordingly in these key priority sectors of the economy.

The current financial crisis and consequent global recession posses both direct and indirect effects. Given that, Africa’s financial sectors in its rudimentary form is not integrated into the global financial system the possible direct impact will be minimal.

But for countries that boost high presence of foreign banks and developed stock markets such as Kenya, Egypt, South-Africa, and Nigeria (Rwanda and Uganda has of late attracted these) the financial sector will be hit as prices of stocks have declined by huge margins and foreign investors have sold their portfolios in these markets, while reversal of portfolio flows makes it difficult for governments to sell bonds during such a period.

African financial institutions will not find it easy or cheap to raise funds on international financial markets given the current credit crunch compromising their liquidity and by extension constrain operations of private sectors that depends on such finance (leading to contraction of credit), and hence growth of such economies.

Besides, large corporations that operate in African economies and which usually source their funding from external sources will find it difficult to do so which will then force them to revise/ halt their investment plans and in most case, their operations which will in turn reduce growth of underlying economies.

Furthermore, importers in such countries also depend on credit from external sources to finance their imports which will also be affected by the current crisis.

Reduced imports mean reduced fiscal revenues to the underlying economies which constrains government’s ability to provide goods and services to her people.

Ends