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Africa and the global financial crisis

Although the global economic crisis is not a crisis of Africa's making, it does no good to bury our heads in the sand and assume we will not be affected. We must never forget that Africa is populated by lions that operate as a pride in comparison with the Asian tigers who tend to be individual animals.

Over the next 12 months we will face many difficult challenges, and tough policy choices will have to be made. This crisis gives Africa a unique opportunity to create an African way of doing business, one which is grounded in fairness, integrity and sustainable development – rather than the greed and recklessness which has got so many of us into an economic mess.

To drive this process of renewal, the corporate world needs strong and principled leadership – of the kind that my own country was blessed with during the greatest turning point in its history.

In Nelson Mandela the people of apartheid South Africa found a leader of real stature. Today, amidst the worst global financial crisis since the Great Depression, we look to the next generation of leaders for such guidance and inspiration.

To have a new global agenda the first need is to be informed by a proper diagnosis of what went wrong with the global economic system in the first place. If we do not first understand the root causes of this crisis, our attempts to address its symptoms – such as the absence of liquidity, falling asset values and collapsing manufacturing industries – are destined to fail. Even worse, there is a real danger that we would learn the wrong lessons from this experience.

Below are five key lessons which I believe the world needs to take out of this crisis.

1. International trade and the flows of real investment across borders as drivers of growth are not what have failed and led to the current crisis. In contrast, this is what has helped reduce the fall. My long-term optimism on growth and the benefits of globalisation remains as strong as ever. If anything, a workable solution to the current crisis demands acting selflessly in global terms.

2. The continuous need for global engagement and leadership by Africans. There is no doubt that many states which are already fragile, especially in Africa and the Middle East, could become even more so as a result of the global economic downturn. Any reduction in already scant resources and revenues could spell disaster for some countries.

3. How well we prepare for the future depends on how well we use commodity inflows – but also, that this future needs to be about more than commodities. Botswana remains a remarkable example of how to invest a commodity windfall wisely.

If we do not resist the urge to ditch the frameworks that have generated such prosperity around the globe, the crisis could hinder the emergence of financial institutions in developing countries.

Without reliable banks and efficient credit markets, Africa like other developing regions will remain poverty stricken, at the mercy of the costly finance provided by weak institutions and narrow networks, and heavily dependent on unrefined commodity exports.

4. An effective response to the current crisis cannot only be technocratic. By itself, a technocratic response is unlikely to convince individuals to once more entrust their hard-earned savings to financial institutions and systems whose conduct has been at the very least dilatory and, in some cases, reprehensible.

To build this trust, we have to reinstate a sense of value in the banking sector and build a reputation for fair play and fair returns rather than excess and profligacy. If we can, confidence in investment and credit systems will return over time.

For business, this means that corporate good governance and social investment cannot just be a slogan to appease civil society. Instead, it must be an operating dictum founded in self-interest. We must act in synch with the world in which we live, not in the bubble of careless ambition, seeing investments as a generational enterprise and not tomorrow's balance sheet. Ethical capitalism requires reasonable returns not rapacious behaviour.

5. The need to strengthen and improve African competitiveness urgently. Competitiveness, as the auto-industry in America has learnt to its cost, is the life-blood of economic growth. Such growth is the linchpin of social harmony and political stability. Accepting the philosophy of the need for private sector-driven growth and the critical guiding role of the state is what propelled Asian growth for the past forty years, from Japan's post-war recovery, through the tigers and cubs, to China's amazing economic performance.

This is an abridged version of a speech given by Nicky Oppenheimer, chairman of family-owned diamond company De Beers, at the Africa Day celebrations in the Plenary Hall of the African Union, Addis Ababa, 25 May 2009. Click here to read the full transcript.

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