The Weakest Link.(International Edition; EMERGING MARKETS)(Africa's economy)

Byline: Scott Johnson; With Karen MacGregor in Durban

Commodity-rich Africa profited when the world was growing. Now that it's not, it will be the hardest hit.

For the last decade or so, an economic uplifting in Africa has brought millions out of poverty. Democracy spread farther and faster than ever before. In December, the World Bank reported that sub-Saharan Africa's 2008 economic growth was 5.4 percent, equaling Europe and higher than Latin America (Africa finally ceded to Latin America its place as the world's slowest-growing region). Even now, many Africans imagine they will escape the global credit crisis relatively unscathed.

They're in for a rude shock. Recent IMF forecasts predict growth of 3 percent this year, compared to 4 percent in low-income countries. There are three main factors at work. Commodities are Africa's bread and butter and commodity prices have been dropping fast thanks to falling demand due to the global downturn. A second factor is that many African countries are largely aid-dependent, and big Western donors with slumping economies are less likely to want to give. Similarly, declines in foreign direct investment and remittances will hammer African economies. Finally, the specter of economic collapse, while scary for well-to-do countries, can wreak political havoc in unstable ones. As revenues decline, companies and governments are likely to have to scale back development plans, which could infuriate populations who had only recently gained some hope that living standards in Africa could rise. "Most Africans believed they'd be untouched," says Greg Mills of the Brenthurst Foundation, an independent think tank in South Africa. "But they underestimated the scale and the intensity of this crisis."

The first thing to implode has been commodity prices. Excluding gold and cocoa, raw-material prices have dropped across the board. Following a historic five-year boom during which energy prices soared by 320 percent, metals and minerals prices rose by nearly 300 percent and food prices were up by 138 percent, commodities plunged in late 2008. In December the World Bank predicted that real food prices would fall by 26 percent between 2008 and 2010, oil prices by 25 percent and metals prices by 32 percent.

For African countries reliant on oil or metals and minerals, this spelled economic disaster. Botswana's economy is almost wholly dependent on diamonds. De Beers, which has largely financed Botswana's growth, last month shut down its mining operations for several weeks and said it would reduce production by about 50 percent through April. Several large coal-mining projects in Mozambique recently shut down as the bottom fell out of fuel production. In South Africa, annual gold production plummeted 13.6 percent to levels last seen in 1922. A plummeting copper price--down by about 60 percent--has led to mine closures and thousands of job losses in the Copperbelt region of Zambia, where copper accounts for 80 percent of foreign earnings and has been the major driver of economic growth. Few African governments were competent enough to use the good times to spur development. Now, prospects will dim further.

Next to be affected will be the aid-dependent countries like Rwanda and Tanzania (Mozambique, which, aside from being commodity-dependent, gets 20 percent of its GDP from aid, will suffer a double blow). Barack Obama has already retreated from his election-era promise to double the U.S. aid budget in the face of the crisis. Goran Holmqvist, an economist at the Nordic Africa Institute in Uppsala, Sweden, says it's a safe bet that rich Western nations won't honor ...