Africaneconomy is not shielded against the international financial crisis due tothe financial fragility of the productive sector, which is dueto its excessive exposure to foreign exchange derivative instruments. Thecompanies used a process of defense of margin of profit in the face of thecontinuous process of exchange appreciation evidenced in the last two years,leading to a fall in the companies’ operating income (Schoenmaker, 2013). Wecan therefore say that the companies substituted operating income for financialincome.
In addition, a second factor that contributed to this expositionwas evidenced: the generalized optimism of the market, optimism is sanctionedby the Federal Government. It was in this context that companies reducedtheir security margins and, under this approach, we assert that the shieldingmyth ignored the fragility of the nonfinancial private sector. The Africancrisis is endogenous, due to the growing financial fragility of the privatesector and the exposure to foreign exchange risk. African ScenarioRegarding Financial Crisis The South African economy showed a sharpdecline by the end of 2008. A broad cyclical the decline has been noticeablesince the end of 2007, but in September 2008 the world became global financialcrisis is bursting out and the world economy is scouring.
The South Africaneconomy recorded its first quarterly decline (-1.8%) in ten years in the fourthquarter of last year and the annual growth rate decreased to 3.1% – aftergrowth of about 5% per annum for four consecutive years calendar years.Although shortages in electricity supply during the first part of 2008 weresevere disruption caused in economic growth, the decline in economic activityfor the full year was especially apparent in the growth rate of real householdconsumption, which decreased from 6.
6% in 2007 to 2.3% – an indication that thelevel of real consumer spending in fact during the second half of the yearshrunk (Duran, & Garcia-Lopez, 2012). The contraction has worsened during the firstquarter of 2009. The growth rate in real fixed investment (the private andpublic sector jointly) decreased from above 16% in 2007 to 2.6% in the firstquarter of 2009. To further rub salt into the wounds, exports sharply declinedin the last quarter of the year and the first quarter of 2009 in response thesevere global economic recession that was unfolding. Businesses had to stormturbulent water in recent years and with unstable economic conditions worldwideremain uncertain.
Global real GDP has been estimated an annual rate of 6.7%during the fourth quarter of 2008 shrank and 5.6% in the first quarter of 2009.The advanced economies took the lead with the economic downturn operations.
Theglobal economic recession has been synchronized and the worst since the SecondWorld War. World trade and money flow fell sharply, while commodity pricesdropped and production and job losses continue to increase. ReactivePolicies towards Business Acquisition of BankThe adverse economic consequences are worsein developed economies, although emerging economies are also affected by theclose trade and financial ties what exist the commodity price-driven inflationcookie that hit the world between 2006 and 2008 has been spectacularly reversedand around the world are central banks, fiscal authorities and multilateralfinancial institutions struggled to combat deflationary tendencies. From March2009 the global economic crisis has apparently stabilized and has optimism beginsto increase that a recovery is at hand (Yan, et al., 2012).
While the SouthAfrican economy was somewhat hedged against the primary driver of the worldwidefinancial crisis (the burden of the US subprime financial soap bubble), it isfully exposed to the indirect consequences of export demand and prices as aresult of global recession conditions and the contraction in capital flows. The local manufacturing sector has aparticularly strong decline experienced the last quarter of 2008 and businessindices in the sector in the first quarter of 2009 dropped to the lowest levelin a decade. While growth in real consumption expenditure slows down and retailbusiness has shrunk, is a measure of resilience in the first quarter of 2009detected. Prospects are, however, clouded by the further reversal of productionand threatening job losses. A number of positive fundamental factors improveprospects for South Africa, which is slightly different would be worrisome(Kupakuwana, 2012). In the first place, South Africa’s banking sector has aninsignificant direct exposure to the subprime financial crisis, it is wellcapitalized and is expertly regulated. While the rand exchange rate initiallyexperienced a setback, its resilience in the reflecting the global financialcrisis as well as the return of inward equity investments in the first quarterof 2009 promised.
Thirdly, South Africa’s public sector hasalready begun with an aggressive firm investment program that will counteractsome of the negative trends in the private sector. As encouraging as thesefundamental factors are, the magnitude and intensity of the prevailing riskscaused by the global financial and economic crisis are profound. For SouthAfrica, these risks concern exports and the availability of foreign capitalaround the finance large current account deficits.
The internationalization of the financialsystem has substantially changed the nature and deter- minutes the globaleconomic dynamic: the combination of deregulation of markets financial and financialinnovations – such as securitization and derivatives – free mobility of capture-andsuch flexibility and volatility of exchange rates and interest rates have onthe one hand, limited to action of domestic macroeconomic policies and on theother, was responsible for both the frequent crises balance of payments inemerging economies, as the liquidity and solvency crises, as the recentinternational financial crisis. This process of financial globalization, inwhich financial markets are integrated in such a to create a “unique”world market of money and credit, has, in turn, before a framework in whichthere are no monetary-financial rules and stabilizing foreign exchange andinstruments traditional macroeconomic policy become increasingly insufficientto contain the financial collapse and currency) worldwide, resulting ineffective demand crisis. JM Keynes, in his General Theory of Employment,Interest and Money 1936, already called the attention to the fact that, inmonetary economies of production, the organization of financial markets CIALfaces a trade-off between liquidity and investment: on the one hand, they stimulatethe development of productive activity by making the most liquid assets,freeing therefore the investor irreversibility of the investment; on the other,it increases the speculative gains possibilities (Al Amine, 2016).At- rather, to establish a connection between thefinancial markets and real economy, Keynes, in Theory General, wrote that”the position is serious when enterprise becomes a bubble on thespeculation. When the development of the activities of a country becomes theby-product of activities of a casino, the job is likely to be sloppy.
“Going tomeet Keynes, today, the action of the global players in a more market integrated,makes the financial markets should be converted into a kind of big globalcasino. Speculation, in a global economy, disruptive character has not o