Chapter 9: Continental drift: globalization, liberalization and human
development in sub-Saharan Africa1
David E. Bloom, Mark Weston, and David Steven
Introduction
One of globalization’s most enthusiastic proponents, Tony Blair, has described Africa as a
“scar on the conscience of the world”. While much of the developing world has experienced
strong economic growth and improved standards of living, Africa, with very few long-term
exceptions, has been left behind. Half of the continent’s population lives in poverty; nearly
one adult in ten is infected with HIV (in seven countries, one in five is infected); and two out
of every five of the world’s wars occur in Africa.2 In many areas, things have been getting
even worse: Growth in real per capita gross domestic product (GDP) was negative in most
countries throughout the 1990s,3 one quarter of African countries have seen human
development indicators deteriorate in recent years,4 and democracy is under threat across
the continent, with Zimbabwe, Ghana, Zambia and Kenya the most prominent
manifestations of the weakness of democratic institutions.5
Many have blamed Africa’s ills on globalization itself. International donor policies, the global
decline in primary commodity prices, rich-world protection of agriculture and textile markets,
and the increased mobility of people that has exacerbated the spread of AIDS have all had
an impact on Africa. Although historical, geographical and internal political factors have also
played a large part in Africa’s plight, there is no doubt the continent presents a challenge to
globalization’s advocates.
This chapter attempts a broad summary of Africa’s development. Part one examines the
state of Africa in the context of the liberalization, economic growth, and human and social
development framework.6 Part two looks at the role of geography, health, policy and the
international environment in Africa’s development. And the final section makes
recommendations on the strategic interventions likely to trigger virtuous development
spirals.
1
The authors are grateful to Larry Rosenberg for a thorough set of thoughtful comments and suggestions. We
would also like to thank Ajit Bhalla, Romilly Greenhill, Khalil Hamdani, Kamran Kousari and Jane Morley for their
helpful comments and contributions.
2 World Bank (2001): World Development Report 2000/01. World Bank. Washington
3 World Bank (2002) a: Global Economic Prospects and the Developing Countries. World Bank. Washington:
205; Population Reference Bureau (2001): 2001 World Population Data Sheet.
4 UNDP (2001): Human Development Report 2001. Oxford University Press. New York.
5 Financial Times (2002): Democracy in Africa. Financial Times. London. 4 January.
6 For simplicity, we will refer to sub-Saharan Africa more simply as Africa.
1
One: The state of Africa
Liberalization
There is plentiful evidence that Africa’s failure to sufficiently open up its markets has
hampered its integration into the global economy. Import-substitution strategies
predominated in the immediate post-colonial era, with industries relying on protection for
their survival. This strategy failed to build productive industries, and left Africa ill equipped
for opening up to the global economy.7 Although protectionist policies gave way to
economic liberalization in the 1980s and 1990s, it has nevertheless been estimated that
over 25 per cent of Africa’s slower growth relative to East Asia is due to its lack of economic
openness.8 While not the only factor, therefore, the relatively limited and belated
liberalization of its economies has made a significant difference to the region’s prospects.
Exports make up 29 per cent of Africa’s GDP – similar to the world average of 27 per cent.9
The region’s share of world trade, however, is less than 1 per cent.10 Most of the continent’s
exports are low-value primary goods, with manufactures making up less than 20 per cent of
total exports.11 Africa has increased its dependence on primary commodities since 1980,12
and worldwide falls in primary product prices (prices fell by an average of 25 per cent from
1997 to 199913) have magnified the effects of the continent’s heavy reliance on primary
goods and highlighted the need to diversify.
High tariff barriers on imports, however, have hindered diversification. Tariffs in Africa have
fallen more slowly than those in other developing regions in the past two decades: while
average developing country tariff rates have been reduced by half since the early 1980s,
Africa’s have fallen by just a third.14 Obtaining the imported inputs needed for upgrading
industries, therefore, is becoming easier for the rest of the developing world than it is for
Africa.
Even between African countries, trade barriers have remained high. Average developing
country tariffs on manufactured goods are three times higher than industrial countries’
tariffs on developing world products.15 With one sixth of Africa’s exports going to other
African countries, lowering intra-regional import duties would provide some incentive to the
region’s industries and farmers to expand and upgrade their production base.
Liberalization of domestic industries has also been slow. The opening up of state-run
service sectors in many areas has been either nonexistent or half-hearted. Yet greater
foreign investment in services and industries could provide Africans with new knowledge,
technology and skills.
7
UNCTAD (1998): African Development in a Comparative Perspective. UNCTAD. Geneva: 69, 106
David Bloom, Jeffrey Sachs (1998): Geography, Demography, and Economic Growth in Africa. Brookings
Papers on Economic Activity, 1998, vol. 2, 207–295.
9 UNDP (2001) ibid
10 UNCTAD (2001): Economic Development in Africa: Performance, Prospects and Policy Issues. UNCTAD.
Geneva: 27
11 UNCTAD (2001) ibid: 28
12 World Bank (2002) a ibid: 126
13 Economist (2001): ibid
14 World Bank (2002) b ibid: 55
15 World Bank (2002) a Ibid: 53
8
2
While Africa’s progress on liberalization is slow, however, it is not insignificant. In most
countries, restrictions on imports have been lifted, tariffs reduced and measures to attract
foreign investment put in place. Foreign direct investment (FDI) in the continent rose from
$834 million in 1990 to $4.3 billion in 1998 – a more than fivefold increase.16 FDI’s
contribution to Africa’s GDP has risen from 0.3 per cent in 1990 to 2.4 per cent today.17
Exports, too, have become increasingly important, rising from an average annual growth
rate of 2.4 per cent in the 1980s to an average of 4.4 per cent in the 1990s.18 And while the
region’s share of world trade remains extremely low, the steady decline that began in the
1950s has recently been halted.19
As well as the steady lowering of barriers to trade and foreign investment, there is also
evidence of a desire to speed up regional cooperation. Trade agreements such as the
Common Market of Eastern and Southern Africa (COMESA), the Economic Community of
Western African States (ECOWAS) and the Southern African Development Community
(SADC) have arisen in order to liberalize regional trade, although many of these blocks
overlap and the system is as yet far from streamlined. Furthermore, negotiations by the
“G77” group of developing countries have become increasingly effective in recent years.
A minority of African countries have already seen benefits from liberalization. Uganda’s
liberalization policies have contributed to annual GDP growth since 1995 of 6 per cent. FDI,
which has been particularly concentrated in manufacturing, mushroomed between 1991
and 1997,20 enabling the country to diversify its export base, and coinciding with a rise in
domestic savings from 0.7 per cent of GDP in 1991 to 7.9 per cent six years later.21 This in
turn facilitated greater investment in manufacturing and export promotion, and the share of
the industrial sector in GDP has increased by one sixth since 1996.22 Uganda has achieved
impressive growth despite starting from a much weaker position than most of its
neighbours. The country is landlocked, its infrastructure weak, poverty rates hover around
40 per cent and debt is among the highest in the world. Moreover, world prices for its main
export – coffee – have been falling. Export promotion, however, combined with deregulation
and privatization policies that are friendly to foreign investors (who receive tax incentives
and may own 100 per cent of investments in companies), has helped Uganda’s people to
turn the corner. Per capita GDP growth averaged 3.8 per cent from 1992-98, and poverty
reduction proceeded six times faster than in the rest of Africa.23
Liberalization combined with export promotion and measures to attract FDI have also
contributed to growth in Mauritius and Mozambique. FDI in export processing zones
spurred Mauritius’ successful diversification efforts, and Mozambique, whose GDP growth
since 1996 has been among the fastest in the world, has used foreign investment to boost
domestic industries (the Mozambique Government responded to the global increase in the
16
World Bank (2000) ibid
UNDP (2001) ibid
18 World Bank (2000) ibid
19 UNCTAD (1998) ibid: 71
20 UNCTAD (1999): Investment Policy review: Uganda. UNCTAD.
21 UNCTAD (1999) ibid
22 World Trade Organization (2001): Uganda Trade Policy Review. WTO, Geneva. December
23 David Dollar and Aart Kraay (2002): Spreading the Wealth. Foreign Affairs, New York. January/February.
17
3
price of fertilizers, for example, by targeting foreign investment that would boost domestic
fertilizer production24).
Liberalization has not produced benefits for all, however. Another landlocked, heavily
indebted African country, Malawi, shows how liberalization by itself is not sufficient for
growth, or even for integration into the global economy.25 Malawi began its structural
adjustment programme in the mid-1980s, but since liberalization began, and despite
opening up its export regime, the share of exports in the country’s GDP has fallen, from 30
per cent in 1994 to 27 per cent five years later. Economic growth, not helped by declining
world tobacco prices (tobacco makes up 66 per cent of Malawi’s exports26) and a fall in
foreign investment, has slowed.27 Foreign firms have been deterred by a weak investment
climate, and liberalization has not been complemented by infrastructure improvements or
the investment in the country’s human capital base needed to promote export diversification
and greater productivity. Malawian firms and farmers have, as a consequence, been
unprepared for the opening up of their markets to global competition.28
Governance of the economy has been much weaker in Malawi than in Uganda. The
Ugandan Government embarked on reform in 1987, with a strong commitment to achieving
macroeconomic stability. Inflation has been contained, privatisation of utilities has begun,
and the exchange rate has been allowed to float. At the same time, higher salaries for
public sector workers have been a key component of civil service reform, thus reducing the
temptations of corruption; infrastructure has improved, with a particular focus on increasing
the efficiency of the energy and transport sectors; and export promotion has proceeded
apace. As a result of its strong macroeconomic performance, Uganda has become the first
country to receive debt relief under the Heavily Indebted Poor Countries (HIPC) initiative,
and the country’s increased attractiveness to foreign investors is reflected in the fact that
Uganda’s improvement in the 1997 Institutional Investor ratings was greater than that of all
other countries.29
Malawi, on the other hand, has failed to achieve macroeconomic stability. Annual inflation
and real interest rates remain high and reform plans have not been successfully
implemented. The unstable economic environment has deterred foreign investors and
made it difficult for Malawian producers to diversify. Privatisation has been slow, and
inefficient state-owned communications and energy utilities continue to hinder efforts to
increase manufacturing productivity and facilitate trade. Although tariffs have been reduced,
non-tariff factors such as price controls, continued civil service corruption, and weak
physical infrastructure have kept production costs high. As a consequence, while Uganda
24
World Trade Organization (2001): Mozambique Trade Policy Review. WTO, Geneva. January
A.S. Bhalla (2002): Globalisation and Sustainable Development: a Southern African Perspective. In
Technology Management and Sustainable Development (forthcoming)
26 UNCTAD LDCs website: http://www.unctad.org/en/subsites/ldcs/country/profiles/malawi.htm
27 World Trade Organization (2002): Malawi Trade Policy Review. WTO, Geneva. February
28 Chinyamata Chipeta, Mjedo Mkandawire, Haile Taye (2002): Malawi: Globalization, Liberalization and
Sustainable Human Development. Making Global Integration Work for People. Edited by Manuel Agosin, David
Bloom, Georges Chapellier and Jagdish Saigal. UNCTAD.
29 World Bank (2000): Country brief: Uganda. September 2000
25
4
has become an attractive destination for foreign investment, many foreign firms have left
Malawi, which is rated by investors as one of the least attractive countries in Africa.30
Interestingly, Uganda, which has benefited so much from liberalization, has retained
relatively high import tariffs on sugar and textiles. Another African success story, Mauritius,
has also protected its domestic industries with high tariffs.31 Zimbabwe and Malawi, on the
other hand, saw food prices rocket after liberalization, increasing poverty and deepening
poverty traps for those who were already poor.32 Tariffs, as developed world import duties
on agriculture and textiles implicitly acknowledge, protect the sectors that are most
vulnerable to globalisation (many of East Asia’s successful globalizers, too, protected
consumer goods while liberalizing tariffs on the imports needed to develop exports). They
allow industries time to modernise and improve productivity in advance of opening up to
world markets, and facilitate the diversification that is essential both for spreading risk and
moving up the economic value chain. Targeted tariff reductions on inputs needed for
exports and modernisation (for example, sewing machine parts, which would help more
African cotton producers to upgrade to textile production) are likely to be more palatable to
domestic producers than across the board tariff reduction.
Liberalization in Uganda, in sum, has been accompanied by efforts to strengthen
institutions, stabilize the economy and promote exports. In Malawi, however, attempts to
improve governance have been inadequate and liberalisation has been held back by
continued state intervention. Both more thoroughgoing liberalization and a greater
emphasis on government-led macroeconomic and institutional reforms will be required for
Malawi to begin to catch up.
African governments’ efforts to liberalize have in many cases been a response to
international donor encouragement. The next section will review how far these policies
have contributed to economic growth, the second sphere of the development framework,
and whether the overall policy environment has been conducive to growth.
Economic growth
The growing economic divide between Africa and the rest of the world is not a recent
phenomenon. In 1820, per capita income in Africa was 68 per cent of the world average.
Despite increasing by a factor of almost 2.5 since then, by 1992 African income levels had
fallen to 25 per cent of the world average. Consistent with these figures, absolute growth
was considerably slower than in other regions – per capita incomes in Asia and Latin
America were 5.9 and 7.4 times higher in 1992 than they had been in 1820. In Western
countries, they were 14.9 times higher.33
Since reaching a peak growth rate of 1.5 per cent in the 1960s, per capita incomes in Africa
have declined and are now 10 per cent lower than they were in 1980.34 GDP growth
throughout the 1990s was negative and, whereas in the 1960s the continent was
30
Chipeta et al (2002) ibid.
World Trade Organization (2001): Mauritius Trade Policy Review. WTO, Geneva. November
32 Bhalla (2002) ibid: 15
33 Angus Maddison (1996): Monitoring the World Economy: 1820-1992. OECD. Paris
34 UNCTAD (2001) ibid: 7; World Bank (2002) a ibid
31
5
economically on a par with much of Asia, it is now by far the poorest region in the world.
Per capita GDP, investment, exports and savings all declined between 1970 and 1997 – in
the rest of the developing world these measures advanced significantly.35 As a
consequence, many African economies have become heavily dependent on loans, and by
1997 foreign debt was equal to 80 per cent of the region’s GDP.
Progress over the next decade is expected to be more encouraging, albeit slow compared
to all other regions. Africa’s economy is forecast to grow by 3 per cent per annum between
2000 and 2010.36 However, even if this forecast is accurate (notwithstanding threats such
as rising numbers of AIDS deaths, war and the dangers of faltering democracies in nations
such as Zimbabwe threatening its neighbours’ stability), such growth will not be sufficient to
prevent an increase in poverty rates, much less promote a decline in rates by half to the
Millennium Development Goal target. According to the United Nations Conference on Trade
and Development (UNCTAD), a continued growth rate of at least 6 per cent will be required
if a “significant reduction” in poverty rates is to be achieved.37 In the 1990s, however, only
Botswana, Mauritius, Uganda and Mozambique approached sustained growth at this level.
A failure to keep up with global markets has contributed to Africa’s slow growth.
Colonialism, migration and the continent’s heavy dependence on exports have meant that
Africa has historically been at least as globally oriented as other developing regions,38 but it
is now being rapidly overtaken. A World Bank study has examined the differing
performances of those developing countries whose ratio of trade to GDP has risen in the
last twenty years – that is, they have become more globalized – and those that have
become less globalized. Although, as some critics have noted,39 the study does not claim
that the more globalized countries adopted pro-trade policies, they did have deeper tariff
cuts than the less globalized group, and it is probable (although not made clear in the
report) that, in at least some cases, these cuts came as part of a deliberate strategy to
open up to the global economy. 43 of the 47 sub-Saharan African countries have become
less globalized over the last twenty years, with significant consequences. It is estimated
that the decline in Africa’s share of world trade from 3 per cent in the 1950s to less than 2
per cent in the 1990s represents an income loss equivalent to 21 per cent of regional
GDP.40 While per capita GDP growth in the more globalized developing countries
outstripped that of rich countries during the 1990s, average growth in the less globalized
nations was negative. And while wages increased overall in the less globalized countries,
they did so at a rate less than half of that in the more globalized group.41 Poverty declines,
too, are slower in Africa than elsewhere. Fifteen of the world’s twenty poorest countries are
in Africa and, while African poverty rates42 fell by 1 percentage point to 47 per cent from
35
World Bank (2000) b: Can Africa claim the 21st Century? Washington: 8
UNCTAD (2001) ibid: 44
37 UNCTAD (2000): Capital Flows and Growth in Africa. UNCTAD. Geneva: 22
38 The African countries listed in the AT Kearney/Foreign Policy Magazine Globalization Index (2002) are, on
average, ranked higher than the Asian and Latin American countries listed.
39 Mark Weisbrot (2002): The Mirage of Progress. The American Prospect. Vol 13, issue 1. 1-14 January; Dani
Rodrik (2002): Globalization, Growth and Poverty: Is the World Bank beginning to get it? The Straits Times, 12
February.
40 World Bank (2002) b: ibid: 20
41 World Bank (2002) b: Globalization, Growth and Poverty. World Bank/OUP. Washington: 5, 13
42 Defined as the percentage of people living on less than $1 a day
36
6
1990 to 1999 and are expected to decline further to 39 per cent by 2015, poverty rates in
South Asia will more than halve during the same period.43
Africa’s reliance on primary commodities has been a major factor behind its weak
integration into the global economy, and policies to encourage export diversification are
essential if the growth pattern of recent years is to be reversed. East Asia’s successful
growth experience was founded not just on economic liberalization, but also on drives to
promote and upgrade exports. Sachs and Warner (1997) suggest that economic growth
based on manufacturing-led exports would be higher than from a natural-resourced based
economy. The dollar value of manufactures trade showed a cumulative annual increase of
2.7 per cent over the period, compared to an average world commodity trade increase of
0.65 per cent.44 In Africa, however, the share of industry in GDP declined from 39 to 32 per
cent from 1980 to 1997,45 and UNCTAD estimates that, without the continued terms of
trade losses suffered by non-oil exporters in the region since 1980, per capita incomes
would have been 50 per cent higher than current levels.46
Although a step forward from primary agricultural products, in the longer term manufactured
exports with a low technology content are unlikely to provide consistently strong gains to
Africa. UNCTAD has highlighted the “fallacy of composition” problem faced by exporters of
labour- and resource-intensive products, where increases in export volumes precipitate falls
in prices.47 The 1998 Trade and Development Report describes how East Asia’s
industrializing economies benefited from a virtuous spiral whereby revenues from exports of
primary commodities were invested in resource-based industries which facilitated
productivity improvements and diversification of primary products. Revenues from the latter,
in turn, enabled the establishment of manufacturing industries, which became increasingly
sophisticated as export earnings funded their development. “Such a pattern,” the Report
explains, “has characterized the export-investment nexus in East Asian NIEs [newly
industrializing economies] ever since their initial stages of development.”48
Only Mauritius, where profits from sugar exports were re-invested in textile production and
exports, has so far followed this pattern in Africa. Elsewhere, even where primary
commodities have brought in substantial revenues, the investment climate has generally
been too weak for savings to be productively allocated. In the continent as a whole, both
savings and investment rates were lower in the 1990s than in the 1980s,49 with weak
financial institutions discouraging domestic investment and hampering the development of
private sector firms.50 Insecurity has also deterred investors – war, political instability and
crime are rife across the continent, and even in peaceful countries, property rights are often
fragile.
43
World Bank (2000): World Development Report. World Bank. Washington.
Bloom, Sachs (1998) ibid: 34
45 UNCTAD (2001) ibid: 10
46 ibid: 36
47 UNCTAD (2001) ibid: 42
48 UNCTAD (1998): Trade and Development Report, 1998. Geneva: 190
49 UNCTAD (2001) ibid: 13
50 Peter Cornelius (2000): Financial Development and the Liberalization of Financial Services Trade. The Africa
Competitiveness Report 2000/2001. World Economic Forum. New York. OUP
44
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Obstacles to foreign investment also abound. High corporate taxes not only raise costs –
they have also pushed many into the informal sector and increased the likelihood of tax
evasion and corruption in the formal sector.51 Red tape is another deterrent. According to
the UNDP, for example, 24-hour delays at customs checkpoints in southern Africa are
“routine”, and “it can take more than a week for intermediate inputs to clear customs on the
Ugandan border.”52 Such inconveniences act as a disincentive to overseas investors and
also deter African producers from diversification and expansion. Coupled with continued
state intervention in many sectors, the outlook for Africa’s entrepreneurs is bleak. As a
1998 UNCTAD report put it: “Stalled growth across much of Sub-Saharan Africa is linked to
the failure of the State to gradually cede its initial economic power to a nascent
independent entrepreneurial class which could assume the lead role in a dynamic
accumulation process.”53
Infrastructure is a further impediment to both domestic and foreign investment. Poor
transport infrastructure, which has persisted despite the historic concentration of World
Bank loans on its development,54 increases the costs of doing business for both agriculture
and industry. African businesses frequently highlight infrastructure as a major barrier to
expansion and diversification,55 and a 1995 study by Amjadi and Yeats found that transport
costs in the region are a higher barrier to trade than tariffs.56 Energy infrastructure has also
impeded growth. In Nigeria, for example, inadequate electricity provision has forced more
than 90 per cent of manufacturing firms to buy their own generators, which has increased
equipment costs to small firms by 29 per cent and to larger firms by 10 per cent.57 Energy
sectors in the region remain largely under the control of governments and, without broadranging liberalization, will continue to be plagued by inefficiency. While much of the rest of
the world has benefited from the communications revolution in terms of increased trade and
co-operation, state-governed infrastructure provision continues to hamper Africa’s
prospects.
Low investment has severely hampered Africa’s technological development, and is a major
threat to its efforts to create an export-investment virtuous spiral. Africa currently lags far
behind other developing regions in terms of the use of technology. As reflected in the
technological indicators listed in the United Nations Development Programme (UNDP)’s
Technological Achievement Index, growth in research and development expenditure,
number of internet hosts, number of telephones, electricity consumption and fertilizer and
tractor use are all considerably slower than in the rest of the developing world.58
There is clearly catch-up potential for Africa, however, and the World Bank believes Africa
has “huge potential for more diversified production and exports, including in
51
Sachs (1996) ibid
UNDP (2001) inid: 65
53 UNCTAD (1998) ibid: 99
54 Kanbur, Ravi, and Sandler, Todd with Morrison, Kevin M. 1999. "The Future of Development Assistance:
Common Pools and International Public Goods", Policy Essay 25 - ODC Books in Brief. ODC.
55 UNDP (2001) ibid: 65
56 Amjadi A. & Yeats A. (1995): "Have transport costs contributed to the relative decline of African exports ?
Some preliminary evidence", Washington DC., World Bank Working Paper.
57 World Bank (2000) b: ibid: 143
58 UNDP (2001): ibid: 48-63
52
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agroprocessing, manufacturing, and services.”59 A twin-pronged focus on immediate
diversification (into low-value manufacturing) and forward planning (for moving towards
higher-value goods and services) is likely to pay dividends in terms of long-term
sustainability. The growth of the palm oil industry in Malaysia is instructive in this regard.
With rubber prices either unsteady or declining in the 1950s and 1960s, the Malaysian
Government began to invest in the country’s nascent palm-oil industry, responding to
increasing international demand as well as Malaysia’s physical and human resource
advantages. Government research into palm oil was carried out in conjunction with industry
(which also funded the research through a levy on production), ensuring that data would be
relevant to producers’ needs. Palm oil products were also exempted from export duties,
which encouraged domestic industries to process and refine the oil as well as to produce it.
According to UNCTAD, “The ensuing massive investment in processing capacity led to
intense competition among refiners, which forced them to enhance their industrial and
technological capabilities rapidly. As a result, within a decade, Malaysia was able not only
to reach the world technological frontier in palm oil refining, but even to push back this
frontier.”60 Liberalization and export promotion clearly contributed to the development of the
palm oil industry, but government provided the vision and brought stakeholders together to
facilitate its rapid growth.
Despite the historical barriers, some parts of Africa have made progress in recent years.
Trade liberalization has begun to provide benefits; privatization is underway in many
sectors; and foreign investment has increased. Macroeconomic and political stability have
also been achieved by some nations. However, without greater and more sustained growth,
poverty reduction and quality of life improvements will continue to be limited.
Human Development
The interaction between economic and human development is a key driver of both virtuous
and vicious development spirals. Weak human development is both a cause and a result of
Africa’s failure to integrate into the global economy. Writing on the effect of human
development on successful global integration, Amartya Sen has compared the experiences
of China and India since moving towards more open, market-driven economies. He argues
that China’s more rapid progress has been driven by its pre-reform focus on improving the
education and health of its people. This left the country much better prepared for
marketization and globalization than India, where illiteracy rates were high and the health of
its population poor.61 Conversely, a failure to globalize has weakened Africa’s human
capital base. Poverty rates in developing countries that are less globalized today than they
were twenty years ago (which includes most of Africa) are rising – in the globalizing
countries they are falling – leading to deteriorating health and declining school enrolment.62
Human development in Africa is in an even more perilous state than in India. All of the
bottom 28 countries on the United Nations Development Programme’s Human
59
World Bank (2000) b ibid: 208
UNCTAD (1998): Trade and Development Report. Geneva: 194
61 Amartya Sen (1999): Development as Freedom. Oxford University Press. Oxford: 42-3
62 See Bloom, Canning (2001): The Health and Poverty of Nations: From Theory to Practice. Development,
2001, Vol. 44, pp 36-43: 10, 14
60
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Development Index are in Africa.63 Average life expectancy is below 50. Infant mortality,
malnutrition, AIDS and tuberculosis rates are by far the highest in the world, and nearly half
of Africans lack access to clean water.64 In education, school enrolment ratios and adult
literacy lag behind other developing regions. And social capital is weak, with crime rife,
slavery still far from abolished, and war on the increase.65
Vicious development spirals, where poor performance in one area triggers problems in
others, proliferate. Weak funding of higher education institutions, for example, means that
countries often lack the leadership skills needed to successfully manage integration into the
global economy. Training of primary and secondary school teachers is also affected, which
trickles down to children’s education prospects and, ultimately, to a country’s potential for
sustained economic growth.66 Poor education also contributes to a lack of awareness of
infectious disease transmission, thus increasing the risk of infection. If a family member
becomes infected with a serious disease such as AIDS, children may have to be withdrawn
from school to help with caring tasks or to help cover the lost income. Their own education
is therefore hampered, and the family’s prospects of escaping poverty further diminished.
Africa’s efforts to improve its human development have followed a pattern similar to its
progress on global integration – where Africa has made steps, others have made strides.
Life expectancy in Africa has risen by 3.5 years since the early 1970s, while South Asia has
seen increases of 12 years, and the developing country average increase is just under 9
years. Infant mortality, meanwhile has fallen by 22 per cent – far from insignificant, but only
half the developing country average decline.67 Fertility rates, moreover, have fallen only
slightly, from 6.8 children per woman in the early 1970s to 5.8 per woman today. African
children remain a source of income and old age insurance for their parents and, because of
the risks that infectious disease, drought, food scarcity and war will affect a child’s chances
of survival, couples have a large number of children to reach their desired family size.
Because of the sustained growth of the youth population, Africa’s continued high fertility in
the face of mortality declines has meant that the share of the working age population in the
total population has fallen since 1950. Unlike other developing regions, therefore, Africa
has been unable to reap a demographic dividend, where a boom generation resulting from
the lag between decreased mortality and decreased fertility temporarily bolsters a region’s
working-age population and, where the policy environment is conducive, provides a major
boost to its economy.68 In Africa, instead of this scenario, the high youth dependency
burden combines with poor economic performance to create high youth unemployment
rates which, in another vicious spiral, can lead to social unrest, increased drug and alcohol
use (and, therefore, a greater incidence of behavior that increases the risk of HIV infection)
and increased crime.
63
UNDP (2001) ibid
UNDP (2001) ibid; World Bank (2000) ibid
65 Bloom, Sachs (1998) ibid: 3
66 See The Task Force on Higher Education and Society (2000): Higher Education in Developing Countries:
Peril and Promise. World Bank. Washington.
67 UNDP (2001) ibid: 169
68 David Bloom, David Canning, Jaypee Sevilla (2001): Economic Growth and the Demographic Transition.
RAND.
64
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Africa’s progress on education has been more encouraging, with increases in primary and
secondary enrolment rates since 1965 the most impressive in the developing world. Adult
literacy rates, too, have also almost doubled, to 60 per cent, since 1970.69 However,
continued high fertility means that population growth will put increasing strain on the
region’s education systems. The school-age population in the least developed countries is
expected to grow by 71 per cent between 1995 and 2030,70 and absorbing the extra
children will be a difficult task. Challenges also remain in expanding tertiary education,
which is crucial if a country is to acquire the skills needed in the knowledge economy.
Increasing girls’ participation in education will have broad collateral benefits. Girls’ net
secondary enrolment ratios declined in 9 African countries between 1985 and 1997,71 and
12 per cent fewer girls than boys are enrolled in primary education across the continent.72
Female education has powerful impacts on fertility rates, family health and poverty
reduction, and is especially important in the fight against AIDS. Data from Vietnam and
Cambodia has shown that more educated women are both more knowledgeable about
transmission of the virus and less likely to behave in ways that increase the risk of catching
it.73 With HIV infection rates in Africa considerably higher than in Asia, and more women
than men infected, female education clearly has the potential to dramatically cut
transmission rates.
Africa’s health challenges are no less complex. Tuberculosis rates are rising, driven by the
HIV epidemic, and malaria, which has long been a deterrent to potential foreign investors,
is still rife.74 HIV/AIDS is a further potential deterrent, with the chief executive of
DaimlerChrysler South Africa recently reporting that “AIDS is definitely one of the factors
inhibiting investments” in Africa’s automotive industry.75 AIDS weakens a country's
attractiveness to investors in various ways. It erodes the productivity of the workforce and
reduces the size of local markets. It also exposes the inability of African society to mobilize
against the disease, reducing investor confidence in the competence of African
governments and the effectiveness of African institutions.
Human development is crucial to economic growth in Africa. As an UNCTAD review of
Ethiopia has suggested, “liberalization and the process of globalization have considerably
increased the choices available to foreign firms over where to invest…Therefore, countries
competing to attract FDI need to offer more than a liberal environment.”76 If any African
countries are to approach the long-term success of East Asian economies like Korea and
Japan, whose economic growth and success in attracting foreign investment were spurred
by their focus on expanding education and improving health in advance of economic
69
The Task Force on Higher Education and Society (2000): ibid.
United Nations Population Division 1998. World Population Estimates and Projections, The 1998 Revision.
Datasets on diskettes. New York, United Nations
71 UNDP (2001): 15
72 UNICEF, EFA 2000 Assessment Statistical Document, p. 29, p. 33
73 David Bloom, River Path Associates and Jaypee Sevilla (2002) b: Health, Wealth, AIDS and Poverty – the
case of Cambodia. Asian Development Bank.
74 Bloom, Sachs (1998): ibid: 18
75 Dr Sarah Myers (2001): South Africa: The Destructive Impact of AIDS on the Automotive Sector. World
Markets Research Centre. Available at
http://www.worldmarketsanalysis.com/InFocus2002/articles/africa_HIV_safrica.htm.
76 UNCTAD (2002): Investment and Innovation Policy Review of Ethiopia. UNCTAD: 102
70
11
reform,77 reinvigorating society will have to become a priority rather than a luxury. The next
part of this chapter will look at some of the reasons why Africa’s human and economic
development has lagged so far behind other developing regions.
Two: Africa’s slow progress
A bad start
Many causes have been put forward for Africa’s ills. They can be broadly grouped under
three sometimes-overlapping headings: intrinsic disadvantages, a poor policy environment
and international pressures.
Bloom and Sachs (1998) estimate that between 60 and 90 per cent of Africa’s slow growth
is attributable to geography, health conditions and age structure. “At the root of Africa’s
impoverishment,” they suggest, “lies its extraordinarily disadvantageous geography.”78 Both
between and within countries, economic development is much greater in non-tropical than
tropical areas, so the fact that 93 per cent of Africa lies in the tropics presents the continent
with inherent disadvantages compared to all other regions. In Africa’s equatorial zones,
high evapotranspiration and heavy rains weather the soil, leaving it unfit for agriculture; in
semi-arid or arid zones, drought is a constant threat; and in more moderately watered
woodland areas, pests and poor soils diminish crop yields. In these circumstances, food
production is a constant struggle.
Many countries in the equatorial zones are net importers of foodstuffs. Weak food
production also leads to low levels of urbanization where food production is insufficient to
support a large population. In a continuation of this vicious spiral, low urbanization rates
limit infrastructure development, as the return to building roads or installing telephone lines
to scattered villages does not merit the cost (Poland, with 1.4 per cent of Africa’s land area
and 8 per cent of its population, has more paved roads than the whole of sub-Saharan
Africa outside South Africa79).
Location is also important to global integration – most of Africa is a long way from the major
world markets of Europe, North America and East Asia, and high transport costs make this
geographical barrier hard to overcome. In most of the world, falling transport costs have
driven globalisation, but in Africa costs are rising. Freight rates by rail are double those in
Asia; port charges are higher, with customs officials’ low salaries often making corruption
difficult to resist; and air transport in Africa is four as expensive as in East Asia. By 1991
freight and insurance payments on trade equalled 15 per cent of export earnings – well
above the developing country average of 6 per cent.80
Africa suffers from further geographical handicaps that keep transport costs high and affect
exports. Relative to its land area, Africa’s coastline is small, and the continent lacks natural
harbours. Because of the coastal climate’s unsuitability for agriculture, only 19 per cent of
77
Sen (1999) ibid: 41
Bloom, Sachs (1998): ibid: 4, 32
79 Bloom, Sachs (1998): ibid: 13
80 World Bank (2001), Global Economic Prospects and the Developing Countries 2001.
78
12
Africans live within 100 kilometres of the coast. 28 per cent of the population, moreover, live
in landlocked states – a far higher proportion than in any other continent. Much of the most
successful agriculture takes place in the eastern highlands, away from the arid coastal
zones, but as Bloom and Sachs (1998) suggest, “what is gained in agriculture is sorely lost
in transport costs.” Adam Smith noted the importance of coastal population density to the
division of labor in his ‘The Wealth of Nations’:
“As by means of water-carriage a more extensive market is opened to every sort of
industry than what land-carriage alone can afford it, so it is upon sea-coast, and
along the banks of navigable rivers, that industry of every kind naturally begins to
subdivide and improve itself, and it is frequently not till a long time after that those
improvements extend themselves to the inland part of the country.” 81
Smith also noted the lack of navigable rivers leading from the coast into inland parts of
Africa. Only 3 per cent of Africans live near ocean-navigable rivers, and a total of 22 per
cent of the population living near coasts and rivers is dwarfed by the US’s 67 per cent and
Western Europe’s 89 per cent.82 Tackling high transport costs is a major challenge for
Africa’s policy-makers, and intra-regional cooperation and liberalization of transport
industries will be crucial if Africa is to reap the same benefits from cheaper transport as the
rest of the developing world.
Health is another major hindrance to Africa’s development, and is in part related to
geography. The infectious disease burden is substantially higher in tropical than nontropical zones, and tropical populations’ life expectancy is lower, even after controlling for
per capita income levels.83 The annual economic burden of malaria, whose transmission in
Africa is more rapid than in other regions due to the prevalence of the highly-infective
Anopheles gambiae mosquito, has been estimated at 1 per cent of Africa’s GDP,84 and the
spread of AIDS is reducing life expectancy in several countries, with effects not just on
economic productivity but also on poverty rates, morale and social cohesion.85 In Asia,
successful action to prevent the spread of AIDS has been shown to provide a significant
return on investment.86 The medical expenditures avoided and income losses averted by
Thailand’s efforts to tackle the virus provide a rate of return between 37 and 55 per cent the minimum return deemed acceptable by the World Bank is 10 per cent. Without
preventive action, it is estimated that the impact of the virus on Thailand’s dependency
ratios would have reduced per capita GDP in 2015 by over 20 per cent. Africa, with much
higher AIDS prevalence than Thailand, clearly has even more to gain from interventions to
tackle the disease. So far, however, only Senegal and Uganda have made substantial
progress.
Governments have a vital role in combating Africa’s health problems – health information
campaigns, preventive measures and distribution of treatment all depend on strong
81
Adam Smith (1776): The Wealth of Nations. Penguin Books. London: 122
Bloom, Sachs (1998): ibid: 9
83 Bloom, Sachs (1998): ibid
84 DS Shepard, MB Ettling, U Brinkmann and R Sauerborn (1991): The Economic cost of Malaria in Africa.
Tropical Medicine and Parasitology 42: 199-203
85 Bloom et al (2002): ibid
86 David E Bloom, Ajay Mahal, Jaypee Sevilla and River Path Associates (2001): AIDS & Economics. Paper
prepared for Working Group 1 of the Global Commission on Macroeconomics and Health. October.
82
13
governance and effective public health systems. In the next section, we will look at the role
of African governments in tackling the continent’s problems.
The African policy environment
Grouping all sub-Saharan African states under one banner obviously has its limitations, but
many of the continent’s developmental weaknesses are common to many of its countries.
War and corruption have plagued the region, with impacts not only on African citizens but
also on its reputation abroad.
Traditionally, the primary objective of a state has been to guarantee the security of its
citizens. Many African states have failed to fulfil this responsibility. One fifth of Africans live
in countries affected by armed conflict.87 The incidence of civil war, which has declined in
the last twenty years in globalizing developing countries, has risen in Africa. Between 1987
and 1997 there were 14 civil wars in Africa and many of these wars, such as the troubles in
the Democratic Republic of Congo and Sierra Leone, had impacts beyond national
boundaries.88 Refugees from Sierra Leone flooded into neighbouring Guinea and Liberia,
and the post-Mobutu conflict in Congo has been complicated by the involvement of
Rwanda, Uganda, Angola, Namibia and Zimbabwe.89 Average military expenditure as a
proportion of GDP in Eritrea, Angola and Nigeria is over five times the world average. In
seven other countries, the proportion is over 50 per cent higher.90
This creates numerous vicious spirals. In 2001, economic growth in African countries in
conflict or experiencing severe governance problems was negative, at -0.4 per cent,
compared to a continent-wide average of +2.7 per cent.91 By deterring foreign investment,
damaging infrastructure and killing large numbers of the working-age population, war
makes global integration and economic development extremely difficult. The conflicts in
Congo and Sierra Leone have been fuelled by the region’s dependence on primary
commodities such as diamonds and coltan (according to the UN, Uganda and Rwanda
have recently become exporters of these goods even though they do not produce them92),
demonstrating that Africa’s inability to diversify away from primary goods has repercussions
beyond the purely economic.
The political instability that has led to many of these wars has been in part driven by a lack
of public confidence in the legitimacy of both politicians and democratic institutions
themselves. Harmful policies directed at certain communities, such as commercial farmers
in Zimbabwe, as well as attempts at constitutional change to hold onto power, have
highlighted the relative fragility of democratic institutions
By giving a voice to people, democracy can be a positive force for reforming
administrations and building institutions, but East Asia’s experience showed that it is not
87
UK Government (2000): Eliminating World Poverty: Making Globalisation work for the poor. White Paper on
International Development. December.
88 UNDP (2001): ibid: 50
89 BBC News (2002): Timeline: Democratic Republic of Congo. BBC News online. 22 February.
90 CIA World Factbook 2001. Available at http://www.cia.gov/cia/publications/factbook/index.html
91 World Bank (2002) Ibid: 203
92 BBC News (2001): UN alleges DR Congo exploitation. 16 April
14
essential to economic development. Many of Asia’s most successful economies have been
managed by authoritarian regimes, with economic advances generally being followed,
rather than preceded, by greater pressure for democracy. What all the Asian regimes had
in common, however, was a strong commitment to economic growth based on solid
institutions and competent administration.
However, instances of inappropriate use of public funds, curbs on press freedom (the
number of attacks on journalists in SADC countries more than doubled between 1994 and
200093), the involvement of foreign companies in corruption scandals,94 and a sometimes
half-hearted approach to eliminating corruption show that in Africa this commitment has
some way to go before becoming a reality. 10 of the 14 sub-Saharan African countries
listed in Transparency International’s 2001 Corruption Perceptions Index fall into the bottom
third of the Index’s 91 countries. Only Namibia, South Africa and Mauritius are in the top
half.95
Corruption, is both a cause and a result of Africa’s economic marginalization. On the one
hand, many foreign firms will be deterred from investing in Africa by the hidden and
unpredictable costs of corruption and the added risks imposed by weak institutions –
perceptions of corruption are an important factor in foreign investors’ “systematic bias
against Africa”, revealed in Institutional Investor polls, and Lambsdorff and Cornelius (2000)
find that reducing corruption increases FDI.96 And on the other, Africa’s failure to liberalize
and open up to the global economy has meant its industries have avoided much of the
scrutiny that companies competing in international markets have had to face. Furthermore,
privatization programmes have been adversely affected by what a Transparency
International report on corruption in southern Africa describes as "cumbersome
bureaucracies and entrenched patronage networks.”97 The report goes on to suggest that
international donors have sometimes been part of the problem: “By overlooking the parallel
existence of corrupt practices in commercial business, critics say, donors who pushed for
speedy divestment and companies that invested in former parastatals have been complicit
in the creation of greater opportunities for private corruption.”98
There have been efforts to control corruption (including regional agreements drawn up by
SADC and ECOWAS), but many leaders, such as Nigeria’s Olesegun Obasanjo, who came
to power on an anti-corruption platform, have found corruption to be so endemic that even
small changes have been extremely difficult to implement. Getting an Anti-Corruption Act
through Nigeria’s parliament, for example, took over a year, and the Nigerian Accountant
General reported in April 2001 that 40,000 staff on the government payroll were no longer
employed. With so many people making money out of corruption, leaders have found it
93
Media Institute of Southern Africa (2000): So this is Democracy – State of the Media in Southern Africa 2000.
MISA.
94 In one of the most prominent scandals, French oil company Elf Aquitaine is being investigated for bribery of
top officials in Gabon and Congo-Brazzaville. BBC News (2001): A potential political earthquake. BBC News
Online. 30 May
95 Transparency International (2001): Corruption Perceptions Index 2001
96 Johann Graf Lambsdorff, Peter Cornelius (“000): Corruption, foreign investment and growth. The Africa
Competitiveness Report 2000/2001. World Economic Forum. New York. OUP; World Bank (2002) a: ibid: 43,
102
97 Transparency International (2001) a: ibid: 62
98 Transparency International (2001) a: ibid: 62
15
difficult to make much progress toward eradicating it. International donors have attempted
to include corruption control as a condition for financial assistance, but until the benefits to
both rich and poor are demonstrated conclusively, the success of such efforts will inevitably
be limited. High levels of corruption are associated with lower growth and lower per capita
income (although causality here is likely to run both ways), and bribes have been estimated
to increase Ugandan firms’ costs, for example, by 8 per cent.99 However, the Economist,
which recommends that multinational enterprises encourage governments to pay higher
wages to fewer civil servants in order to stamp out “power without pay” situations, claims
that investor interest in eliminating bribery has long been “half-hearted,” as the benefits of
such measures are not widely perceived. Strengthening of democratic institutions and
press freedom and liberalization will also help increase the accountability of politicians, and
many NGOs, such as the Uganda Debt Network which publishes a roll call of corrupt public
figures, have set an example for their regional peers.100 Disseminating best practice in
tackling corruption and facilitating the creation of region-wide NGO anti-corruption networks
may be promising avenues for international donors to explore.
The “cumbersome bureaucracies” noted by Transparency International as such a breeding
ground for corruption are a legacy of Africa’s post-colonial statist policies which, combined
with the economic protectionism to which many countries turned in a reaction against
colonialism, pushed Africa into what Jeffrey Sachs has described as “largely self-imposed
economic exile.”101 Foreign aid, Sachs argues, propped up these policies and delayed
economic reform while the continent plunged into debt and economic stagnation: “Since the
onset of the African debt crises of the 1980s,” he says, “the guidance [of donors and
international financial institutions] has become a kind of economic receivership, with the
policies of many African nations decided in a seemingly endless cycle of meetings with the
IMF, the World Bank, donors and creditors.”102
International pressures
African governments, with few exceptions, have yet to make dramatic progress in the
economic sphere. Foreign institutions, too, however, clearly bear some responsibility for
Africa’s problems, and if globalisation is to provide opportunities rather than threats to the
continent, the international community’s cooperation is vital. Currently, though, three
internationally driven factors – trade barriers, debt, and strict migration controls – are
aggravating Africa’s exclusion from the global economy.
First, trade barriers. Although structural adjustment policies have been the focus of
international efforts to bring Africa into the global economy, the World Bank estimates that
firms exporting from poor countries face barriers twice as high as those exporting from rich
ones. “Rapid trade liberalization in Africa,” an UNCTAD document explains, “has not been
reciprocated in terms of better access to markets for African producers.”103 According to the
Economist, if North America, Europe and Japan were to eliminate all barriers to imports
99
World Bank (2000): ibid; Economist (2002): The worm that never dies. London. 2 March.
Transparency International (2001) a: ibid: 75
101 Jeffrey Sachs (1996): It can be done. Economist. London. 29 June
102 ibid
103 UNCTAD (2001): From rhetoric to reality of African development: UNCTAD calls for major policy shift.
UNCTAD, press release, 11 September.
100
16
from sub-Saharan Africa, the region’s exports would rise by 14%.104 Subsidies, which cost
developed countries the equivalent of 241 per cent of Sub-Saharan Africa’s combined
GDP, correspond to ten times the official development assistance granted to developing
countries and more than half of developing country exports to developed countries.105
Rich-country protection of textiles and agriculture, which costs poor countries $100 billion a
year, is particularly damaging to Africa.106 Africa has a comparative advantage in both these
areas through its abundant cheap labor supply, but massive agricultural subsidies in highincome countries and high tariffs on textiles prevent the continent from exploiting its main
asset.107 Until international tariffs on agriculture are cut, inland parts of the region will be left
to stagnate and rural poverty, which already accounts for most of African poverty, 108 will
increase as populations grow. Although the incentive created by high tariffs could
theoretically provoke diversification into tariff-free areas, in practice it appears to limit rural
populations to subsistence farming, where households produce just what is required for
their survival. As well as leaving families at the mercy of climate and pests, a subsistence
existence also encourages high fertility rates and low school enrolment rates, as families
need their children to work on the land. Such spirals further limit prospects for future
development.
Coastal zones’ prospects of diversifying into manufacturing are more promising. Low
transport costs and greater proximity to trade routes enable both cheaper exports and
better access to the imported components needed for many manufacturing outputs.
According to Bloom and Sachs, “the success stories in manufacturing export-led growth are
almost all coastal economies well connected to international shipping routes.”109 They note
that in Africa, however, coastal cities such as Abidjan, Accra, Dar es Salaam, Lagos,
Maputo, and Mombasa, which, as cities, would have the economies of scale necessary for
infrastructure development, “play almost no role as export-oriented manufacturing centers.”
If tariffs within Africa were reduced, there would be potential for new coastal manufacturing
bases to buy primary products, such as cotton, from inland areas and produce textiles.
Eventually, the increase in income, if productively invested, could enable landlocked
countries to move towards processing commodities themselves.
If African coastal cities are to develop manufacturing exports, then, in addition to reduced
transport costs, efficient customs administration and low labor costs, they would benefit
greatly from foreign direct investment. South East Asia’s export-led growth was driven in
part by its targeting of foreign investors via export processing zones (EPZs), which cut
transaction costs for multinational enterprises and in some countries have provided
104
Economist (2001) ibid
E. Supper (2001): Is There Effectively a Level Playing Field for Developing Country Exports?, UNCTAD,
Policy Issues in International Trade and Commodities Study Series, No.1, United Nations, New York and
Geneva 2001: 5.
106 World Bank (2002) a: ibid: xii
107 According to the World Bank, agricultural subsidies in high-income countries total more than 6 times all
development assistance.
108 World Bank (2002) a: ibid: 40
109 ibid: 35
105
17
permanent 100 per cent tax holidays.110 In South East Asia, Hong Kong, Korea, Taiwan,
Singapore, Malaysia, Thailand and Indonesia all adopted this approach, but in Africa only
Mauritius has so far followed. Outside Mauritius, and unlike all other developing regions,
Africa plays very little part in the global textile industry, where its abundant labor supply has
the potential to give it a strong comparative advantage.
This failure to diversify has in part been influenced by IMF and World Bank opposition to
EPZs and tax concessions aimed at attracting export-oriented manufactures, and it is
becoming clear that the structural adjustment programmes these institutions promote have
not yet produced the desired results.111 The Economist has argued that the programmes
have “all too often led to stable but stagnant economies in Africa. A preoccupation with
fiscal balance has, for instance, kept tariffs high.”112 Former World Bank economist William
Easterly agrees. In the ten years to 2001, he says, the IMF and World Bank gave 36 poor
countries ten or more loans each, with conditions attached. “The growth rate of income per
person of the typical member of this group during the past two decades was zero.”113 Either
the conditions or their implementation (and possibly both) have been at fault, therefore, and
new thinking and new strategies are clearly required. Fast-growing economies like
Mauritius would appear to offer a good example for others to follow.
The second major international constraint on Africa involves debt. When measured as a
proportion of exports and GDP, Africa is by far the world’s most indebted region.114 The
ratio of debt to gross national product (GNP) has increased since 1990, and lay at 66 per
cent in 2000.115 Official aid from international institutions to sub-Saharan Africa amounted to
$21 per capita in 1998116; annual payments on Africa’s debt, however, amount to nearly
$40 per capita.117 In 1999, moreover, over 26 per cent of Africa’s debt was made up of
interest and principal arrears (up from 15 per cent in 1990).118 Many countries spend
substantially higher proportions of their national budgets on debt service payments than on
health and education.119 Development assistance, therefore, has clearly been inefficient in
many areas, and the IMF/World Bank Heavily Indebted Poor Countries (HIPC) initiative,
which relieves extremely indebted countries of some of their debt burden, is a response to
this failure. 33 of the 47 sub-Saharan African countries are being considered for debt relief,
but so far, due to stringent criteria for the granting of relief, only Uganda and Mozambique
have seen any cancellation of their debts.
Africa’s debt mountain creates a plethora of obstacles to its development. Debt servicing
payments constrain investment in infrastructure, health, education and social security. The
110
See David E. Bloom, Ajay S. Mahal, Damien King, Fiorina Mugione, Aldrie Henry-Lee, Dillon Alleyne, Philip
Castillo and River Path Associates (2002): Jamaica: Globalisation, Liberalization and Sustainable Human
Development.
111 Bloom, Sachs (1998) ibid: 36
112 Economist (1997): Out of Africa. 13 March.
113 William Easterly (2001): The failure of development. Financial Times. 7 September.
114 UNCTAD (1998) ibid: 15
115 UNCTAD (2001) ibid: 25
116 World Bank (2000) ibid: 315
117 Figures taken from statistical appendix of International Monetary Fund (2001): World Economic Outlook.
IMF. October; and Population Reference Bureau (2001): World Population Data Sheet. PRB. 2001.
118 UNCTAD (2001) ibid: 24
119 Jeffrey D Sachs, Maciej Cuchra, Sara E Sievers (2000): The case for increased debt forgiveness. The Africa
Competitiveness Report 2000/2001. World Economic Forum. New York. OUP
18
availability of foreign exchange needed for capital goods imports is also limited. Many
countries ran up debts under leaders who are no longer in power, but private investors
inevitably tar today’s leaders with the same brush, and countries saddled with severe debt
problems are often unattractive to domestic and foreign investors regardless of the new
leadership’s good intentions.
The HIPC initiative attempts to use debt relief as a policy tool in a similar way to aid by tying
it to conditions. Bloom and Sachs hypothesise that structural adjustment has failed because
programs have not addressed “nitty-gritty” details, while William Easterly has claimed that
conditions on previous loans were not enforced and receiving governments found it easy to
ignore donor recommendations. If debt relief is not to go the same way as aid, conditions
may need to be made tougher, but more sensitively designed. Uganda’s response to debt
relief has been to set up a publicly monitored fund that spends the money saved only on
specific development projects.120 Donors therefore know that relief is being put to
constructive use. Debt relief not only eases a country’s economic pressures and frees up
government money for spending on vital social improvements – it can also stimulate public
pressure for change. According to Romilly Greenhill of Jubilee Research, the nongovernmental organisation (NGO) behind the global debt relief campaign, people in
Uganda have responded to news of the relief of their country’s debt by asking leaders
where the money is going.121
In the past, donors have been criticised for imposing conditions on developing countries. A
bottom-up approach, whereby a government asks for a certain amount of debt relief to pay
for a project or program of its own rather than the donor’s choosing, might help to deflect
future criticism and transfer responsibility to the developing countries themselves. If the
project is not completed or a goal such as a reduction in HIV infection rates not met in the
time specified by the government, relief for future projects may be reduced or, in some
cases, a need for greater technical assistance and capacity-building identified. Similarly, if
the project is completed before time, interest payments on remaining debts may be
reduced. Projects’ performance should also be monitored in the longer term so that interest
payments are also reduced if, for example, a school built with debt relief money
outperforms enrolment targets. In this way, donors operate more like conventional banks,
and receiving governments are more accountable for their actions. Simultaneous increases
in NGO and UN agency monitoring will make it more likely that this kind of relief will be
directed to genuine reformers than leaders who prefer to spend money on arms or divert it
into their own bank accounts.
Along with trade barriers and debt enforcement issues, migration controls are the third
major international obstacle to Africa’s development. Many of the overpopulated countries
in inland tropical Africa would benefit from increased outward migration. By reducing an
economy’s pool of labor, outmigration will tend to push up domestic wages, help to reduce
poverty and ease demographic pressures which might otherwise lead to severe social
120
121
Economist (1999): Right on debt. Economist. London, 10 June.
Romilly Greenhill, Jubilee Research, personal communications
19
unrest;122 remittances from émigrés give a country more capital to invest in development;
returning workers bring back new skills and knowledge to upgrade a country’s human
capital base – they also set an entrepreneurial example for those remaining at home; and
links between domestic firms and expatriates increase export and technology-transfer
opportunities. However, despite the opening up of world markets in terms of trade, the
world has recently become much less globalized in terms of labor flows. Between 1870
and 1910, 10 per cent of the world’s population relocated permanently from one country to
another; over the past 25, years only 1 to 2 per cent have done so.123
Rich-world controls on labor flows have a disproportionate effect on Africa. Faced with
aging populations, and therefore reduced workforces and possible pensions crises, the
West is likely to derive significant economic benefits from relaxing immigration controls. So
far, however, Western leaders have failed to make the case for increased immigration, and
political pressures have kept the numbers down.
Labor is Africa’s biggest competitive advantage, but in many areas this labor is crammed
into small, landlocked economies with extremely limited employment opportunities. Widely
heralded increases in education enrolment are more likely to lead to unrest than growth if
people have no jobs when they finish school, and the caveat that “brain drain” will deprive
countries of their most talented workers is likely to be balanced by the increased stability,
knowledge transfer and remittances that emigration provides. In Latin America, for
example, workers’ remittances have overtaken foreign aid as a source of revenue, and in El
Salvador and the Dominican Republic remittances are even higher than exports.124
Programmes such as the Colombian government’s network of expatriate researchers and
engineers, whose members, covering 30 countries, carry out joint research projects with
foreign universities in areas such as biotechnology, can help home countries to benefit from
the skills acquired by expatriates. There is potential for Africa’s leaders to use international
negotiations on liberalization of markets to call for increased movement of labor, with
benefits to both industrialized and developing economies.
Three: Virtuous spirals
Africa’s leaders have attempted to map out a strategy for the regeneration of the continent
in their New Partnership for Africa’s Development (NEPAD), which they endorsed at the
Organisation of African Unity summit in July 2001. NEPAD is vast in scope, but it identifies
four areas for immediate action from an impressively broad range of recommendations:
communicable diseases, information and communications technology (ICT), debt reduction,
and market access. Even tackling these issues will be a major challenge for many cashstrapped African governments, however, and the three spheres development framework
highlights the need to find strategic entry points, where actions in one area can trigger
gains in others. Many African countries face unique challenges but, as the leaders
122
Timothy Hatton and Jeffrey Williamson find that emigration powerfully raises the wages of remaining
unskilled workers. Timothy J. Hatton and Jeffrey G. Williamson (2001): "Demographic and Economic Pressure
on Emigration Out of Africa," Working Paper No. w8124, February, National Bureau of Economic Research, and
Timothy J. Hatton and Jeffrey G. Williamson, paper presented to the conference on Globalization: Trade,
Financial and Political Economy Aspects, Greece, May 2000.
123 Dollar &Kraay (2002): Spreading the Wealth. New York. Foreign Affairs, Vol 81, No 1, January/February.
124 Economist (2002): Making the most of an exodus. London. 21 February.
20
responsible for NEPAD have noted, some consistent actions to promote virtuous spirals
can be identified:
–
The need for regional cohesion. Africa’s integration into the global economy should be
built on intra-regional integration. The NEPAD plan suggests a “discretionary
preferential trade system for intra-African trade”,125 which would help to promote the
development of fledgling African industries while shielding them from the worst of the
global currents. Intra-regional co-operation can also help African countries to improve
their skills and knowledge in advance of global integration.126 Previous attempts at
regional integration have had mixed results, and at present, regional trade barriers
exclude rather than encourage African exporters. Cooperation should go beyond
liberalization, however, with governments working together to tackle cross-border
issues such as AIDS and war. If Africa can begin to solve some of its own problems,
its negotiators will have more clout in the international arena and the continent’s
image will be strengthened in the eyes of foreign investors. Links with other
developing regions may also have beneficial effects for trade and investment, and
successful economies such as those in South East Asia may provide valuable lessons
for Africa.
–
The need for infrastructure improvements. Intra-regional cooperation could also give
an impetus to lowering the costs of transport, energy and communications.
Globalisation has been driven by dramatic innovations in these areas, but many parts
of Africa still suffer from the constraints of state ownership. Even small steps can
produce big results, with the UK Government reporting that the improved access to
markets created by a programme to build dirt roads in Mozambique led to increased
agricultural production.127
–
The need to tap into the African diaspora. Africans living abroad offer a pool of
knowledge and skills not yet available to domestic populations. Communications
technology can help governments build networks designed to capitalise on diaspora
groups’ resources. The Colombian Government, as we have seen, has focussed on
research projects in biotechnology and other fields specifically relevant to Colombia’s
development. Governments and universities in Africa might follow this example, with
benefits for agricultural productivity (Africa has benefited little from the ‘green
revolution’ that transformed agriculture in much of Asia) and pharmaceutical
development.
–
A further response to the opportunities of globalisation has already been seen in
several nations’ efforts to develop tourism. Africa’s natural resources give the
continent many competitive advantages, but the region’s image is more often colored
by poverty, violence and disease than spectacular scenery and rich wildlife. Skilful
marketing such as Kenya and South Africa’s online travel websites will have little
effect if Western news stories are dominated by humanitarian disasters and crime. As
125
The New Partnership for Africa’s Development. Available at http://www.dfa.gov.za/events/nepad.pdf.
October 2001: 48
126 UNCTAD (1998) ibid: 89
127 UK Government (2000): ibid
21
well as threats, however, current events can also offer opportunities - the August 2002
World Summit on Sustainable Development in Johannesburg, for example, provided a
strong platform for Africa to demonstrate its commitment to tackling its human
development problems at the same time as preserving its environment.
–
The need for export diversification. Tourism is just one example of the wide-scale
diversification of exports that is required if Africa is not to remain “stuck as an exporter
of a narrow range of primary commodities, most of which are suffering long-term
declines in their international terms of trade.”128 As we have seen, the quantity of
Africa’s exports is already slightly above the world average – it is quality
improvements that are now required. Diversification away from primary goods will
increase regional stability. And upgrading into more dynamic and profitable sectors –
textiles instead of cotton, for example, and branded coffee instead of coffee beans –
will help exporters to circumvent high tariff barriers on agriculture.129 Kenya’s
successful cut-flower exporters are an example of how farmers can diversify within the
agricultural field, and the growing Western market for exotic fruits and alternative
medicines gives Africa further opportunities to exploit and develop existing resources.
At present, however, much of the continent lacks the human resources, technology
and capital required to develop a manufacturing base, and foreign investment, along
with well-channeled aid, will be required to provide the technologies and skills needed
for diversification. Strategic targeting of foreign firms that possess the required
technology will both speed up diversification and give domestic firms the chance to
complement, rather than be swallowed up by, overseas producers.
–
The need for governments to facilitate foreign investment. If governments are to
promote their countries as destinations for FDI, they need to cut red tape for investors.
This requires policy coordination across many departments, including customs,
immigration and tax authorities. Structural changes can also be made to investment
promotion agencies to include members of the private sector on their governing
boards. Businessmen should have the opportunity to communicate online with
investment agencies so that they can receive swift assistance when problems arise.
Furthermore, strategic targeting of foreign firms that possess technology useful to the
economy will both speed up diversification and give domestic firms the chance to
complement, rather than be swallowed up by, overseas producers.
–
The need for ICT. Many have suggested that Africa should attempt to leapfrog
existing technologies and move directly to wireless communications. Clearly, the
continent will not be able to take full advantage of the communications revolution
while nearly half of its people are unable to read, but there are large potential benefits
128
Bloom, Sachs (1998): ibid: 4
As UNCTAD’s 1996 Trade and Development Report showed, countries increasing their market share in
products in which trade is growing faster than the average for all products – “dynamic” products – can
strengthen their competitive position. East Asia’s economies benefited greatly from dynamic products. UNCTAD
(1996): Trade and Development Report, 1996. Geneva. Africa’s trade negotiators at the WTO have a role to
play in supporting this diversification. Effective training in commercial diplomacy will ensure that they have a firm
command of the issues. This will give them a stronger hand in negotiations and allow them to respond better to
the needs of domestic producers, thereby ensuring their economies benefit from the international trading
system.
129
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if Africa can get connected. Landlocked states would be better able to integrate with
the world economy, the costs of doing business in many fields would be reduced, and
the increase in access to information may have strong effects on democracy and the
strength of civil society. If African countries are to make gains in ICT, educational
improvements are essential – India has benefited from a strong higher education
system, and a tertiary-level focus on science and technology can provide broad
benefits in the global knowledge economy.130 Communications and energy
infrastructures in Africa, too, must be improved if the region is to compete in global
ICT markets. Privatization of energy and telecommunications sectors is needed to
help foster the competition and foreign investment required for their modernization.
Regional groupings like SADC and ECOWAS can work to facilitate the rollout of
networks across borders. And the advantages of a micro-level approach have been
demonstrated in Bangladesh, where poor people have received loans from foreign
donors to buy mobile phones and set up successful mini-telephone centres.131
–
The need for microfinance to encourage small businesses. The informal sector,
dominated largely by agriculture, accounts for three quarters of employment in
Africa,132 but many are deterred from investing in improving productivity or moving into
new areas of production by the difficulty of accessing finance. Peter Cornelius has
found that “the cost of borrowing is widely regarded as the single most important
obstacle to the operation and growth of private sector firms,”133 and there are
therefore few incentives for people to move into the formal sector. Microfinance
programs offering credit to registered small businesses or individuals might be
combined with lower corporate tax rates to attract businesses into the formal sector,
potentially increasing government revenues at the same time as giving small
enterprises the opportunity to grow. Microfinance programs in other areas, such as
the Grameen Bank’s program in Bangladesh, have had a particularly strong response
from women. In Africa, women are prominent in low-value areas such as agriculture,
and access to finance can give them a tool for investing in their own and their families’
development.
–
The need for a focus on women. Girls’ education is a vital development instrument.
The World Bank, recognising the importance of promoting gender equity, has
recommended support for farming and microenterprise as a key to empowering
women.134 Gender inequality in Africa has broad-ranging effects and creates many
vicious spirals. Inadequate female education, for example, underlies the continuation
of higher fertility rates and has negative impacts on family health. Women’s lack of
status compared to men makes it more difficult for them to refuse unprotected sex.
The risk of AIDS is therefore increased, and Africa is the only continent where HIV
130
The Task Force on Higher Education and Society (2000) ibid
UK Government (2000) ibid: 123
132 Global Labour Institute (2000): Notes on Trade Unions and the Informal Sector. Available at
http://www.global-labour.org/trade_unions_and_the_informal_sector_wiego.htm
133 Peter Cornelius (2000): Financial Development and the Liberalization of Financial Services Trade. The Africa
Competitiveness Report 2000/2001. World Economic Forum. New York. OUP
134 World Bank (2001): Attacking poverty with a three-pronged strategy. World Bank Policy and Research
Bulletin, Vol 12, no 1. January-March 2001
131
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infections among women outnumber those among men.135 Conversely, an
improvement in women’s status via an improved education can, merely by increasing
the proportion of a population available for productive work, boost economic growth. If
Africa’s human development indicators are to improve to the extent that they have an
impact on economic growth, efforts by policy-makers, donors and NGOs to target
women are likely to trigger increasing benefits.
–
The need to tackle AIDS. AIDS is cutting life expectancies across Africa, with only
Senegal and Uganda having made sustained inroads against its spread. Other African
governments have so far failed to make an impact, and partnership with the private
sector may now be needed to counter HIV’s effects. Radio, whether publicly or
privately run, is widely listened to across sub-Saharan Africa and offers an obvious
vehicle for the transmission of information on the virus. And, to take a more specific
example of the potential benefits of public-private partnership, the pharmaceutical
company Boehringer Ingelheim is offering its drug Nevirapine, which is simple to
administer and dramatically reduces the rates of mother-to-child HIV transmission,
free to African governments for the next five years. Governments therefore have a
strong incentive to improve medical distribution networks (possibly again with the help
of private firms with existing distribution networks that are looking to demonstrate their
social responsibility), with huge collateral benefits. The availability of a drug to stop
HIV transmission to their children is likely to encourage many pregnant women to
present for testing. At the testing centre, those who test positive can be advised on
treatment methods and on measures to stop them passing on the infection; those who
test negative can be informed about prevention methods; and all women who are
tested can be given information on other health issues. Moreover, by empowering
women to take control over an aspect their health, Nevirapine is likely to increase
interest in health issues in general, with consequent positive impacts on family health.
–
The need for tailored education. African governments have already made progress on
increasing access to education at all levels. Quality of education, however, is uneven,
and curricula in many countries do not address Africa’s specific needs.136 According to
UNCTAD, Africa’s current “skill-per-worker” endowment is similar to that of Thailand,
Malaysia and Indonesia 30 years ago.137 In order to connect to the global knowledge
economy, Africa needs to develop its skills in science and technology. To redress the
human development balance, it needs to generate new knowledge specific to local
conditions – for example, on the ecology of disease. Working with its diaspora will
contribute to this, as will connecting to the internet. The latter also offers opportunities
for distance training of teachers. Private sector communications companies Cisco,
Marconi and Virgin have recently teamed up with the UK Department for International
Development to use ICT to support teacher training. The initiative sets up district
135
UNAIDS (2000): Report on the global HIV/AIDS epidemic. June 2000. Geneva.
David E Bloom, Joel Cohen (2002): The Unfinished Revolution: Universal Basic and Secondary Education.
Forthcoming.
137 UNCTAD (1998) ibid: 74
136
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resource centers to which teachers can travel, providing internet access and the
chance to exchange information and materials with their peers and their tutors.138
–
The need to tackle corruption. Progress on economic and human development will
inevitably be hampered by corruption. Donors and civil society can play a role in
monitoring government activity, and the strengthening of democracy will also
encourage greater openness. If Africa’s reputation with domestic and foreign
investors, tourists and the international community is to be improved, its leaders need
to work to shed the continent of its corrupt image. Africa’s own people, too, are more
likely to be spurred to greater productivity if the fruits of their labor are seen to be fairly
distributed.
–
The need for international cooperation. The NEPAD strategy paper suggests that
structural adjustment, whose benefits the World Bank and IMF have for so long
preached to Africa, is now required of developed countries. Lowering trade barriers
and migration controls and relieving Africa of its debt will greatly facilitate the region’s
development. Political pressures in the West are likely to make standing still on these
issues increasingly difficult, with the HIPC debt relief program already highlighting the
power of NGO networks to enforce change. International donors, by focussing their
aid on those countries genuinely committed to reform, can act as a catalyst for
improvements across the region.
Conclusion
In recent years some parts of Africa have made steps on the road to recovery. Others,
however, have faltered. Gains in terms of liberalization and economic growth have been
undermined by human development setbacks such as AIDS and civil strife. In some
countries, liberalization appears to have come too soon, while in others export
diversification has led to unprecedented growth. Regional integration may help to distribute
the benefits of globalization while strengthening the response to the threats, and it is in the
political interests of the international community’s globalizers to ensure that Africa begins to
close the economic gap with the rest of the world.
Liberalization in much of Africa has not yet led to sustained and sufficient improvements in
the quality of life of the continent’s people. Policies need to move beyond liberalization,
therefore, and focus on boosting the supply-side of Africa’s economy. Growth-oriented
strategies should be based on encouragement to domestic businesses and measures to
attract beneficial foreign investment. Growth is unlikely to be sustainable, however, without
a renewed focus on the region’s human capital. Poor health, insecurity and corruption
bedevil the lives of many Africans and mar the region’s standing in the eyes of the rest of
the world.
The three spheres approach to development recommends a balanced focus on
liberalization, economic growth and human and social capital development. Hitherto,
however, Africa and its international partners’ policies have been tilted towards the
138
UK Government (2000) ibid: 112
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liberalization sphere. Continued opening up of Africa’s markets, while important to the
region’s integration into the global economy, is unlikely to be sufficient to improve Africans’
prospects without significantly improved progress in the human development and economic
growth spheres. Going forward, these last should be the main focus of domestic and
international policy-makers’ attention.
Human development is particularly crucial. Long-term economic growth is unlikely to be
sustainable if Africa’s governments fail to invest in the education of their people. Progress
in access to primary education now needs a renewed push to achieve universal enrolment.
Secondary education should also be a key focus of investment and ideas, with curricula
tailored to national needs. And the traditional neglect of tertiary education is no longer a
viable option in today’s economy, where countries without strong higher education systems
are likely to lack the skills needed for successful integration into knowledge and
communication-driven global markets.
Investment in a country’s health is equally essential. AIDS is devastating large parts of
Africa and the infectious disease burden continues to severely hamper poverty reduction
efforts. Foreign aid can play a part in improving health systems, and private sector
involvement will further help ease capacity and financial pressures on governments. Action
to prevent AIDS via condom provision and information campaigns can have collateral
impacts on population growth. Tackling the virus, which has left Africa with over 13 million
orphans, will also contribute to the social cohesion needed for sustained development.
A focus on its people is vital to Africa’s development. As the NEPAD planners recognise,
only when Africans are given the tools to “extricate themselves from the malaise of
underdevelopment and exclusion in a globalising world,” will their continent begin to reverse
its long-term drift.
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