Bottlenecks in power generation, port capacity and efficiency, and road and rail networks had been identified as the key constraints on economic growth -- in some countries such as Nigeria reducing growth by as much as 3% -- leading to concerted efforts to boost Africa's historically low share of global investment flows. This goal had been greatly assisted by a continent-wide trend -- with notable exceptions -- towards greater political stability and improved macroeconomic management, which had helped trigger a revival of foreign investor interest in Africa's undervalued assets and the continent's medium- to long-term growth prospects.

Global slowdown. The past year has upturned expectations of continued investment growth. The Washington-based Institute of International Finance forecast in January that net private sector capital flows to emerging markets will fall to about 165 billion dollars in 2009 from the 466 billion dollars recorded in 2008, and warned that capital flows to emerging markets are in danger of collapse as the financial crisis in developed economies chokes off the supply of credit to developing economies. The sharpest contraction in the supply of capital will come from already stressed commercial banks, which are expected to make a net withdrawal of about 61 billion dollars from emerging markets in 2009.

Both the IMF and World Bank have now drastically scaled back their forecasts for African economic growth in 2009 -- with the IMF expecting growth of 3.25% and the World Bank expecting growth of 3.5%. These forecasts are half what was expected six months ago, and both institutions have warned that they could be subject to further downward revision.

Policy responses. Various initiatives -- largely stopgap measures -- are underway in an effort to mitigate the impact of declining capital flows, notable among which are:

• the World Bank's proposed vulnerability fund, although given the failure to honor the Gleneagles commitment to increase aid flows to 0.7% of GDP, expectations are not high;

• the African Development Bank's plans to triple lending for African infrastructure schemes in an effort to salvage key projects; and

• the International Finance Corporation's 3 billion dollar recapitalization fund for credit-starved banks in Africa, Asia and Latin America.

South-South alternative? African frustration that its long-awaited economic revival has been choked at birth by a credit crisis hatched in the developed world has found expression in calls for greater efforts to boost South-South trade -- especially the India, Brazil, South Africa (IBSA) forum. Trade among developing countries has been increasing both as a share of developing countries trade and as a share of world trade for most of the past decade, and remains a dynamic growth area.

However, the center of gravity in South-South trade remains with inter-Asian trade, which accounts for two-thirds of all intra-developing country trade. IBSA is seeking to boost trilateral trade to 25 billion dollars by 2025 from 11 billion dollars at present. Even if that target is reached, Africa's share of it will remain small and cannot compensate for the downturn in trade with the North.

Outlook. Africa's lack of integration in world markets shielded it from the primary impact of the subprime crisis. Internal reform has helped generate a secular growth spurt not wholly reliant on high commodity prices. However, improvements in savings, investment, productivity and diversification are not sufficient to sustain that growth in the face of a protracted period of low commodity prices. The first victim of the slowdown will be investment in the infrastructure upon which future growth will depend.