Economic Recovery In Africa: The Paradox of Financial Flows

Economic Recovery in Africa The Paradox of Financial Flows Vijay S. Makhan International Political Economy Series Gen...

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Economic Recovery in Africa The Paradox of Financial Flows

Vijay S. Makhan

International Political Economy Series General Editor: Timothy M. Shaw, Professor of Commonwealth Governance and Development, and Director of the Institute of Commonwealth Studies, School of Advanced Study, University of London Titles include: Glenn Adler and Jonny Steinberg (editors) FROM COMRADES TO CITIZENS The South African Civics Movement and the Transition to Democracy Glenn Adler and Eddie Webster (editors) TRADE UNIONS AND DEMOCRATIZATION IN SOUTH AFRICA, 1985–1997 Einar Braathen, Morten Bøås and Gutermund Sæther (editors) ETHNICITY KILLS? The Politics of War, Peace and Ethnicity in Sub-Saharan Africa Deborah Bräutigam CHINESE AID AND AFRICAN DEVELOPMENT Exporting Green Revolution Gavin Cawthra SECURING SOUTH AFRICA’S DEMOCRACY Defence, Development and Security in Transition Jennifer Clapp ADJUSTMENT AND AGRICULTURE IN AFRICA Farmers, the State and the World Bank in Guinea Neta C. Crawford and Audie Klotz (editors) HOW SANCTIONS WORK Lessons from South Africa Susan Dicklitch THE ELUSIVE PROMISE OF NGOs IN AFRICA Lessons from Uganda Kevin C. Dunn and Timothy M. Shaw (editors) AFRICA’S CHALLENGE TO INTERNATIONAL RELATIONS THEORY Kenneth Good THE LIBERAL MODEL AND AFRICA Elites Against Democracy Kees Kingma (editor) DEMOBILIZATION IN SUBSAHARAN AFRICA The Development and Security Impacts Vijay S. Makhan ECONOMIC RECOVERY IN AFRICA The Paradox of Financial Flows Clever Mumbengegwi (editor) MACROECONOMIC AND STRUCTURAL ADJUSTMENT POLICIES IN ZIMBABWE

Nana Poku REGIONALIZATION AND SECURITY IN SOUTHERN AFRICA Howard Stein, Olu Ajakaiye and Peter Lewis (editors) DEREGULATION AND THE BANKING CRISIS IN NIGERIA A Comparative Study Peter Vale, Larry A. Swatuk and Bertil Oden (editors) THEORY, CHANGE AND SOUTHERN AFRICA’S FUTURE

International Political Economy Series Series Standing Order ISBN 0–333–71708–2 hardback Series Standing Order ISBN 0–333–71110–6 paperback (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and an ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England

Economic Recovery in Africa The Paradox of Financial Flows Vijay S. Makhan

© Vijay S. Makhan 2002 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2002 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world. PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 0–333–80155–5 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Makhan, Vijay S., 1948– Economic recovery in Africa: The paradox of financial flows/ Vijay S. Makhan. p. cm. – (International political economy series) Includes bibiliographical references and index. ISBN 0–333–80155–5 1. Africa – Economic policy. 2. Economic assistance – Africa. 3. Flow of funds – Africa. I. Title. II. International political economy series (Palgrave (Firm)) HC800 .M345 2002 338.96–dc21 2001058051 10 9 8 7 6 5 4 3 2 1 11 10 09 08 07 06 05 04 03 02 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne

To the development partners of Africa and the African leadership

Contents List of Tables and Figures List of Abbreviations List of Appendices Preface Acknowledgements Introduction 1

ix x xiii xv xviii 1

A survey of Africa’s Economic Performance in the Post-Independence Period 1965–73 1973–80 1980–94 The African economy during the mid/late 1990s Increasingly sound macroeconomic fundamentals Commodity dependence Low levels of domestic investment and savings Low or declining external financial flows and unsustainable debt The recovery of 1994–7 in perspective Summary

29 32 32

2

The Paradox of Financial Flows External financial flows External debt Capital flight Savings Summary

35 37 47 54 56 59

3

New Priorities for Foreign Aid International consensus on priorities for foreign aid Assessment

61 63 74

4

New Perspectives on Aid Delivery and Development Management Aid effectiveness Improving development management Assessment

77 80 83 86

vii

8 10 13 17 19 23 26 28

viii Contents

5

Conclusion The development finance gap No simple panaceas Summary

88 90 95 102

Appendices

103

Notes and References

225

Index

232

List of Tables and Figures Tables 1.1 1.2a 1.2b

1.3 1.4 2.1 2.2

Africa: macroeconomic indicators, 1990–8 Africa: frequency distribution of countries according to real GDP growth rates, 1990–8 Africa: frequency distribution of countries according to real per capita GDP growth rates, 1990–8 Africa: balance of payments summary and current account financing, 1990–8 Africa: external debt outstanding and debt service payments, 1990–8 Net official long-term flows to developing countries, 1990–8 Net long-term resource flows to developing countries,1990–8

22 23

23 30 31 39 44

Figures 1.1 1.2 1.3 1.4 1.5 2.1

Average real growth rates of GDP, exports and investment in Sub-Saharan Africa, 1965–94 Growth in industry and agriculture in Sub-Saharan Africa, 1965–94 Terms of trade of Sub-Saharan Africa, 1954–96 Composition of net resource flows to Sub-Saharan Africa, 1970–96 Public and private investment in Sub-Saharan Africa, 1970–94 Summary of the HIPC Initiative

ix

9 12 15 20 21 52

List of Abbreviations ACMS ACP ADF AEC AfDB AFREXIM AIDS AISI APC APPER ARABSAT AU BCEAO

CFA

CFF COMESA DAC DRC DSA ECA (United Nations) ECCAS ECOSOC

ECOWAS EPZ EU FAO FDI

African Centre for Monetary Studies African Caribbean Pacific Group of States African Development Fund African Economic Community African Development Bank (also abbreviated as ADB) African Export Import (Bank) Acquired Immune Deficiency Syndrome African Information Society Initiative African Population Commission Africa’s Priority Programme for Economic Recovery Arab Satellite African Union Banque de la Communauté des Etats de l’ Afrique de l’Ouest (Bank of the Community of the States of West Africa). Communauté Financière Africaine (African Financial Community; comprising countries in the CFA franc zone; 1 French Franc = 100 Franc CFA) Compensatory Financing Facility Common Market of Eastern and Southern Africa Development Assistance Committee Democratic Republic of the Congo Debt Sustainability Analysis Economic Commision for Africa Economic Community of Central African States Economic and Social Commission (of the Abuja Treaty establishing the African Economic Community) Economic Community of West African States Export Processing Zone European Union Food and Agricultural Organization Foreign Direct Investment x

List of Abbreviations xi

G7

G8 GDP GEF GNP GSP HDI HIPC HIV ICPD IDA IDDA IDG IFAD IGAD IMF ITC LDCs MIGA NAM NGO OA OAU ODA ODF OECD PPP PRSP PTA RASCOM REC SACU SADC SAP SDR TDR

Group of Seven Industrialized Countries (Canada, France, Germany, Italy, Japan, United Kingdom, United States) Group of Seven plus Russia Gross Domestic Product Global Environment Facility Gross National Product Generalized System of Preferences Human Development Index Highly Indebted Poor Country Human Immunodeficiency Virus International Conference on Population Development International Development Association Industrial Development Decade for Africa International Development Goal International Fund for Agricultural Development Inter-governmental Authority on Development International Monetary Fund International Trade Centre Least Development Countries Multilateral Investment Guarantee Agency Non-Aligned Movement Non-Governmental Organization Official Assistance Organization of African Unity Official Development Assistance Official Development Finance Organization of Economic Cooperation and Development Public–Private Partnership Poverty Reduction Strategy Paper Preferential Trade Area (of Eastern and Southern Africa) Regional African Satellite Communication Regional Economic Community Southern African Customs Union Southern African Development Community Structural Adjustment Programme Special Drawing Rights Trade Development Report

xii List of Abbreviations

TICAD TNC TRIMs TRIPs UEMOA UMA UN UNCTAD UNDP UNECA Africa UNESCO UNHCR UN-IATF UNICEF UNIDO UN-NADAF UN-PAAERD UNTACDA VAT WFP WIPO WIR WTO

Tokyo International Conference for African Development Transnational Corporation Trade-related Investment Measures Trade-related Intellectual Property Rights Union économique et monétaire ouest africaine Union du Maghreb Arabe United Nations United Nations Conference on Trade and Development United Nations Development Programme United Nations Economic Commission for United Nations Educational, Scientific and Cultural Organization. United Nations High Commission for Refugees United Nations Inter-Agency Task Force United Nations Children’s Fund United Nations Industrial Development Organization United Nations New Agenda for the Development of Africa United Nations Programme of Action for African Economic Recovery and Development United Nations Transport and Communications Decade for Africa Value Added Tax World Food Programme World Intellectual Property Organization World Investment Report World Trade Organization

List of Appendices

1.

Extracts from the OAU Charter

103

2.

Extracts from the Abuja Treaty Establishing the African Economic Community

104

3.

Extracts from the Constitutive Act of the African Union

112

4.

Extracts from A New African Initiative (renamed New Partnership for Africa’s Development)

114

Declaration of the Assembly of Heads of State and Government of the OAU on the Political and Socio-Economic Situation in Africa and the Fundamental Changes Taking Place in the World – July 1990.

117

Relaunching Africa’s Economic and Social Development: the Cairo Agenda For Action – June 1995

121

Declaration on Africa’s External Debt Crisis – December 1987

136

African Common Position on Africa’s External Debt Crisis – December 1987

140

The African Debt Crisis: Strategies Towards Sustainable African Debt Relief – Extract, January 1997

160

Report of the Meeting of Ambassadors and Experts of Member States of the OAU Contact Group on the African Debt Crisis – Extract, June 1999

163

Brief on the Implementation of the Sirte Declaration on Africa’s External Debt Crisis – January 2000

165

5.

6.

7. 8. 9.

10.

11.

xiii

xiv List of Appendices

12.

13.

OAU Assessment of the Implementation of the United Nations New Agenda for the Development of Africa (UN-NADAF) – September 1996

165

Statements by the Author

171

(i)

(ii)

at the UN General Assembly on the mid-term review of the implementation of the UN-NADAF – September 1996

205

at the 45th Session of the UNCTAD Trade Development Board – October 1998

210

(iii) on the Findings of the World Investment Report 1998 on Africa – November 1998

215

(iv) on the Challenges of Financing Development in Africa – May 1999

220

Preface A paradoxical situation is unfolding in Africa. A good policy environment has been put in place in most countries of the region thanks to economic reforms and improvements in the structures of governance. To emphasize their determination to continue to implement these reforms, African leaders at the Organization of African Unity Summit Meeting in July 2001 adopted ‘A New African Initiative’ for African recovery. At the same summit, the African Union (AU) was launched as the successor to the OAU. The AU aims inter alia to accelerate the process of economic integration among African countries to facilitate a deeper integration into the wider global economy. Since the mid-1990s, African economies have experienced recovery from the stagnation of the 1980s and early 1990s and achieved modest rates of growth. This growth, however, has barely kept pace with population growth. It has also been too weak to generate the financial surpluses required to invest in human development, infrastructure and technology that a modern economy requires. The dynamic gains that have been seen in other places from the explosive growth in private capital flows and international trade in the new global economy have largely by-passed African countries. Private capital flows, including foreign direct investment, have not only proved to be unstable as a reliable source of development finance but are also concentrated in a small number of countries. Foreign aid flows, which are a more stable and predictable means of development finance, have shown a declining trend in recent years. Hence, the financial flows that are required to support the improved conditions in African countries for strong growth have been far from adequate. The result is the condemnation of millions of Africans to a life of poverty and social deprivation. Endemic poverty in turn provides a fertile breeding ground for violence and political instability. Here in lies the paradox of economic recovery and diminishing inflows of financial resources. This book examines this rather striking paradox. Focusing particularly on Africa’s economic performance during the last five years of the 1990s, the book demonstrates that, in spite of the policy reforms, growth in Africa is ultimately dependent on good weather to support agricultural output and on favourable commodxv

xvi Preface

ity prices. When these two factors are present, African countries report positive, if modest, growth rates. If the weather fails or commodity prices are depressed, the gains from the good years are wiped out and a further deepening of poverty is the result. Not unsurprisingly, therefore, Africa remains the weakest link in the global economy, containing a disproportionate share of the world’s least developed countries. Against this background, it has to be said that there have been enough declarations of support for the development of Africa by the international community. As is well known, international targets for poverty reduction and social wellbeing have been established at a number of international conferences, but the evidence suggests that these targets are not being met. What is required now is the backing of declarations and intentions with practical action and resources. The time has come for the international community to live up to its promises so that the underlying cause of widespread poverty in Africa can be addressed – that is, Africa’s fundamental constraint of dependence on peasant producing economies and reliance on traditional production methods. In this context, as yet another United Nations conference is being organized, the forthcoming UN Conference on Development Financing, a timely opportunity is presented for initiating concrete measures towards mobilizing the resources that are required for economic and social modernization in Africa and to put country economies on a path of sustainable development. This is a major challenge facing Africa and the international community today. The Organization of African Unity has long been engaged in advocacy for external support of Africa’s efforts to lay the foundations for structural economic change. Included in the book, as appendices, are some official documents of the OAU on these themes as well as extracts from public statements I have made on these issues in my capacity as Assistant Secretary General of the OAU. These documents are being made available to a wider public for the first time, both to introduce the work of the OAU in this area and to focus attention on the question of the future of development in Africa given the fundamental constraints inherent in commodity dependent economies. It should also be pointed out that, since I started work on this project, a number of consequential developments have unfolded: the OAU is giving way to the African Union; new home-grown initiatives to place Africa on a fast track of socio-economic development are being conceptualized and formulated. The latest of these initiatives is A New

Preface xvii

African Initiative adopted by the Assembly of Heads of State and Government of the OAU at their 37th meeting in Lusaka in July 2001. While these initiatives and the constant attention that is being focused on Africa no doubt augur well for the continent, the issue remains firmly one of adequate financial flows. VIJAY S. MAKHAN

Acknowledgements This work has demanded a lot of time, research and meticulous revision and has taken longer than I had initially imagined. It would not have been possible without the commitment and dedication of some people. My deep appreciation and thanks go foremost to David Luke, Senior Economist at the OAU who supported me throughout, from the beginning to the end, providing much of the research work. He assisted me more than any one can imagine to bring this work to fruition. I am indebted to him. I also wish to express my gratitude to Professor Femi O. Fajana, currently Team Leader of the Policy Analysis Support Unit at the OAU for his readiness to review critically the manuscript and for making some invaluable suggestions. My thanks are also due to Rico Bien Aimé, computer expert, for his assistance; Saba Tesfaye, my private secretary, for her patience and dedication in re-arranging the entire typescript; and not least of all, my wife Uma for her constant encouragement and for putting up with my late nights in the preparation of this work. VIJAY S. MAKHAN

xviii

Introduction

Africa – in particular the countries south of the Sahara – experienced modest recovery towards the end of the 1990s, following two decades of almost continuously dismal economic performance. Several sources of data, notably the UN Economic Commission for Africa (UNECA), the African Development Bank (ADB), the UN Conference on Trade and Development (UNCTAD) and the World Bank show that there was a significant improvement in real gross domestic product (GDP) between 1995 and 1998 compared to the period between 1991 and 1994. As would be expected, there are slight variations in the actual figures among the different sources. However, according to the African Development Bank (ADB), growth averaged 3.8 per cent between 1995 and 1998 compared with 1.3 per cent between 1991 and 19941. As welcome as this spurt in growth may be, and the evidence does suggest it is underpinned by increasingly sound macroeconomic fundamentals in many countries, it only provides grounds for cautious optimism. Not only does it remain the case that African countries still have to make up for the two ‘lost decades’ of low growth, increasing poverty, worsening indicators of human well-being as well as a declining share of world production and trade, but the evidence also suggests that the recovery is in fact fragile. Indeed, the late 1990s surge is beginning to seem no more than a wave, with the typical motion that characterizes this phenomenon. Between 1996 and 1998, the same AfDB source suggests that real growth declined steadily from 5.5 per cent to 3.2 per cent. This was due to such exogenous developments as droughts and floods in various parts of the continent associated with the El Niño and La Niña weather patterns. In addition to the decline in levels of production, commodity prices have also fallen as a result of weakening global demand in the 1

2 Economic Recovery in Africa

wake of the East Asian financial crisis of 1997–8. The crisis also introduced an element of uncertainty, with projections of export contraction, lower earnings and growth of around 1998 levels in both 1999 and 2000. These projections provide a timely reminder of the underlying structural constraints on African economies. It is now becoming clear that while policy reform and greater political stability in many countries provided the basic framework for recovery, the resumption of growth owed much to good weather conditions and a temporary surge in export receipts. According to UNCTAD, a 25 per cent rise in non-oil commodity prices from 1993 to 1996 accounted for much of the increase in export earnings.2 These gains are not expected to continue in view of the medium term outlook for commodities. Indeed, UNECA data show that the terms of trade of African countries as a group fell by an average annual rate of 1.3 per cent during the period 1990–6; a further wealth of available evidence confirms the secular decline of the terms of trade for primary commodities.3 In this way, economic performance in Africa remains vulnerable to adverse external shocks from price fluctuations in some major primary commodities, unfavourable weather conditions and, indeed, social conflicts. But it may also be the case, as observed by the ADB, that the effect of any external shocks may increasingly be mitigated by a greater resilience of African economies as a result of macroeconomic reforms that have been implemented in many countries.4 Such underlying resilience is certainly not enough to generate or accelerate growth in African countries. In particular, declining export receipts have not been offset by official development assistance (ODA) or private capital flows. ODA has fallen for five consecutive years, from 0.33 per cent of the combined gross national product (GNP) of the Organization for Economic Cooperation and Development (OECD) donors in 1992 to 0.22 per cent in 1997, its lowest level ever.5 Foreign direct investment (FDI) inflows to Africa have remained stagnant, hovering at around 3 to 4 per cent of global flows for a number of years.6 The actual figure for 1997, US$4.7 billion, is at the same level for 1996. Equity flows to Africa which were zero up to 1990, peaked at US$4.9 billion in 1994, but declined to US$2.1 billion in 1997 (that is, around 7 per cent of total equity flows to developing countries as a whole).7 Other private flows, including net bank lending, have shown a declining trend for a number of years. Overall, Africa south of the Sahara received an average of $27 per capita of ODA and just $3 per capita of private capital flows in 1997. In

Introduction 3

contrast, Latin America and the Caribbean received $13 per capita of foreign aid and $62 per capita of FDI.8 In the absence of significant private flows, Africa is clearly the region most dependent on ODA. In effect, the pressure of the resource squeeze is coming from two directions. Internally, many African countries face a situation of low savings and investment as a result of low growth and declining levels of public investment as governments have pursued more stringent budgetary and fiscal policies as part of stabilization and economic reform programmes. Externally, official and private flows have not been forthcoming. On top of all this, Africa’s debt as a proportion of exports and of GDP is the highest of any developing region in the world. It is generally agreed that the debt and its servicing are having a severe adverse impact on investment and renewed growth. It impedes public investment in physical infrastructure and human resources and also deters private investment, including foreign direct investment.9 The UN New Agenda for the Development of Africa in the 1990s (UN–NADAF), launched in 1991 as a framework for mobilising action on internal and external constraints on the region’s development, noted that ‘Africa’s debt burden constitutes a critical bottleneck constraining the recovery and development of the continent. Therefore, a major priority is to tackle Africa’s external debt problem.’10 In addition to the expectation that the debt problem would be speedily resolved, UN–NADAF estimated that for African countries to achieve an average annual growth rate of 6 per cent during the course of the 1990s, a minimum of US$30 billion would be required in net ODA to Africa in 1992 after which real net ODA would need to grow at an average rate of 4 per cent per annum. These targets for external support have, of course, not been met, thereby derailing the credibility of UN–NADAF. Indeed, in the years since UN–NADAF was adopted, debt has continued to be a major constraint on African economic recovery. On one occasion, in 1996, a statement that was made on behalf of the Organization of African Unity/African Economic Community (OAU/AEC) noted that ‘to state that Africa’s external debt constitutes a major impediment in Africa’s development would be a gross understatement. The volumes that have been written on Africa’s external indebtedness invariably qualify it as crippling and a burden. These are self-explanatory terms, pregnant with meaning and therefore require no further elaboration.’ 11 In recent years, the Heavily Indebted Poor Countries (HIPC) Initiative has become the main instrument for addressing the debt problem in Africa. Thirty-three of the 41 HIPC-eligible countries are in


Africa. But the impact of the HIPC Initiative is yet to be felt in the region. By mid-1999, only Malawi, Mozambique, Uganda and Zambia were able to benefit from the Initiative. By this time, Burkina Faso, Côte d’Ivoire, Ethiopia, Guinea-Bissau, Mali and Mauritania were also in the pipeline to receive debt relief within the framework of the Initiative. Under terms agreed at the Group of 7 (G7) Cologne Summit in June 1999, up to 25 countries could benefit from substantial debt relief by 2001 within the framework of the Initiative. As welcome as these new terms are, debt relief has been too ineffective and too slow. The progress attained at Cologne required the effort of a worldwide civil society coalition to drive home the urgency of the problem. The combined effect of low growth, deteriorating terms of trade, declining or stagnant external resource flows and a debt burden that is only very slowly being addressed is that the share of investment in GDP, which had averaged 25 per cent in the 1970s, had fallen to 17 per cent by 1997. The investment share of GDP in Africa is the lowest of any region, reflecting also the lower economic performance in Africa compared to other developing regions. It therefore follows that the recovery of the late 1990s has not been supported by strong investment performance. Rather, the recovery reflects the temporary resurgence in commodity prices of the mid1990s and more efficient utilization of existing capacity, as the effect of economic reforms take hold. Thus African economies are caught in a vicious circle, in which the existing economic structure has been unable to generate growth in savings and export earnings needed to maintain and increase levels of investment and imports. This, in turn, impedes structural change, economic growth and an effective assault on widespread poverty in the region. How to break out of this vicious circle is the main economic question that faces Africa today. Meanwhile, the implementation of economic reforms is improving resource allocation in African economies, but the financial flows required to support the improved conditions for strong growth are not forthcoming – economic recovery and the paradox of financial flows. A good policy environment now exists in much of Africa. More than at any time in the post-independence period, foreign aid and investment is needed to sustain and translate the recovery into stronger growth. This requires financing to develop human resources and physical infrastructure as well as investment in sectors and products where value-added is greater, productivity growth is faster and demand elasticities in world markets are higher. The new policy context is not only

Introduction 5

propitious for the fungibility effect of foreign aid but also for the effectiveness of such flows as a lightning rod for private investment. In short, the conditions are right in most countries of Africa for external resource flows to be used to make a major difference in addressing the main economic question in Africa – the well-known and long-standing structural weaknesses, supply side constraints, lack of institutional capacity and high transaction costs in the region. As the World Bank has noted, ‘the good news…is that many poor countries have initiated serious reforms in policies and governance, so that the climate for effective aid is the best that it has been in decades’.12 In most of Africa today, there is not only strong political will and commitment to deepen political and economic reforms, but also a growing sense of futility in the face of the overwhelming social and economic difficulties that face reform-minded leaders. Meanwhile, in the global village in which we now live, expectations in African societies continue to rise as images of lifestyles and patterns of consumption in richer countries are transmitted by the new information technologies. These rising expectations can only be met in economies with robust growth. Without such growth and in the context of fragile multi-ethnic nation–states with population pressures from demographic structures mostly made up of young people, political instability can be the expected result. In this regard, the rethinking of the ‘Washington consensus’ which had emphasised stable macroeconomic policy, trade liberalization, ‘getting prices right’, reliance on market forces and minimal government interference, could not have come at a more opportune time for African countries.13 The clear implication is that the ‘one size fits all’ strait-jacket of structural adjustment should be abandoned in favour of a more inclusive approach that is directly responsive to the socio-economic constraints and actual needs of the local situation. Donors are being advised to embrace more effective coordination mechanisms and to recognize the imperative of local ownership, participation and a development strategy aimed at facilitating the broader transformation of society.14 This new approach complements the overall targets and goals set by the international community for economic and social development. These targets include cutting global poverty by half by 2015 and the improvement of various other indicators of human well-being such as infant mortality and literacy rates. But even the financing of these targets remains uncertain as the downward trend in levels of ODA that has become an established pattern during the 1990s is projected to


continue for the foreseeable future. Yet the systematic implementation of programmes designed to meet these targets will go a long way in overcoming human resource-related and institutional capacity supply side constraints in African countries. But these programmes need to be complemented by increasing levels of investment in physical infrastructure and the productive sectors not only to sustain the recovery but also as the engine of growth. Like Europe at the time when the Marshall Plan was put into effect, the potential pay-off could be farreaching. A sustainable recovery will better position African countries to attract private capital flows which, clearly, will continue to grow in importance in the context of the new global economy. It will enhance regional integration within Africa as well as the fuller integration of individual countries into the world economy. A durable recovery, moreover, is the most important ingredient for sustainable peace and political stability in the region. This book reconsiders the question of financial flows in support of economic recovery and the effort required for resolving the main economic question in Africa. The book is divided into five chapters. Chapter 1 appraises the performance of African economies during the 1990s to situate the recovery of the mid- to late-1990s in the context of the region’s long-standing and deep-rooted economic difficulties. Chapter 2 examines the data on external resource flows to Africa. Taken together, the first two chapters illustrate the broad dimensions of the main economic question in Africa and the extent of the resource gap faced by African countries if the recovery is to become sustainable. Chapter 3 reviews the internationally agreed targets for socio-economic development. Chapter 4 outlines the ideas on development cooperation emanating from the post-Washington consensus era. The argument of these two chapters is that the international targets and the realism of the emerging ideas constitute a solid basis for more effective external support to African countries. In conclusion, Chapter 5 suggests that there is no simple panacea for the development problems faced by African countries. The main challenge ahead is to strengthen the current recovery in order to provide the necessary support for more vigorous growth. In addition to external financial flows, key areas are identified where simultaneous action is required or current efforts must be sustained. These are macroeconomic stability; peace, responsive governance and institution-building; human development; private sector development, diversification, trade and export expansion; and regional cooperation and integration as an essential part of the overall process of integration into the wider global economy. Finally, a sub-

Introduction 7

stantial Appendix contains key OAU/AEC documents relating to the issues raised in the preceding chapters. These documents, which are being released to a wider audience for the first time, contain valuable insights into how the continent’s economic problems have been perceived from within Africa’s premier inter-governmental Organization. Within the framework of the United Nations, preparations are under way for the convening of a major event to review issues concerning the question of financing for development in the year 2002. The aim is to provide a forum for discussion of issues concerning the international financial architecture in the new context of globalization. It is hoped that the issues addressed by this book will help to clarify the crucial role of external financial flows in helping Africa to meet both current and future challenges.

1 A Survey of Africa’s Economic Performance in the PostIndependence Period

This chapter reviews the performance of African economies during the post-independence years, with particular emphasis on the 1990s. The aim is to consider the recovery of the second half of the decade in proper perspective. The underlying issues and factors will be examined against the background of the region’s economic performance during the earlier decades of the 1960s, 1970s and 1980s. In particular, the need for realism concerning African growth prospects will become clear as a result of this discussion Perhaps more than in any other period in Africa’s post-colonial history, the 1990s have proved that excessive optimism is not helpful to Africa – the weakness of the mid-decade recovery makes this clear. By the same token, the decade has shown that extreme pessimism is not helpful either – in several countries, political and economic reforms that were difficult and tricky to implement at the same time provided a more conducive environment for recovery. What the experience of this decade has clearly illustrated is that Africa requires sober realism: sober realism about the limited prospects of Africa’s economies, constrained by supply side difficulties in a global economy that is becoming more deeply integrated as well as characterized by significant and rapid technological change. To this extent, a review of post-independence economic performance in Africa shows that where and when growth took place, it was driven by strong investment performance, strong export receipts and external resource flows (see Figure 1.1). But it will also be clear from the survey of the period as a whole that there were policy failures, which resulted in decisive measures not being taken early enough to stem the onset of severe macroeconomic imbalances and rising indebtedness. Indeed, the return to sound macroeconomic fundamentals during the 1990s was 8

9

7

6

5

Per cent

4

3

2

1

0

–1

1965–73

1973–80

1980–94

GDP Exports of goods and non-factor services Gross domestic investment Figure 1.1 Average real growth rates of GDP, exports and investment in Sub-Saharan Africa, 1965–94 (per cent per annum) Source:

UNCTAD, Trade and Development Report, 1998, p. 116.


the result of the effort to take the necessary corrective action to reverse the policy failures of the earlier decades. It has become commonplace to point out that in the early 1960s several African countries registered a higher GDP than some East Asian countries such as South Korea. The complete reversal of these relative positions by the 1990s can be attributed to factors that are the main focus of this survey: investment, export receipts, external resource flows, and policy failures. In the survey that follows, these factors are examined within four main time frames: 1965–73; 1973–80; 1980 until the early 1990s; and the rest of the 1990s.1

1965–1973 Africa’s growth performance was quite strong from the mid-1960s until the first oil shock in 1973. Growth was at an average annual rate of 4.5 per cent, or more than 2 per cent per capita (see Figure 1.1). But this was lower than in other developing regions during the same period, except South Asia. There were, however, considerable differences in growth among African countries south of the Sahara, with average rates ranging from 0.5 per cent per annum in Chad to 14.7 per cent per annum in Botswana. Many of the countries that performed least well after independence were ones that suffered years of civil turmoil. Others that experienced stagnation included those lacking in natural resources that were in demand in developed countries, and landlocked countries that did not have adequate transport links and port arrangements with neighbouring countries. Nevertheless, a group of countries described by UNCTAD as ‘star performers’ emerged during this period with growth rates comparable to those of the best-performing economies elsewhere in the developing world. In this group of eight countries, six achieved growth in excess of 8 per cent per annum (Botswana, Burundi, Côte d’Ivoire, Kenya, Nigeria, and Zimbabwe) and two had growth rates of more than 6 per cent (Congo and Gabon). Strong investment performance was the driving force behind postcolonial growth. On average, investment grew in volume by 6.4 per cent annually during 1965–73 as can be seen from Figure 1.1. Investment shares were rising steadily everywhere, from less than 14 per cent of GDP in 1965 to over 18 per cent in 1973 for the region as a whole, and more than 20 per cent in many countries. It should be remembered that this was also an era when protectionist barriers

Post-Independence Economic Performance 11

created by the import-substitution policies increased average returns on investment. Under colonial rule, inward investment had been limited mainly to minerals and oil extraction, and in some cases to the production of import substitution goods such as beverages and textiles. This pattern continued after independence, but also with a strong effort to attract FDI into infant industries by using various incentives, including import protection. The stock of investment doubled between 1960 and 1970. Between 1965 and 1973, as can be seen in Figure 1.1, export revenues in African countries grew very strongly, averaging 15 per cent per annum. Export volumes experienced rapid growth in key commodities such as tea, coffee and cocoa, and were helped by trade preferences granted by the former colonial powers. Moreover, the previous trend of falling terms of trade came to a halt in 1965 and the share of exports in GDP grew steadily for most countries after independence. Increasing export revenues eased the foreign-exchange constraint in the non-CFA countries and whilst import volumes grew more slowly than exports in this period, the share of imports in GNP remained high. The conventional school of thought during this era took the view that Africa’s growth prospects lay in exploiting the comparative advantage it had in natural resources. On this basis, it should begin to industrialize and diversify its exports. Indeed, the starting point of this policy coincided with the establishment of institutions and structures such as export marketing boards, and multi-purpose state development corporations towards the end of the colonial era. Regional integration and trade arrangements were also pursued to overcome the constraints of small markets and restrictive colonial trading legacies. But different conditions in member countries in terms of the level of industrialization (such as in the East African Community that embraced Kenya, Tanzania and Uganda), the export composition of most African economies, and infrastructure weaknesses often led to tensions or constrained these regional arrangements. Even as growth accelerated, however, the pace and pattern of structural change in many countries lagged behind, in comparison with other developing regions. Industry was the fastest growing sector, due to a large extent to the expansion of mining and transportation. Manufacturing activity grew by a robust 7.3 per cent per annum during 1965–73, but in most cases from a low base. It was only in Zimbabwe that manufacturing by 1973 generated more than 20 per cent of

12

9

8

Industry

7

Agriculture

Per cent

6

5

4

3

2

1

0

1965–73

1973–80

1980–94

Figure 1.2 Growth in industry and agriculture, in Sub-Saharan Africa, 1965–94 (per cent per annum) Source:



output. In the large majority of other countries the proportion was less than 10 per cent, as can be seen in Figure 1.2. However, in some countries, notably Côte d’Ivoire, Kenya, and Nigeria, strong nascent industries emerged during this period. In some cases private entrepreneurs were prominent, but in most cases the state took the lead. In the agricultural sector, growth of value-added activity was generally weak averaging only 2.5 per cent per annum, as shown in Figure 1.2. This rate was much lower than in other developing countries and in many cases agricultural growth did not keep up with population increase. There was an expansion of cultivated land, but public and private investment was not forthcoming on a scale necessary to transform the technological profile of agricultural production and enhance productivity growth. As a result, agricultural production remained constrained by traditional peasant production methods. Export expansion occurred with little diversification, either vertically towards processed commodities or horizontally within the primary sector.

1973–1980 The 1973 oil price increase and the subsequent slowdown of growth in the developed world had a particularly adverse impact on African countries, except for a few oil exporters. Because of the underlying factors at play, exposure and vulnerability were greater in Africa than in other developing regions. Indeed, countries registering a break in growth performance between 1973 and 1980 were far more numerous in Africa than in other developing regions, where the break came primarily in the 1980s. Many African countries ended the 1970s with increased external indebtedness, greater macroeconomic imbalances and instability, a lagging agricultural sector, and a weak and uncompetitive industrial base. Coming on top of such structural weaknesses, the external shocks of the 1980s drove a large majority of the countries into deep crisis, and earlier gains in living standards were wiped out. With population growth still accelerating, this meant a fairly significant drop in average per capita GDP growth rate in Africa, from 1.2 per cent per annum in the 1965–73 period to 0.7 per cent per annum. Moreover, almost half the countries in Africa actually experienced negative per capita income growth rate in this period.


Variation in growth rates among countries increased with declines in output reaching as much as 7 per cent per annum in some countries. Growth rates declined even among the ‘star performers’ such as Côte d’Ivoire and Kenya but a few countries in this group, such as Botswana, continued to register growth rates as high as 10 per cent per annum. There was, however, significant volatility in growth rates that tended to coincide with fluctuations in countries’ external terms of trade. These fluctuations reflected not only the negative effects on most African countries of the 1973 oil price shock and the recession that followed in the developed countries but also the short-lived boom that resulted from the rebound in world prices for a number of non-oil primary exports in 1976. Terms of trade fluctuations for the postindependence period are shown in Figure 1.3 It should be noted that, while a large majority of African countries were hurt by the 1973 oil price shock, oil-exporting countries such as Gabon and Nigeria benefited substantially from the windfall, although their growth contracted when oil prices declined during 1977–9. There was also a continued deterioration in agriculture where the average growth rate for Africa as a whole fell from 2.5 per cent in the period up to 1973 to below 2 per cent during 1973–80. As can be seen from Figure 1.2, it failed to keep pace with population growth. More significantly, industrial growth halved compared with 1965–73 and there was a sharp deceleration in manufacturing growth, which fell to 3 per cent per annum for the region as a whole, as also shown in Figure 1.2. A number of countries, including Zimbabwe, which had been a ‘star performer’, actually experienced negative manufacturing growth, whereas in no country had manufacturing output declined in the earlier period up to 1973. For the non oil-exporting countries in the region, export volumes, which had been increasing almost constantly for two decades, peaked in 1973 and showed a slight downward trend during the rest of the 1970s. Despite rising nominal prices for a number of non-oil commodities, export earnings slowed down, growing at an average rate of 4 per cent per annum during 1973–80. However, as import prices rose dramatically because of oil and accelerating inflation in the industrialized countries, the purchasing power of the non-oil countries’ exports stagnated in the mid-1970s, whereas that of the oil exporters increased sharply, as shown in Figure 1.3. In the 1970s, many African countries benefited from the expansion of international bank lending to developing countries. Initially, this expansion improved access to international finance for a number of

15

170

160

All SSA countries

150

140

Index

130

120

110

100

90

SSA excluding oil exporters

80

70

60 1954

1960

1966

1972

1978

1984

Figure 1.3 Terms of trade of Sub-Saharan Africa, 1954–96 (index numbers, 1954–6 = 100) Source:


1990

1996


countries, and some, notably oil-exporting countries, used such lending to finance additional import growth. From 1976, however, bank lending was increasingly used to compensate export shortfalls due to terms of trade losses and declines in the purchasing power of exports in non-oil producing countries. Net new long-term borrowing by African countries south of the Sahara from all sources rose from $3 billion in 1976 to $11.5 billion in 1980. The share of long-term commercial bank lending in total disbursements increased rapidly, accounting for more than two-thirds of total borrowing at the end of the decade. The major borrowers from this source were Cameroon, Congo (DRC, then known as Zaire) Côte d’Ivoire, Gabon, Kenya, and Nigeria. Short-term lending also rose dramatically from $2.5 billion in 1976 to $22 billion in 1980. This increase in international private lending to African countries south of the Sahara coincided with sharp declines in the return on investment. Such declines were not generally experienced elsewhere in the developing world: indeed, figures for South Asia show that returns there increased slightly. Although investment decelerated during this period, it rose as a share of GDP averaging over 20 per cent, compared to 15 per cent during 1965–73. In a small number of countries, investment accelerated in response to favourable price shifts in traditional exports and export diversification linked to the exploitation of previously untapped oil and mineral reserves. In contrast, other countries experienced a sharp slowdown in investment growth, and in some cases absolute declines. Only government expenditure maintained its strong growth and consequently accounted for a rising share of GDP with government consumption equivalent to 4 per cent more of GDP in 1980 than in 1973. The rise in government expenditure coupled with declining revenues led to growing fiscal deficits and inflationary pressures. Because many African countries had pegged the value of their currencies to major convertible currencies, exchange rates appreciated significantly in real terms. According to some estimates, they appreciated on average by some 40 per cent between 1973 and 1980. The current account deficit (before official transfers) as a whole for countries in the region in this period more than doubled compared with the earlier period up to 1973, averaging 15 per cent of the regional GDP. This situation was also reflected in a rapid rise in total long-term external public and private debt for Africa, south of the Sahara, from


18 per cent of GDP in 1970 to 40 per cent in 1980. The growing fiscal and current account imbalances and rising debt and inflation levels of the 1970s were exceptional by the standards of the 1960s.

1980–1994 Like many other parts of the developing world, most African countries failed to adjust early enough to the more hostile external environment that resulted from a policy turnaround by the major industrial countries. This was characterized in particular by a deterioration in terms of trade; sharp increases in international interest rates, and stagnation and declines in net transfer of external resources. Thus Africa lagged further behind other developing regions primarily because its structural weaknesses were deeper and its room for manoeuvre was less. The period 1980–94 witnessed a noticeable deterioration in the economic performance of most African countries. Population grew faster than output, with per capita incomes falling on average by 0.6 per cent per annum. The dispersion of growth rates among countries, which had increased during the 1970s, was greatly reduced and there was a downward convergence of growth rates during these years of crisis. For every country that experienced positive per capita output growth during 1980–94, two had negative per capita growth rates. There were in fact only nine countries that had positive per capita growth and of these only in Botswana and Mauritius was growth sufficient to tackle the challenges of economic development and poverty alleviation. The fact that the ‘star performers’ of the previous period also registered negative growth rates further underscores the damaging lack of continuity in Africa’s growth performance. Average growth as a whole for Africa south of the Sahara during this period is shown in Figure 1.1. The performance in agriculture did not deteriorate drastically in the 1980s compared with the previous decade. For Africa south of the Sahara as a whole, agricultural growth was maintained on average at about 2 per cent per annum between 1980 and 1994, mostly on account of a turnaround after the mid-1980s. In many countries, growth was faster in agriculture than in industry. It dropped in the latter sector to around 2 per cent per annum – a dramatic decline from the 8 per cent attained in the initial post-independence period (see Figure 1.2). After peaking in 1977, the terms of trade of non-oil producing countries south of the Sahara deteriorated almost every year until 1994. For North African and other African oil exporters, the trend started in


1981. It was steeper but did not last as long. Unlike previous episodes, when the terms of trade deteriorated in the context of rising prices of both primary commodities and manufactures, deterioration in the 1980s was associated with rising prices of manufactures and falling prices of commodities. Deflationary policies in the major industrial countries took much longer to have a tangible impact on prices of manufactures than on commodity prices, which tend to be much more sensitive to market pressures. World prices for most commodities exported by African countries were at historically low levels in the late 1980s and early 1990s. In real terms, prices for coffee and cocoa – two of the main non-oil commodity exports of the region – were down by around 40 per cent. In 1992, coffee prices were at a seventeen year low. Real prices of other major export items were also well below the level of the 1970s – by over 50 per cent for tea and cotton, one third for copper and sugar and a quarter for tobacco. The terms of trade of the non-oil producing African countries deteriorated by more than one third between 1977 and 1993 compared with a deterioration of about 20 per cent for other non-oil producing developing countries. Thus by 1993, these countries would have needed to have increased the volume of their exports by more than 50 per cent above their 1977 levels in order to be able to import the same volume of goods as in that year. In the event, export volumes did rise, but not enough to compensate for this decline in terms of trade. In some cases (such as cocoa) success in increasing export volumes proved selfdefeating by depressing prices further. The decline in export prices and earnings during the first half of the 1980s coincided with a sharp rise in international interest rates. The average interest payable on outstanding commercial debt rose from 8.4 per cent in the 1970s to 11.4 per cent. This is because a significant part of long-term loans had been contracted at variable interest rates. The ratio of interest payments to export earnings rose from less than 2 per cent to more than 8 per cent. Simultaneously, new private lending collapsed and this was responsible for the decline in the net new longterm borrowing by countries south of the Sahara from $10.8 billion in 1980 to about $7 billion per annum in the three years that followed. The region in fact started making net negative transfers to private lenders as interest payments exceeded net new lending. However, aggregate resource flows and aggregate net transfers to the region as a whole remained positive as a result of the response of the international community to increasing payment difficulties in the


region. Since 1980, the region’s external financing has increasingly come from official sources. ODA and official lending both rose, the latter in large part in the context of stabilization and adjustment programmes. There was a marked shift in total ODA flows in the 1980s in favour of countries south of the Sahara, as can be seen in Figure 1.4. These additional resource flows, however, were not sufficient to offset the impact of terms of trade losses on foreign exchange earnings, let alone the increased debt service requirements. According to one estimate, between 1980 and 1990 only six out of 21 countries for which data were available were able to cover their terms of trade losses with net ODA inflows. There was a GDP loss in Africa south of the Sahara of $16.4 billion due to the terms of trade and an ODA net inflow of $2.4 billion which shows that less than 15 per cent of terms of trade losses were compensated for by ODA. The impact on imports and investment was crushing. Imports were reduced drastically during the first half of the 1980s. Although they recovered slowly from 1987 onwards, in per capita terms, import volumes were still one third lower in 1993 than in 1980. The impact of worsened terms of trade on import compression was particularly severe. As the UNCTAD analysis suggests, if the terms of trade had remained at their 1976–78 levels, the imports of these countries would have been higher by one quarter of their actual value in every year between 1981 and 1993 even without any increase in export volumes. Additional ODA during the period made up for only one-quarter of the loss in export purchasing power. The squeeze on imports inevitably led to a lower utilization of existing capacity and a fall in new investment. Part of that capacity became unusable giving rise to the phenomenon of de-industrialization. Investment fell continuously throughout the period and failed to recover. For the 1980–94 period, the average decline amounted to 0.5 per cent per annum, and in per capita terms it was much greater. The share of investment in GDP, which had averaged around 26 per cent in the 1970s, fell to below 20 per cent in the 1980s and to 16 per cent in the first half of the 1990s. Public investment was cut by more than half, while private investment fell from 12 per cent of GDP in the 1970s to around 10 per cent (see Figure 1.5).

The African economy during the mid/late 1990s Compared to the stagnation during the years between 1990 and 1994, Africa experienced recovery during the period 1995 to 1998. The best

–5

0

5

10

15

20

25

1970

1972

1974

1976

1978 1980 1982

Commercial lending Official lending ODA FDI Total

1984

1986

1988

1990

Figure 1.4 Composition of the net resource flows to Sub-Saharan Africa, 1970–96 (billions of dollars) Source: UNCTAD, Trade and Development Report, 1998, p. 122.

$ billion

30

1992

1994

1996

20

21 30 Public investment Private investment 25

Per cent

20

15

10

5

0 1970–1979

1980–1989

1990–1994

Figure 1.5 Public and private investment in Sub-Saharan Africa, 1970–94 (per cent of GDP, weighted averages) Source: UNCTAD, Trade and Development Report, 1998, p. 123.


year was 1996 when real GDP grew by 5.5 per cent compared with 2.9 per cent in 1995, 3.4 per cent in 1997, and 3.2 per cent in 1998, the last year for which figures are available at the time of writing. The downturn in 1997 and 1998 was largely due to the East Asian financial crisis and its effects in Africa of reduced export volumes and lower commodity prices. However, for the four years between 1995 and 1998, growth averaged 3.8 per cent compared with an average annual growth of 1.3 per cent between 1991 and 1994 (see Table 1.1). But in real per capita terms, except for an average of 2.7 per cent in 1996, economic growth barely kept pace with population growth in 1995, 1997 and 1998, with averages of 0.2 per cent, 0.7 per cent and 0.6 per cent, respectively, as summarized in Table 1.1. Averages do of course conceal variations. There was indeed significant variation in economic performance across the continent. In 1998, 13 of the 53 African countries (for which the AfDB provides data) registered growth rates of above 5 per cent or more and 28 African countries posted growth rates of 3 per cent or more (see Table 1.2a).2 As the steep fall in per capita income in the last two decades is still to be recouped, the fact that only 19 African countries posted an estimated annual per capita income increase of more than 1.5 per cent in 1998 (see Table 1.2b) illustrates the gravity of the region’s development crisis. It is this weakening of overall growth in 1997 and 1998 with a continuation of the trend in 1999 and 2000, and possibly beyond, which leads to the inevitable conclusion that the mid-decade recovery was Table 1.1

Africa: macroeconomic indicators, 1990–8

Indicators

1990

1 2 3 4 5 6 7 8 9 10 11 12 13

2.5 –0.3 17.0 22.0 –4.3 20.1 4.8 4.8 5.0 7.1 –8.9 –1.9 21.9

Real GDP growth rate Real per capita GDP growth rate Inflation (%) Investment ratio (% of GDP) Fiscal balance (% of GDP) Growth of money supply (%) Export growth, volume (%) Import growth, volume (%) Terms of trade (%) Trade balance ($ billion) Current account ($ billion) Current account (% of GDP) Debt service (% of Exports)

Source:

1995

1996

1997

1998

2.9 0.2 33.0 20.0 –3.0 22.6 9.2 7.3 –0.6 –4.6 –13.5 –2.7 23.0

5.5 2.7 25.1 18.9 –2.5 18.4 8.1 3.2 2.5 4.4 –4.4 –0.8 22.2

3.4 0.7 13.7 18.7 –1.8 15.8 4.4 7.9 1.5 2.2 –4.2 –0.8 18.8

3.2 0.6 12.0 20.0 –2.7 12.4 –0.7 4.8 –5.7 –11.4 –19.0 –3.4 22.5

African Development Bank, African Development Report, 1999, p. 1.

Post-Independence Economic Performance 23 Table 1.2a Africa: frequency distribution of countries according to real GDP growth rates, 1990–8 Real GDP growth rate (%)

Number of countries 1996 1997

1990

1995

1998

Negative 0–3 Above 3 to 5 Above 5

21 6 11 14

10 11 19 13

5 5 19 24

4 14 13 22

4 21 15 13

Total

52

53

53

53

53

Table 1.2b Africa: frequency distribution of countries according to real per capita GDP growth rates, 1990–8 Real per capita GDP growth rate (%)

Number of countries 1990

1995

1996

1997

1998

Negative 0–1.5 Above 1.5 to 5 Above 5

29 8 10 5

18 14 14 7

10 8 25 10

16 11 24 2

23 11 17 2

Total

52

53

53

53

53

Source:

African Development Bank, African Development Report, 1999, p. 3.

short-lived and fragile. Not only does overall economic performance remain vulnerable to such adverse external shocks as inclement weather and lower international prices for major primary commodities, but also to an unsustainable debt burden, low investment and savings to GDP ratios, which among other factors, continue to be major constraints on the performance of African economies. Nevertheless, more efficient allocation and utilization of resources has been achieved through tremendous progress in implementing macroeconomic policy and structural reforms in most countries in the region.

Increasingly sound macroeconomic fundamentals Macroeconomic trends of the 1980s such as excessive budget deficits, rapid expansion in money supply, high inflation, and misaligned


exchange rates are no longer recurring problems in Africa. The 1990s have witnessed a more prudent fiscal management. The trend in earlier years undermined macroeconomic stability and contributed to misallocation of resources. The macroeconomic fundamentals in Africa improved substantially throughout the 1990s, but the fiscal balance came under pressure in 1998 due to adverse economic conditions. The overall trend on the fiscal, monetary and current account framework for the 1990s can be seen from data in Table 1.1. Better fiscal management has gone hand in hand with improved monitoring and control of public expenditure, ongoing public enterprise reform, accelerating privatization, as well as tax reforms which improved revenue generation and made collection more effective. 3 Although the average overall budget deficit rose to 2.7 per cent of GDP in 1998 from 1.8 per cent recorded the previous year, the increase was still moderate and reflected the responsible approach to fiscal management that is becoming so evident in the region.4 Fiscal responsibility has contributed to the creation of a more stable macroeconomic environment. With lower deficits, African governments have reduced their borrowings from the banking system. This, in turn, has enabled central banks to curb excessive money supply growth and increase the availability of credit to the private sector. One of the clear indicators of macroeconomic stability during the 1990s is moderation in monetary growth in contrast to the more expansionary stance of the previous decade. Growth in money supply slowed to just over 12 per cent in 1998. This was well below the levels recorded for 1995–7 and at the beginning of that decade (see Table 1.1). It is clear that monetary authorities in most African countries have recognised the long-term damaging effects of lax monetary policies, which in the past were a major cause of rapid inflation and resultant exchange rate depreciation. Several countries also managed to maintain stable and positive real interest rates in contrast to the earlier part of this decade when negative real rates were the norm.5 In line with recent economic reforms, monetary policy is now set with the main objective of ensuring that inflationary pressures are kept under control. A lower rate of inflation can appropriately be seen as the result of fiscal and monetary restraint. The average rate for the region in 1998 was 12 per cent, continuing the downward trend since the mid-1990s (see Table 1.1). In more than half the countries, the inflation rate was less than regional average.6


However, as the African Development Bank reports, exchange rate depreciation has contributed to the level of inflation that remains in many countries as have rising food prices associated with shortfalls in food production. But as inflation continues to slow, greater exchange rate stability will become possible. Upward pressure on food prices will continue to be a serious problem as a result both of adverse weather conditions and the failure so far in the region as a whole to increase food production per capita.7 For Africa, overall the rate of currency depreciation slowed markedly from 17 per cent in 1996 as measured by a weighted index of 13 leading currencies to 8 per cent in 1997. This trend continued in 1998 and reflects higher foreign exchange reserves, the phased removal of exchange rate distortions, which narrowed the difference between official rates and parallel rates in several countries, lower inflation and the continent-wide improvement in fiscal and monetary conditions.8 But the export momentum that had also contributed to lowering the rate of currency depreciation slackened in 1998 as merchandise exports fell by 9.1 per cent to $117.8 billion. This was in sharp contrast to export performance in the middle of the decade when exports increased by an average of 8.6 per cent between 1994 and 1997. Export performance underlines the impact of the Asian financial crisis on African exports. Export volumes declined, albeit marginally, by 0.7 per cent in 1998 compared to an increase of over 4 per cent in 1997 and a peak of 9 per cent in 1995. On the other hand, imports grew slightly to $129.18 billion, with lower domestic economic growth accounting for much of the weakening of import demand. These trends are reflected in the balance of trade, which deteriorated by 5.7 per cent compared with an improvement of 1.5 per cent in 1997 and the peak of 2.5 per cent in 1996. The fall in exports resulted in a trade deficit of $11.4 billion in 1998 compared to a surplus of $2.2 billion the previous year. As a result of the widening trade gap as well as increased deficit in net services, the current account deficit increased to $19 billion or 3.4 per cent of GDP (see Table 1.1).9 It should be clear from this that the improved macroeconomic framework of most African countries contributed significantly to stabilization and recovery. But the impact of exogenous forces has put into jeopardy much of what has been achieved. Moreover, as welcome as good and improving macroeconomic fundamentals are, this alone is not sufficient to address fully the main economic question in Africa. In fact, given the


inherent structure of African economies, there is limited scope to use macroeconomic policies to pursue counter-cyclical measures.

Commodity dependence Commodity dependence is the bane of African economies. Thirty-nine African countries are dependent on just two primary commodities for over 50 percent of export earnings.10 The vulnerability of commoditydependent economies to external shocks was again in evidence during the Asian financial crisis. Indeed, during four decades of independence, African economies have consistently demonstrated this vulnerability. The substantial drop in commodity prices in 1998 affected almost the entire range of African exports. However, since demand was sustained in the European Union and the United States, which are Africa’s main export markets, most countries of the region were partly insulated from the effects of the slowdown in world trade. But owing to the decline in commodity prices, the region’s export earnings fell sharply in 1997–8 with corresponding loss in the terms of trade and increase in the current account deficit, as noted above. The real price of commodities, which fell by an average of 5 per cent in the 1980s, rebounded to an annual increase of 2–3 per cent in the mid-1990s, only to take a plunge during the latter years of the decade. The long-term outlook for commodities is not encouraging. In addition, projections suggest that the prices of manufactures will increase twice as rapidly (2.2 per cent annually) as non-fuel commodities (1.1 per cent) over the next ten years (i.e. 1999–2009), with obvious and serious effects on growth as well as on the overall macroeconomic situation in Africa.11 As a result, the region’s terms of trade may well continue the 1997–8 downward spiral in spite of the modest end-ofdecade recovery in the price of the continent’s top export, crude oil. As the African Development Bank has noted, technological innovations in the oil industry are increasingly making new oil cheaper to find and produce even in difficult terrain; this will boost world oil reserves in a market already awash with excess supply.12 Metal and mineral prices, especially gold, also weakened during the late 1990s, resuming an overall downward trend for the decade as a whole. Food prices and those of agricultural raw materials were significantly lower for African importing countries, and the region benefited enormously from a rise of almost 25 per cent in beverage prices such as coffee, cocoa and tea, which generally performed well throughout the 1990s, and are important exports.13


In country-specific terms, the export earnings of the eleven significant exporters of oil (that is, Algeria, Angola, Cameroon, Congo (DRC), Egypt, Equatorial Guinea, Gabon, Libya, Nigeria and Tunisia), which account for 42 per cent of regional GDP, were down by 25–30 per cent in 1997–8. The oil-exporting African countries lost 13 percent of GDP on account of the deterioration in terms of trade. Because oil revenues finance more than 50 per cent of government expenditure in these countries (except in Cameroon and Egypt), oil exporters also had to face difficult budget decisions as a result of the substantial drop in export earnings.14 African oil-importing countries also suffered from the commodity price decline, depending on their individual export structure. Their losses were generally much smaller than those of oil-exporting countries as lower oil importing bills partly offset lower export earnings. However, for oil importers whose exports are concentrated on commodities for which price declines were moderate, or for which prices even rose, the export revenue loss was smaller and, in varying degrees, they enjoyed an improvement in their terms of trade. Such was the case in 1998 for exporters of cocoa (Ghana and Côte d’Ivoire), tea and tobacco (Malawi), and iron ore (Mauritania). However, in the first quarter of 1999, the drop in the price of cocoa affected major exporters of that commodity. As previously noted, volumes of commodity exports declined slightly in 1998 but were still significantly higher than during the early 1990s. Angola, Botswana, Uganda, Ghana, Equatorial Guinea, Côte d’Ivoire, and Mauritius achieved the most impressive export expansion. Less encouraging, however, was the fact that with the exception of Mauritius, increased production and/or prices of primary commodities drove all the fast export growth economies. Given the outlook for commodities, the diversification of exports must be an essential element of the response to Africa’s development problem. While the average export–GDP ratio for the region remained at about 22 per cent, performance varied considerably. The most export oriented countries – Angola, Botswana, Congo Brazzaville, Equatorial Guinea, Gabon, Mauritius, Namibia, and Swaziland – register export-GDP ratios in excess of 40 per cent. The implications of this for other African countries are clear. The relatively small and slow-growth domestic markets that are so common in Africa mean that more rapid export growth is an essential prerequisite for stronger economic performance.15 As African economies may not be able to withstand competition for value-added products in


global markets in the short- to medium-term, there is an urgent need to achieve diversification and broader-based economic development within the framework of regional markets and regional economic integration. Such an approach should lead to greater stability in export earnings and, consequently, sustainable improvements in the terms of trade and the current account.

Low levels of domestic investment and savings Throughout the 1990s, the average investment-to-GDP ratio for Africa hovered at around a fifth of GDP (see Table 1.1). This is well below the level necessary to sustain strong economic recovery and is significantly lower than average investment/GDP ratio in Asia and Latin America, which were 33 per cent and 25 per cent respectively during the same period. In several low-income countries – including Burundi, Central African Republic, Congo (DRC), Liberia, Niger, Rwanda and Somalia – investment ratios were even lower, at less than 15 per cent of GDP. This means that low-income countries were not investing enough even to meet replacement needs, let alone to create new production capacity. Africa’s lacklustre investment performance reflects the sharp decline in public investment, especially in infrastructure, which arose from the tight fiscal policy of governments seeking to reduce budget deficits. As public sector investment declined in the 1990s, private investment became dominant, accounting for two-thirds of domestic investment in 1997. Between 1990 and 1997, private investment increased by more than half to $72.4 billion.16 This is an encouraging further affirmation of the important contribution of policy reform to the recovery. Yet estimates suggest that African countries need investmentto-GDP ratios in the high twenties just to sustain current growth rates. As the African Development Bank has also noted, ‘the required increase in the investment ratio would obviously have to be greater to accelerate growth’.17 As regards savings, the average national savings rate of about 17 per cent of GDP between 1991 and 1998 remained below that of other developing regions. Thus, in relation to the investment-to-GDP ratio, the savings-investment gap averaged 4 per cent of GDP during the 1990s. Not only has the savings rate been below the 24 per cent average of developing countries as a group, but it has also been insufficient to finance the investment necessary for rapid and sustained economic expansion. Individual country performances were mixed;


with a savings rate of under 10 per cent in some countries – Comoros, Congo (DRC), Liberia, Madagascar, Sierra Leone, Somalia, Sudan and the countries of the Great Lakes Region – while savings rate of more than 20 per cent was recorded in Algeria, Botswana, Gabon, Lesotho, Mauritius, Mozambique, Namibia and Nigeria.18

Low or declining external financial flows and unsustainable debt Between 1997 and 1998, the deficit on the current account of balance of payments jumped from $4.2 billion to $19 billion, which also reflected the dramatic fall in the trade balance. This sharp increase in the deficit is a return to the overall trend for the 1990s following some improvement during the recovery years of 1996–7 (see Table 1.3). Current account deficits were increasingly financed by non-debt creating capital flows, which reached a net amount of $14.3 billion in 1998.19 During the 1990s, these flows have been volatile but generally on the decline. In particular, net capital transfers (which include ODA grants) were in 1998 less than half their 1990 level. (This issue of external financial flows is discussed in greater detail in Chapter 2). In view of the declining trend in ODA, debt forgiveness and migrant transfers are becoming prominent items in capital transfers.20 Foreign direct investment (FDI) flow to Africa represented only 3 per cent of FDI flows to developing countries as a whole and 1.2 per cent of global investment flows, down from 1.4 per cent in 1996.21 This is in spite of the high profitability reported for foreign investments in Africa, which is also a reflection of the relative scarcity of capital in the region. FDI has also been highly concentrated in terms of countries, sectors and sources. A few countries – Angola, Ghana, Morocco, Namibia, Nigeria, South Africa, Tanzania, Tunisia, Uganda and Zambia – accounted for over 90 per cent of FDI inflows, with Nigeria alone absorbing a third during much of the decade. Within these countries, FDI goes mainly to the extractive industries, especially oil, gas and precious metals. The main investing countries are France, United Kingdom, Germany and the United States. With regard to other resource flows, net external borrowing increased to $4.3 billion in 1998 because countries were able to attract fresh official and private flows to offset loan repayments. The increase in 1998 reflects a reversal of net outflow to official creditors and private banks recorded in 1997 (see Table 1.3).

30 Economic Recovery in Africa Table 1.3 Africa: balance of payments summary and current account financing, 1990–8 ($ billion) 1990

1995

1996

1997

1998a

Exports (f.o.b.) Imports (f.o.b.) Trade Balance

104.7 97.6 7.1

115.0 119.6 –4.6

125.7 121.2 4.4

129.6 127.4 2.2

117.8 129.2 –11.4

Net Services Net Factor Income Current Transfers Balance on Current Accountb

–8.9 –22.5 15.4 –8.9

–8.6 –15.9 15.6 –13.5

–6.7 –17.1 15.0 –4.4

–7.1 –15.3 16.0 –4.2

–8.6 –15.5 16.4 –19.0

Balance on Capital Accountc Balance on Financial Accountd

15.5 1.7

2.0 12.3

5.8 4.3

3.6 –2.5

7.0 14.2

–8.9 –14.2 23.1

–13.6 –6.6 20.1

–4.4 –12.2 16.5

–4.2 –9.7 13.9

–19.0 0.7 18.3

16.9 15.5 2.7 –0.6 6.8 –1.1 0.1

7.8 2.0 4.9 0.7 11.7 6.9 1.4

12.2 5.8 5.7 0.5 3.9 6.1 –1.3

13.2 3.6 8.0 –0.5 1.2 –2.9 –0.4

14.3 7.0 7.2 –0.4 4.3 3.0 3.2

Balance of payments transactions

Current Account Financing Current Account Balanceb Capital Outflowse Financing Requirements Non-Debt Creating Flows, Net Capital Transfers Direct Investment Net Credit and Loans from IMF Net External Borrowing From Official Creditors From Banks Notes:

a

Estimates. Current Account refers to trade balance, net services, net factor income, and current transfers payments. c Capital Account refers to capital transfers and acquisition/disposal of nonproduced, non-financial assets. d Financial Account refers to direct investment, portfolio investment and other investment transactions. e Recorded asset transactions, which pertain mostly to export credits, and errors and omissions which are taken to be a measure of capital flight. Source: African Development Bank, African Development Report, 1999, p. 11. b

As shown in Table 1.4, the stock of Africa’s external debt stood at around $319.9 billion in 1998, with long-term debt accounting for four-fifths. Algeria, Côte d’Ivoire, Egypt, Morocco, Nigeria, and South Africa accounted for more than half of the total external debt. The debt burden in Africa is high, averaging 50 per cent of GDP and over 200 per cent of total exports. Around a quarter of total export earnings goes towards servicing the debt (see Table 1.4). It should be acknowledged that the severity of debt service burden varies among African

Post-Independence Economic Performance 31 Table 1.4 Africa: external debt outstanding and debt service payments, 1990–8 ($ billion, unless otherwise indicated) 1990

1995

1996

1997

1998a

Total Outstanding Debt Short Term Debt Long Term Debt

279.5 29.6 249.9

329.5 41.7 287.9

330.2 42.3 287.9

314.7 44.6 270.1

319.9 44.8 275.0

Total to Official Creditors Total to Financial Institutions Total to Other Private Creditors

193.8 43.3 42.4

243.8 36.8 49.0

249.9 35.3 45.1

234.2 35.9 44.6

241.8 32.7 45.4

21.9 9.1 12.8 60.0

23.0 9.3 13.8 65.7

22.2 9.3 12.9 61.9

18.8 7.7 11.1 56.7

22.5 1.1 11.4 57.6

222.6

230.6

212.1

195.6

215.2

Ratio of Debt Service Payments to Exports of Goods and Services (%) Debt Service Ratiob Interest Payments Ratioc Amortization Ratiod Total Debt to GDP Total Debt to Exports of Goods and Services Notes:

a

Estimate. Amortization payments on long-term debt and interest payments. On total interest payments. d On amortization payments (i.e. principal repayments) on long term debt only. African Development Bank, African Development Report, 1999, p. 13. b c

Source:

countries. To take a well-known example, during much of the 1990s Mozambique spent on debt service payment almost twice what it spends on health. Similar data for Ethiopia, Mali and several other lowincome countries in Africa have become well known, thanks to the debt relief campaign. The most striking thing about the data in Table 1.4 is that the level of indebtedness hardly changed during the 1990s. This underscores the view that the debt is unpayable and unsustainable given existing resource constraints and related factors. Moreover, it should be expected that Africa’s level of indebtedness would increase as a result of declining terms of trade and the possible loss of market shares in some primary commodities following competitive market exchange rate adjustments by Asian countries in the wake of the 1997–8 crisis.22 The OAU member states, in the Cairo Agenda for Action, a 1995 statement of policy on re-launching Africa’s socio-economic recovery, took the view that Africa’s external debt stock and its rapid growth are a deterrent to inward investment and non-debt-generating resource flows.23 This view has become widely prevalent as the Heavily Indebted


Poor Countries (HIPC) initiative administered by the IMF and World Bank has proved too slow a vehicle to bring about relief, and shows clear signs of inertia with respect to implementation.24 UNCTAD, for example, has emphasized that the debt of the low-income African countries is not sustainable and is having severe adverse impact on the attraction of new investment and renewed growth.25 The professed aim of HIPC is to enable highly indebted poor countries to achieve sustainable debt levels within six years. The countries concerned are required to follow an IMF-approved adjustment programme during these years as a condition for qualifying for relief. With only a handful of the 41 HIPC-eligible countries having qualified – or in the pipeline to qualify – by mid-1999, the G7 Summit held that year agreed to accelerate the process as well as to extend the scope of debt relief. By 2002, 20 eligible countries qualified for debt relief; this now includes write-off of all loans given as aid and up to 90 per cent of loans granted to finance trade. In spite of these developments, a comprehensive solution to the debt burden is necessary to re-establish the creditworthiness of the African countries concerned. This is also an essential part of the response to the main economic question in Africa.

The recovery of 1994–7 in perspective Seen from the perspective of the entire decade of the 1990s, the recovery of 1994–7 was no more than a temporary period of relative relief from the region’s deep-rooted and long-standing economic difficulties. Notwithstanding the return to improved macroeconomic fundamentals, weak growth, commodity dependence, low levels of investment and savings, stagnant or declining external resource flows, and an unsustainable debt burden, combined to weaken the recovery. This was not only in terms of the brief duration of the recovery but also the depth and scope of its impact on African economies. Incidences of political conflict and instability, albeit limited to a handful of the continent’s 54 countries, however, have not been helpful.

Summary A factor of particular significance in both the review of the 1990s and the survey of the preceding post-independence period is the stagnation of investment. Policy failures during the 1970s and 1980s also resulted


in a deterioration of the macroeconomic situation. However, the structural adjustment programmes adopted by most countries since the early 1980s emphasized stabilization and tended to ignore investment. This meant that African countries have generally been unable to make a positive adjustment to the changed global environment and shifts in key variables affecting their economic performance. Such adjustment would have required a restructuring of agriculture and industry as well as investment in human resources and institution building as a strategic response to the main economic challenge. But as the UNCTAD analysis demonstrates, the region was caught in a vicious circle whereby the existing production and accumulation structures were unable to generate the growth in export earnings needed to maintain imports, which in turn constrained investment and income growth. The dilemma was further exacerbated by the overall downward trend in the terms of trade and insufficient external resource flows to compensate the loss of purchasing power of exports. In particular, two aspects of the policy failure in regard to investment should be noted. The failure occurred during both the independence era up to the early 1980s when policy ‘ownership’ was effectively in the hands of African governments, and the period after 1980 when policy ‘ownership’ was effectively in the hands of the Bretton Woods institutions as a result of conditionalities that had been imposed. Now that realism about Africa’s grim economic prospects has become obvious, and given the low levels of domestic savings and investment prevalent in the region, it remains to be seen whether external support in the form of investment and other resource inflows will be forthcoming to provide the much-needed assistance required for addressing the region’s main economic challenge. Africa’s socio-economic problems have been well chronicled, with literally dozens of official reports and a vast amount of academic literature written to catalogue the region’s economic decline and proffer remedies.26 The issues explored in this literature are wide-ranging and include the continent’s colonial history, initial economic conditions at the time of independence, social structure and ethnicity, post-colonial politics, institutions and policies, corruption, technological backwardness, climate and geography. Notwithstanding the erudition and insights of this, and after all the foregoing issues have been taken into consideration, the main economic problem in Africa, as highlighted in this review, remains the structural weakness and supply-side constraints which have made economic performance too dependent on


favourable weather and peasant commodity production. From the perspective of this main economic question, a return to increasingly sound macroeconomic fundamentals such as has been the experience of most African countries in the 1990s is necessary, but not sufficient, to achieve improved economic performance. The problems of commodity dependence, low levels of domestic savings and investment, inadequate external flows and unsustainable debt urgently need to be addressed.

2 The Paradox of Financial Flows

African countries, especially those south of the Sahara have become increasingly dependent on foreign aid or official development assistance (ODA) largely due to such factors as falling export receipts, a weak capacity to generate internal savings, a major problem of debt overhang, and a relatively high susceptibility to capital flight. This aid is mainly from the Organization for Economic Cooperation and Development (OECD) governments and includes other financial flows channelled through multilateral agencies.1 During the 1990s, official development financial flows (ODF) accounted for 70 to 80 per cent of all resource flows into Africa and 9 to 11 per cent of the region’s entire GDP. This is a far higher proportion than in Latin America (0.5 per cent) and Asia (1 per cent). For the 33 least developed countries in Africa in 1995, ODF accounted for over a fifth of national income.2 Recently, as donors have grown weary, official aid has been dwindling: from $32 per African in 1990 to $19 in 1998.3 However, it is paradoxical that, at precisely the time when a new window of opportunity has been opened through the sacrifices of difficult political and economic reforms in most African countries, levels of foreign aid or ODA flows were cut back sharply. By the mid-1990s, conditions were especially favourable for using foreign aid to intensify these reforms and direct efforts towards addressing the human, institutional, infrastructure and other supply constraints on development in the region. Moreover, as will be seen in Chapter 3, clear targets for the alleviation of poverty, the reduction of social deprivation and the promotion of human and sustainable development had been identified at the series of UN conferences that were held during the 1990s. But the downward trend in levels of ODA that became an established pattern during the 1990s is projected to continue for the foreseeable future. In so far as 35


the availability of development finance is an important consideration in the design and implementation of policy reforms, this trend has not only impeded the impact of such reform in African countries but has also put the attainment of the UN targets out of reach of most countries in the region. As argued earlier, private capital flows have not been sufficient to make up for the gap left by declining levels of ODA. In the absence of significant FDI flows, Africa is clearly the region most dependent on ODA – a situation that remained more or less constant throughout the 1990s. This trend, underscores the need for foreign aid to be directed both to bridge the gap left by low levels of private flows, and to serve as a lightning rod for FDI. Depressed levels of savings, the debt burden, and capital flight are further constraints on Africa’s ability to generate funds for financing sustained economic recovery and expansion. As indicated in the previous chapter, the average national savings rate of around 17 percent of GDP in Africa for the period 1988–96 was well below the 24 per cent average registered by developing countries as a group and the 30 per cent in Asia over the same period.4 Thirty-three of the 41 countries identified by the World Bank as Heavily Indebted Poor Countries (HIPCs) are in Africa. Some of these countries are using up to 40 per cent of their exports to service debts. Even some North African countries, none of which is an HIPC, are using up to a quarter of export earnings in debt servicing.5 As regards capital flight, it has been estimated that private citizens hold 39 per cent of Africa’s stock of wealth overseas. The comparable figure for Asia is 6 per cent.6 In addition to the need to increase external financial flows to Africa, the reversal of capital flight will also help to ease the development finance constraints in the region. As we have seen in Chapter 1, notwithstanding the increasingly sound macroeconomic fundamentals in African countries, their economic recovery remains precarious. The recovery has been due largely to improved policies and the relatively strong performance of commodity prices during the mid-1990s. To this extent, a vigorous supply response to increasing resource flows and investment has not driven the recovery. A good policy environment now exists in much of Africa. More than at any time in the post-independence period, foreign aid and investment are needed to sustain and translate the recovery into stronger growth. The conditions are especially propitious for external resource flows to be used to make a major difference in addressing the main economic question in Africa – the well-known and long-standing

The Paradox of Financial Flows 37

structural weaknesses and supply-side bottlenecks in the region. These are constraints such as the lack of financing and investment in physical infrastructure, human resources, and in sectors and products where value-added is greater, productivity growth is faster and demand elasticities in world markets are higher. As the World Bank has noted, ‘the good news…is that many poor countries have initiated serious reforms in policies and governance, so that the climate for effective aid is the best that it has been in decades’.7 I now propose to examine the financial constraints that confront Africa in relation to external financial flows, debt, domestic savings, and capital flight to illustrate the extent of the resource gap faced by these countries in this critical period of favourable prospects for sustainable recovery. I will argue that easing these constraints could enable Africa to address more meaningfully its main economic question, to become more fully established on the road toward sustainable growth and development, and to respond more adequately to the challenges of regional integration as well as integration into the global economy.

External financial flows External financial flows are made up of two main elements: official flows and private flows. Official flows consist of grants and loans from bilateral and multilateral sources. Private flows consist of commercial bank loans, bonds and related instruments, FDI, and portfolio equity flows. This section examines the trends exhibited by these flows during the 1990s. Official flows As previously noted, official development finance (ODF) is the term used for all official flows including concessional and non-concessional flows from bilateral and multilateral donors. Official development assistance (ODA) flows constitute what is more popularly referred to as foreign aid. ODA flows consist of grants and loans from bilateral donors or channelled through the multilateral institutions. The main donors are the OECD countries and within this group, the Development Assistance Committee (DAC) members. Since the end of World War II, the use of ODF to promote growth and development has been a significant dimension of international relations. In the UN system and the Bretton Woods institutions, the institutional framework was established to meet these and related


objectives. The years that followed saw the expansion of the multilateral system, including the establishment of regional development banks alongside the growth of the bilateral system, centred on national donor agencies, as the scale and scope of development challenges became clear. Cold War competition between the western and Soviet bloc countries for influence in the developing world, including the interest of the former in containing communism, was also a key factor in this expansion. Indeed, during the 1970s and up to the late 1980s, there was significant expansion in the volume of net ODF, consisting of concessional and non-concessional finance from bilateral and multilateral sources. But from the early 1990s, ODF has declined in both real and nominal terms. Table 2.1 shows an overall downward trend in both net concessional and non-concessional flows in nominal terms.8 The downward trend in the flow of ODF is also reflected in the trend in the flow of ODA from the OECD–DAC countries. During the 1980s, ODA as a proportion of the combined GNP of DAC countries remained stable at around an average of 0.35 per cent. The 1990s, however, saw ODA decline from 0.33 per cent in 1992 to 0.27 per cent in 1995. By 1997, the latest year for which figures were available at the time of writing, ODA as a proportion of the GNP of these countries had declined to 0.22 per cent – the lowest level of foreign aid recorded in post-World War II era. It is now less than a third of the target of 0.7 per cent of donors’ GNP adopted by the United Nations in 1970 and the trend is in the downward direction away from this target.9 The corresponding GNP share of ODA to least developed countries (LDCs) from the DAC countries followed this general trend during the 1990s. ODA flows to LDCs, as a ratio of donor GNP was 0.05 per cent in 1997 compared with 0.09 per cent at the beginning of the decade.10 This ratio is also well below the recommended target of 0.15 per cent that was agreed at the first UN Conference on LDCs held in Paris in September 1981. Net ODA flows peaked in 1991 when they reached $69 billion in 1995 prices. In 1997 the level of ODA was $47.6 billion in current prices. It should be noted, however, that four DAC countries – Denmark, the Netherlands, Norway and Sweden – have maintained their ODA to GNP ratios at or above the 0.7 per cent target set by the UN and also above the 0.15 percent target for aid to LDCs. Among the major donors, Denmark increased its ODA ratio from 0.9 in 1986 to more than 1 per cent a decade later. France has maintained a ratio of around 0.5 per cent, while other countries including Canada, Japan, the UK and the USA have recorded a decline of between 15 and 50 per cent.

3.2 15.9

0.1 14.3 1.2 18.0

54.0 44.0 30.5 13.5 7.0 6.5 10.0 4.5 5.5

1992

1.7 18.6

53.3 41.5 28.3 13.2 6.7 6.5 11.8 3.4 8.4

1993

1.6 17.3

45.5 45.8 32.4 13.3 5.6 7.8 –0.3 –2.5 2.3

1994

16.8 20.6

53.4 44.7 32.3 12.3 5.1 7.2 8.8 5.0 3.7

1995

1.0 19.4

32.2 40.1 28.9 11.2 2.9 8.2 –7.9 –12.7 4.8

1996

14.7 17.0

39.1 33.4 25.7 7.7 0.2 7.4 5.7 –8.0 13.7

1997

21.0 16.1

47.9 32.7 23.0 9.7 2.8 6.9 15.2 0.8 14.4

1998a

Note: Although the Republic of Korea is a high-income country, it is included in the developing country aggregate since it is a borrower from the World Bank. a Preliminary Source: World Bank, Global Development Finance Report, 1999, p. 70.

62.6 51.0 35.3 15.7 9.3 6.4 11.6 3.9 7.6

1991

56.9 44.8 29.2 15.6 9.6 6.0 12.1 2.9 9.2

1990

Net official long-term flows to developing countries, 1990–8 (billions of US dollars)

Official development finance Concessional finance Grants Loans Bilateral Multilateral Non-concessional finance Bilateral Multilateral Memo items Use of IMF credit Technical cooperation grants

Table 2.1

39


Among the DAC countries, Japan provided the highest volume of net ODA in 1997 ($9.4 billion or 0.22 per cent of GNP), followed by the United States ($6.2 billion or 0.09 per cent of GNP), France ($6.3 billion or 0.48 per cent of GNP), and Germany ($5.9 billion or 0.28 per cent of GNP).11 These four countries also accounted for half of all DAC aid to LDCs in 1997.12 The Group of 7 leading industrial countries has been mostly responsible for much of the decline in ODA. Japan, the largest donor in volume terms, announced a 10 per cent cut in ODA in 1998 as part of a package of measures to boost the domestic economy. Some of the cut however, was restored in a supplementary budget. In the USA, where the ratio of ODA to GNP was halved during the last decade, aid fell victim both to tighter fiscal policies aimed at achieving a balanced or surplus federal budget and to public scepticism about its effectiveness. Opinion polls have shown continued public concern over the funds devoted to ODA, in part because of exaggerated perceptions of aid’s share in the federal budget (currently about 1 per cent). In Germany, ODA has been crowded out by the costs of reunification. Italy reported a 45 per cent cut in ODA between 1996–7 reflecting a drop in funds available for grants, net loans and multilateral contributions.13 The UK, on the other hand, recorded the smallest decline in ODA among the G7 during the 1990s and the Labour Government which came to power in 1997 announced increases in the ODA to GNP ratio for the coming years. Canada, where substantial cuts in ODA were made during the 1990s, announced a similar commitment. The share of GNP devoted to ODA by G7 countries in 1997 ranged from a high of 0.48 per cent for France to a low of 0.09 for the USA.14 By contrast, ODA from non G7 countries has remained stable in nominal terms and averaged 0.46 per cent of their combined GNP in 1997. ODA rose in real terms in 12 of the 14 countries in this group,15 with Sweden and Ireland announcing increases in 1998. The level of ODA is also expected to rise in the Netherlands where there is a political commitment to keep ODA at 0.8 per cent of GDP.16 But in the Euro zone, in general, continued efforts to meet the Maastricht monetary union target for fiscal deficits (3 per cent of GDP) have restricted the scope for real increases in ODA. One positive development worth noting was the successful conclusion of negotiations for the replenishment of the resources of the International Development Association (IDA) and the African Development Fund (ADF), both of which are important windows of finance for low income African countries. Donors approved the twelfth


replenishment of IDA, (IDA-12), for the period 1999 to 2002 that will allow the IDA to provide concessional lending of $20.5 billion. Of this amount, $11.5 billion were new pledges. Similarly, the eighth replenishment of the ADF (ADF-8) for the period 1999–2001 amounted to $3.5 billion, maintaining in nominal terms the level of resources that had been available through this window since the mid-1990s.17

Explaining the decline in ODA There are three main explanations for the downward overall trend in ODA. First, the emergence during the 1980s of a new orthodoxy, the ‘Washington consensus’, emphasized that stable macroeconomic policy, trade liberalization, ‘getting prices right’, reliance on market forces and minimal government interference, rather than interventionist policies supported by foreign aid, was the best way to bring about development. The collapse of the socialist economies during the latter part of the decade and a superficial reading of the reasons for the remarkable success of the Asian ‘tiger’ economies added momentum to this dogma. However, as noted in the Introduction, there has been a serious rethinking of the main tenets of the ‘Washington consensus’ which has led to a major retreat from its emphasis on minimal government. Second, the end of Cold War rivalries also brought an end to the use of aid as an instrument for securing influence in the developing countries as part of the ideological competition between the western and former Soviet bloc countries. As the former Soviet bloc countries turned inward and became increasingly preoccupied with internal transition activities, their aid programme literally collapsed. To this extent, the ‘peace dividend’ that was expected to boost the financing of ODA at the end of the Cold War has not materialised. By the mid1990s, the countries of the former Soviet bloc had not only become net recipients of official resource transfers from developing countries mostly through debt service and repayment rescheduling, but also received around $7.5 billion in official assistance (OA) flows from OECD–DAC countries. The latest figure for 1997 is around $6 billion, also reflecting the downward trend in all official flows.18 The third general explanation for the downward trend in aid during the 1990s has been the relentless globalization of the world economy. This process is accelerated by far-reaching technological changes, especially the ongoing revolution in information technology as well as by increasing cross-border flows of goods, services and other factors of production. This, indeed, is reflected in the phenomenal increase in


private capital flows during the 1990s. Private flows – which are discussed below – from OECD–DAC countries to (mostly middle-income) developing countries, which in 1970 were around $30 billion in 1995 prices, increased to well over $200 billion in 199719, to become exceedingly far more important than ODA in volume terms. In the globalized economy, which is characterized by massive flows of private capital, it would appear developing countries are expected to depend more on this source than on ODA for financing their development. In addition to, and reinforcing, the above three factors as explanations of the declining trend of ODA has been aid fatigue in donor countries. The fatigue is partly a by-product of the perception in these countries of aid misuse in recipient countries. This perception has not given adequate credit to the political and economic policy reforms adopted by many African countries with a view to improving the efficiency of resource allocation and utilization. Notwithstanding the explanations for the downward trend in ODF during the 1990s, there is abundant evidence suggesting an increased rather than reduced need for aid. As will be seen in Chapter 3, the 1990s was also the decade that the international community formed a carefully negotiated consensus at the series of world conferences on the need to make an effective advance on global poverty and social deprivation. Yet, according to the World Bank, the number of people in low income countries living in poverty (defined as living on US$1 or less a day) rose from 1.2 billion in 1987 to 1.3 billion in 1993. And while life expectancy has risen in developing countries (from 56 years to 63 for males and from 59 years to 66 for females between 1980 and 1995), access to education and health services has worsened. The number of people aged 15 years and above in developing countries who are illiterate rose from an estimated 848 million in 1980 to 872 million in 1995. The number of people per hospital bed rose from 921 in 1980 to 950 in 1993.20 African reality is fully reflected in this global picture. As was seen in Chapter 1, about half the population of Africa are income poor – that is, living on $1 or less a day – although there are variations in the depth and incidence of poverty and social deprivation between and within the regions and sub-regions of the continent. This is the highest proportion of all the continents. While Africa’s vulnerabilities have been fully recognized in such programmes as the UN Programme of Action for Africa’s Economic Recovery and Development (1986), the UN New Agenda for the Development of Africa in the 1990s (1991) and in the UN System-Wide Special Initiative on Africa (1996), resource flows required by the region have simply not been forthcom-


ing. The resource squeeze is coming from two directions. Net official development assistance (ODA) flows to Africa continue to register a downward trend both in real terms and in relation to the GDP of recipient countries. Private capital flows have not been enough to bridge the gap. Indeed, the new global motors of finance appear to have by-passed the region almost entirely. Meanwhile, the debt overhang remains critical in the determination of resource availability in most countries. These issues are the focus of the sections that follow. Private flows The picture painted above shows that after years of expansion, official flows were characterized by a declining trend throughout the 1990s. The reverse has been the case for net long-term private flows – defined as the sum of private debt flows (including commercial bank lending and bond finance), portfolio equity flows and foreign direct investment – which, generally, have surged throughout the decade although fluctuations have not been unknown. At the beginning of the decade, net ODF stood at $56.9 billion and net private flows to developing countries was $43.9 billion. Eight years later, by 1998, ODF had declined to $47.9 billion while private flows had soared to $227.1 billion (see Table 2.2). The largest component of net private flows is foreign direct investment, which stood at $155 billion in 1998, a substantial decrease from $163.4 billion in 1997, associated with the contagion effect of the East and South-east Asian crisis. This is followed by bonds, which grew from $1.2 billion in 1990 to $30.2 billion in 1998, also down from the peak of $53.5 billion in 1996 and $42.6 billion in 1997. Next is commercial bank lending, which stood at $25.1 billion in 1998, down from $60.1 billion in 1997. Portfolio equity investments stand fourth in size among the major components of private flows. This instrument increased substantially between 1990 and 1993, but is also prone to wide fluctuation (reflecting its relative volatility). In 1998, equity flows came to $14.1 billion, down from the peak of $51 billion in 1993. Africa, however, has hardly benefited from the phenomenal, though intermittent, growth in private flows. A more detailed assessment of the trends in these flows to Africa follows. Foreign direct investment (FDI) Throughout the 1990s, Africa’s share of overall FDI flows to developing countries did not exceed 5 per cent. Its share in total outflows from the European Union, Japan and the United States – the ‘Triad’ constituting

123.1 62.6 60.5 26.2 18.6 4.8 10.8 3.0 7.6 34.4

1991 152.3 54.0 98.3 52.2 38.1 16.3 11.1 10.7 14.1 46.1

1992 220.2 53.3 167.0 100.0 49.0 3.3 37.0 8.6 51.0 67.0

1993 223.6 45.5 178.1 89.6 54.4 13.9 36.7 3.7 35.2 88.5

1994 254.9 53.4 201.5 96.1 60.0 32.4 26.6 1.0 36.1 105.4

1995 308.1 32.2 275.9 149.5 100.3 43.7 53.5 3.0 49.2 126.4

1996

338.1 39.1 299.0 135.5 105.3 60.1 42.6 2.6 30.2 163.4

1997

275.0 47.9 227.1 72.1 58.0 25.1 30.2 2.7 14.1 155.0

1998a

Note: Net long-term resource flows are defined as net liability transactions of original maturity of greater than one year. Although the Republic of Korea is a high-income country, it is included in the developing country aggregate since it is a borrower from the World Bank. a Preliminary Source: World Bank, Global Development Finance Report, 1999, p. 24.

100.8 56.9 43.9 19.4 15.7 3.2 1.2 11.4 3.7 24.5

1990

Net long-term resource flows to developing countries, 1990–8 (billions of US dollars)

Net long-term resource flows Official flows Private flows From international capital market Private debt flows Commercial banks Bonds Others Portfolio equity flows Foreign direct investment

Table 2.2

44


the most important source regions for FDI flows – became even lower as other developing regions became more attractive investment locations. Until 1996, it never exceeded 2 per cent, increasing to 2.4 per cent in 1997.21 Moreover, the available data show that ten countries – Algeria, Angola, Côte d’Ivoire, Egypt, Gabon, Morocco, Nigeria, South Africa, Tunisia and Zimbabwe – accounted for over 60 per cent of all FDI inflows to the region in 1998. The 33 LDCs in Africa received around a third of FDI inflows to the region in 1998 but at around $2.2 billion their share remained very low. In volume terms, Africa as a whole attracted $8.3 billion in FDI in 1998, compared to the record $9.4 billion achieved in 1997. The decrease in 1998 was largely accounted for by reduced inflows for privatization projects, especially in South Africa.22 The total FDI flow to the whole of Africa in 1998 was around a third of what Brazil received and about the same as what Singapore and Ireland received in 1998.23 As was observed during the launch of the 1998 World Investment Report, ‘there is gross under-investment in Africa. Despite our efforts to put in place economic reform programmes, this single fact is responsible to a substantial degree for the enormous economic problems we face and the scale of poverty that can be found among our people’.24 Africa’s low share of FDI flows is somewhat surprising in view of evidence that indicates rates of return on investment in the continent exceed those in other developing regions, although this also reflects the scarcity of capital. One estimate for the period 1990–94 suggests that rates of return on FDI in the region averaged 24–30 per cent, compared with 16–18 per cent for all developing countries.25 More recent data from UNCTAD confirm this position.26 Most of the FDI flows to Africa are from the UK, France, the USA, Germany, Japan and the Netherlands. France became the single most important investor in the region during 1992–6 when it overtook the UK, which had held this position during 1987–91. In recent years FDI flows to Africa from Asia have also increased significantly due mainly to the activities of transnational corporations in South Korea, Malaysia, Taiwan Province of China, and China.27 The extractive sector, especially mineral and energy resources, is the destination of most of the FDI inflows into Africa. UNCTAD has described this phenomenon as resource-seeking investment.28 Resource-seeking investment accounts for around 40 per cent of investment flows. However, there is evidence of significant increases in market-seeking investment (that is, investment in the production and


distribution of goods and services) and efficiency-seeking investment (that is, investment in sectors that require specific types of comparative advantage such as low labour costs for textiles, or the availability of appropriate skills in the labour force such as is required for some manufacturing or services activities). Indeed, the manufacturing and services sectors together accounted for 57 per cent of the destination of FDI inflows to Africa in1996.29 Privatization has also emerged as an important mechanism of attracting FDI to Africa. Total proceeds from privatization in Africa, south of the Sahara, were estimated at $2.3 billion in 1997, although South Africa alone accounted for over half of this amount. Sales in the telecommunications sector raised more than $1.7 billion – or 72 per cent of total regional proceeds.30

Private debt flows Africa’s relatively small share of FDI flows to developing countries is also reflected in its share of private debt flows such as bonds and commercial bank loans, as well as portfolio equity flows. Bond and portfolio equity flows are of relatively recent origin in most of Africa. South Africa and Tunisia account for virtually all of the bonds that have been issued from the region in recent years. Bond issues in 1997 were around $500 million.31 Portfolio equity flows to Africa which were zero in 1990 increased during the decade, from around $100 million in 1993 to $2.1 billion in 1997. Most of these flows went to South Africa and Egypt.32 The relatively advanced capital market in South Africa is the explanation for its dominant position in bond and portfolio flows. For the rest of Africa, concerns about macroeconomic stability, political and market risks including apprehension about emerging markets in general are among the factors that account for the low bond and equity flows to the region. These concerns cannot be fully justified at a time of political reforms, increasingly sound macroeconomic fundamentals in most African countries, improvements in prudential supervision and the regulatory framework of capital markets as well as the growing liberalization and internationalization of domestic markets. In 1997, there were 15 stock markets in the region with the major markets located in South Africa, Nigeria, Egypt, Kenya, Zimbabwe, and Morocco. Smaller markets exist in Côte d’ Ivoire, Tunisia, Mauritius, Malawi, Botswana and Ghana, among others. There are plans to convert the Abidjan stock exchange into a regional market. It is noteworthy that during 1997, when emerg-


ing markets as a whole lost ground, the Botswana stock exchange topped the world league table with a 101 per cent local currency gain and a 93.5 per cent rise in US dollar terms.33 Commercial bank loans Commercial bank loans to Africa recorded negative balances for most of the 1990s, but rose to around $4 billion by 1997. Here, again, South Africa accounted for much of commercial bank lending to Africa, although a number of countries including Côte d’Ivoire, Ghana, Namibia, Zambia and Zimbabwe have been able to attract loans.34 The failure of commercial bank flows to Africa to pick up during the 1990s is in sharp contrast to the experience of other developing regions where commercial bank lending has witnessed a sharp turnaround during the 1990s. The main explanation for the lack of commercial bank flows to Africa is the continuing problem of debt overhang. In other regions such as Latin America, economic and policy reforms were accompanied by a decisive resolution of the debt crisis. The restoration of access to financial markets and the marked improvement of credit worthiness ratings during the 1990s swiftly followed. In Africa, however, effective debt relief continues to lag behind economic reforms and the improvement in macroeconomic performance. As a result, the credit ratings of most African countries have remained much lower on average and are only just beginning to improve, reflecting growing market recognition of the changed macroeconomic situation. Low levels of commercial bank borrowing also reflect a tendency of African governments to restrict such borrowings in the context of the effort to qualify for debt relief. In summary, the overwhelming message from the trends exhibited by external flows to Africa during the 1990s is that ODF resources have failed to support African economic recovery in a dynamic or effective way. Private flows are yet to make up for this deficiency. Indeed, private flows are only a trickle and represent an insignificant share of flows to all developing countries.

External debt In an address to the UN Economic Commission for Africa Conference of Ministers in May 1999, the problem of debt overhang in Africa was described as ‘the mother of all our economic difficulties’.35 This is not an exaggeration. Relative to Africa’s income, the size of the debt is such


that there is no realistic prospect for it to be repaid. The recovery will, therefore, remain sluggish without a cancellation of the debt or, at least, its reduction to low and sustainable levels. This also has to be seen in the broader context of declining ODA flows and low average rates of savings. Moreover, as the UN Economic Commission for Africa has argued, the resolution of Africa’s debt has great potential as a nonconventional source of development finance.36 Yet there has been considerable resistance to this, most obvious, conclusion. As part of economic reform programmes supervised by international financial institutions, African governments have been put under tremendous pressure to pay. Debt servicing and repayment is the priority of these programmes rather than the need to support the recovery as the basis of long-term growth and transformation. According to one analysis, ‘when debt repayment comes first, with macroeconomic adjustment policies imposed by creditors, health and education budgets are squeezed to the bone. So are other long-term investments that are necessary for development.’37 The insights of Gordon Brown, the British Chancellor of the Exchequer, on the significance and gravity of the debt overhang is illuminating. He has described poor country debt as ‘the greatest moral issue of our day’ and ‘the greatest single cause of poverty and injustice across the earth and potentially the greatest threat to peace’.38 Despite recognition of the seriousness of the problem, it is yet to be addressed decisively and comprehensively through coordinated international action. No viable exit strategy for the most indebted countries has emerged from the various initiatives that have been taken by the governments of the leading creditor countries and the international financial institutions that fall under their control. Little wonder that civil society – including religious groups – have embarked on an energetic campaign to sensitise international opinion about the problem. How did this debt come about? What are its dimensions? What are the efforts that have been made to address the problem and how far have they succeeded? What is required to resolve this ‘mother of all our economic difficulties’? These issues will be considered in the next section. The origins of Africa’s external debt can be traced back to the 1970s. Against the background of falling commodity prices and rising import costs, African governments, encouraged by international financial institutions, resorted to heavy borrowing to sustain imports and investment, mostly within the state sector. The prevailing consensus within these institutions at the time advocated the adoption of a debt-led strategy of growth in which expansion of the state sector was seen as


the best way forward for developing countries. Public industrial enterprises, large-scale agriculture and rural development projects, and other capital-intensive ventures were financed within the framework of this strategy. This pattern of spending in the state sector fuelled corruption and suited the purposes of those governments that were so inclined. From a base of $3 billion in 196239, Africa’s debt had climbed to $111 billion by 1980.40 The Cold War played a part. Anxious to retain the loyalty of African governments in the context of East–West rivalries, the financing required for the debt-led strategy of growth was made easily available by the major powers or through the institutions they controlled. By the early 1980s, the strategy collapsed under mounting evidence of relative inefficiencies in the state sector and the twin pressures of rising interest rates and declining terms of trade. Under the supervision of international financial institutions, economic reform programmes that followed ushered in an austere climate, but accorded priority to the servicing of the debt that had been accumulated in the previous decade. Despite the tight fiscal and monetary regime that was introduced, the debt burden remained and began to grow as interest payments skyrocketed. In effect, structural adjustment programmes attempted the impossible feat of trying to pay off more debt with less income. This simply allowed unpaid debt to mushroom. Indeed, analysis provided by UNCTAD shows that continuous growth in arrears is one of the main dimensions of African debt. For Africa south of the Sahara, accumulated arrears on interest and principal payments reached $64 billion in 1996, amounting to about 27.4 per cent of the total debt of $234 billion. Two-thirds of the increase in debt since 1988 has been due to arrears.41 Other dimensions of African debt underscore the severity of the problem and yet an effective solution lies within the ambit of the rich creditor nations. By 1997, 93 per cent of the debt of African countries south of the Sahara was public or publicly guaranteed. Almost 80 per cent of this amount is owed to official creditors, with bilateral official creditors accounting for 46 per cent and multilateral creditors accounting for 33 per cent. The debt problem in that part of Africa is therefore essentially one of official debt.42 In contrast, 40 per cent of North Africa’s debt is owed to commercial creditors.43 Around half of official bilateral debt is concessional with long repayment periods and low interest rates. Multilateral debt is owed mainly to the World Bank and IMF. Borrowing from these institutions increased in importance during the 1980s as credit from other sources dried up and


repayments mounted. Under current rules, neither the Bank nor the Fund can reschedule or write-off debt. Indeed, the nonrescheduling of multilateral debt has generally negated the positive efforts of some bilateral creditors in reducing bilateral debt in recent years. Although Africa’s external debt is only a small part of the total debt of developing countries, as a proportion of exports and GDP it is the highest of any developing region. Moreover, unlike other developing regions, these ratios have exhibited a rising trend since 1988, when creditors first recognized the need to introduce debt reduction as a central element of an international debt strategy dealing with the debt problem of poor countries. As the debt climbed, a series of rescheduling – in effect postponement of payment – initiatives were taken labelled according to the venue – Venice, London, Toronto, Naples, Lyon and so forth – where they were agreed. These initiatives have proved bewildering, complicated and time-consuming for all concerned, involving several thousand meetings over the past fifteen years. Yet they did not solve the problem. In effect, the role of these initiatives was to spin out the economic difficulties facing the countries concerned and shift the debt down the line for repayment at a later date.44 The initiatives have failed to deal with the problem because they were predicated on the assumption that the problem is essentially one of temporary liquidity. This is far from the case. The African debt crisis is not just a liquidity problem. It is also a solvency problem, the roots of which are embedded in the continent’s development problématique – the main economic question. Thus what is required is significant amounts of debt reduction to eliminate the overhang and restore growth. This is in fact what has happened in Latin America, where the restructuring of its mostly commercial debt was designed to deal decisively with the problem of overhang. The persistence of the debt overhang was the notable outcome of almost a decade of debt reduction operations that went through many incremental steps from Toronto Terms to London Terms to Naples Terms to Lyon Terms, and so on as improvements made in each step failed to address the question. By the mid-1990s it was clear that the problem required radical measures, including action on multilateral debt, which hitherto had been regarded as untouchable. It is against this background that the Highly Indebted Poor Country (HIPC) Initiative was launched in 1996. The HIPC Initiative embodies a comprehensive and coordinated approach that recognizes the key role that multilateral financial insti-


tutions played in setting policies in debtor countries. Multilateral debt relief is accordingly included within its remit. The initiative has been formulated in recognition of the need for debtor countries to reach a sustainable debt position in the context of growth and development. But from the start, the HIPC Initiative was plagued by limitations in its design. The basic issues relate to eligibility and adequacy of debt reduction to be granted, as well as the speed with which countries in need will actually benefit from relief. The initiative requires a HIPC to spend six years under IMF supervision before qualifying for relief. This is far too long (see Figure 2.1 for a summary of the HIPC programme). Moreover, while the HIPC Initiative is designed to reduce debt to a ‘sustainable’ level, the measurement of sustainability is based mainly on the ratio of service payments to export earnings. As UNCTAD has argued, there can be little doubt that since all the debt has to be paid in foreign currency, export earnings are an important determinant of debt-servicing capacity.45 However, as very large proportions of debt are owed by the public sector, the debt burden relative to government revenues is at least equally relevant in determining debt-servicing capacity. Even when the economy generates sufficient export earnings and faces no external financing gap, servicing of external sovereign debt could pose serious difficulties. It could necessitate a transfer from the private to the public sector through either cuts in public spending or increases in taxation, both of which could have serious consequences for stability and growth. A better measurement of a country’s ability to pay would be a ratio of service payments to government revenues. For African countries, this measurement is all the more relevant as most of the debt owed is official debt. This specific shortcoming in regard to measurement was recognized in 1997 when the HIPC Initiative was modified with the introduction of an additional sustainability criterion. This allowed for debt reduction if the debtor country has, inter alia, an export-to-GDP ratio of at least 40 per cent and a minimum threshold ratio of fiscal revenue-to-GDP of 20 per cent. While eligibility, according to this criterion, will depend on having a minimum fiscal revenue ratio, one of the arguments advanced in favour of debt relief is that it would allow debtor governments to reduce high taxes which tend to undermine growth by introducing serious distortions in the economy, including heightened barriers to trade (via trade taxes), capital flight, tax evasion and reduced work effort. Despite the welcome improvement of the additional criterion, the HIPC Initiative which was heralded as a comprehensive solution to the

52

•

•

•

•

Entry Point

Decision Point

Completion Point

First Stage (3 years)

Second Stage (3 years)

Third Stage

Paris Club provides flow rescheduling as per current Naples terms (67% reduction, on a present value basis) Other bilateral and commercial creditors provide at least comparable treatment. Multilateral institutions continue to provide adjustment support in the framework of World Bank/IMF supported adjustment programme. Country establishes first track record of good performance.

•

•

•

•

•

Paris Club provides more concessional flow rescheduling including up to 90% debt rescheduling (as needed on a case-bycase basis). Other bilateral and commercial creditors provide at least comparable treatment. A special Consultative Group meeting is convened to agree on a financing plan and identify additional relief needed for the country to achieve debt sustainable at the completion point. Donors and multilateral institutions provide enhanced support. Country establishes a second track record of good performance under IMF and World bank programmes.

•

Paris Club provides deeper stock-ofdebt reduction of up to 90% (as needed on a case-by-case basis)

•

Other bilateral and commercial creditors provide at least comparable treatment.

•

Multilateral institutions take such additional measures, as may be needed, for the country to reach a sustainable level of debt, each choosing from a menu of options and ensuring broad and equitable participation.

Decision point Either Paris Club stock-of-debt operation under Naples terms and comparable treatment by other creditors adequate for the country toreach sustainability – country not eligible for HIPC initiative. Or Paris Club stock-of-debt operation (67% reduction of eligible stock-of-debt) not sufficient for the country’s overall debt to become sustainable – country request additional support under the HIPC Initiative and Executive Boards determine eligibility.

Figure 2.1

Summary of the HIPC Initiative

Source: IMF/World Bank; A Framework for Action to Resolve the Debt Problems of HIPCs, April 1996.


debt trap at its inception, has not worked. Speed of debt relief, in particular, proved a telling point. During 1998 and 1999, only six countries completed the HIPC process (Uganda, Bolivia, Guyana, Mozambique, Mali and Burkina Faso).46 The question of ability to pay and the need to re-establish the conditions for sustained growth has remained a thorny issue. In particular, while the addition of the fiscal burden criterion has somewhat broadened the range of eligibility and the scope for debt relief, it does not appear to go far enough in restoring the financial viability of the public sector, which holds the key to restoring stability and growth. It is with these considerations in mind that advocacy was made for greater attention to be paid to the fiscal burden of debt (for example, setting limits to the amount of debt servicing from the budget expressed as a proportion of GDP).47 Further, advocacy for this measure was to be applied independently of the degree of export orientation of the economy and the extent to which debt-servicing cuts into export earnings in assessing debt sustainability. Indeed, the campaign of the NGOs in the run up to the 1999 Group of 7 Summit in Cologne, seized upon the importance of this measure. The campaign pointed out repeatedly and graphically that poverty and social deprivation cannot adequately be addressed when the proportion of the fiscal budget in the HIPCs going into debt-servicing is too high. Something, indeed, is wrong if a poor country is forced to spend more on debt-servicing than on pressing priorities like health care and education. It was in recognition of these shortcomings that, under tremendous political pressure, the G7/G8 Summit in Cologne in June 1999 issued recommendations for the ‘enhancement’ of the HIPC Initiative, aimed at making debt relief deeper and faster. Other objectives were broadening the initiative (expanding the number of eligible countries) and strengthening the link between debt relief and poverty reduction. Specific proposals to this end, based on the Cologne recommendations, were subsequently endorsed at the IMF and World Bank meetings in September 1999 as an Enhanced HIPC Framework. This was to be financed through new pledges of bilateral contributions and the financing of the IMF’s participation through the sale of up to 14 million ounces of the institution’s gold stocks. The main elements of the Enhanced HIPC Framework are: • The lowering of debt sustainability thresholds to provide a greater safety cushion, and better prospects for a permanent exit from unsustainable debt. In particular, the export-to-GDP ratio has been


reduced from 40 per cent to 30 per cent and the fiscal revenue-toGDP ratio has been reduced from 20 to 15 per cent; • The provision of faster debt relief through interim assistance; • The introduction of ‘floating’ completion points that would shift the focus of assessment towards positive achievements and outcomes rather than the length and track record; and • The (resulting) increase in the number of countries expected to be eligible for debt relief.48 While the Enhanced HIPC Framework is a considerable improvement, experience so far demonstrates that the approach to debt reduction, as has been applied, is inadequate. Not only has it perpetuated aid dependency, but it has also failed to promote sound policies and commitment and ownership of debt reduction programmes. Resolving the crisis of African debt requires a bolder approach in order to secure the rapid and adequate reduction of debt needed to restore the financial viability of the public sector and economic growth, and in order to ensure that the operation will never have to be repeated.

Capital flight Capital flight may be regarded as another non-conventional source of development finance but there are various methodological problems with its definition, calculation and estimation. The definitional issue concerns the fact that outflows from developed countries are called foreign investment while from developing countries the same activity is called capital flight. Investors from developed countries are seen as responding to investment opportunities while investors from developing countries are said to be escaping the high risks perceived at home. In practice, therefore, the variety of definitions that has been proposed is a reflection of the analyst’s judgement on the dividing line between normal capital outflows and capital flight.49 From a policy perspective, however, there are at least three important reasons why there is concern about capital outflows from developing countries in general, and from African countries in particular, which are currently facing severe financial constraints. First, capital that is exported cannot contribute to domestic investment. To this extent, capital flight is a diversion of domestic savings from real investment. Second, income and wealth generated and held abroad are outside the purview of domestic authorities, and therefore cannot be taxed. Thus, potential government revenue is reduced,


thereby constraining policy implementation and debt-servicing capacity. Third, income distribution is negatively affected by capital flight, where taxation is avoided.50 Although there are methodological problems in estimating capital flight, there is evidence that capital flight is a serious problem in Africa. An important study of 18 countries in Africa south of the Sahara suggests that between 1982 and 1991 there was a cumulative outflow of some $22 billion from the countries in the sample. The study estimates the average capital-flight-to-debt ratio for the 18 countries at 40 per cent.51 However, the study found no evidence of a linkage between external debt and capital flight. In other words, no evidence was found of flight-driven external borrowing (borrowing to replace exported capital) or debt-driven capital flight (capital exported because of the uncertainties associated with debt overhang).52 This is a significant finding and implies that even though there is a serious incidence of capital flight in some countries, this is not necessarily associated with the debt problem. It is a finding that is also consistent with the historical record of the origin of the debt problem in African countries. Moreover, it contradicts the view often expressed by creditor governments and agencies that meaningful discussion of the solutions to Africa’s external debt will need to wait until the issues of capital flight are sorted out. In other words, solutions to capital flight should be made a precondition to discussions on debt relief. This, however, is not to underestimate the seriousness of the problem of capital flight in Africa. The economic causes of capital flight include perceptions of relative risk, exchange rate misalignments, financial sector constraint and/or repression, and fiscal deficits. Other causes include corruption and graft. Econometric analysis clearly shows that domestic macroeconomic policy failures are the culprit in capital flight. Of particular significance are the policy failures that cause inflation, exchange rate misalignment (generally currency overvaluation), high fiscal deficits and the lack of opportunities for profitable investment within the domestic economy.53 As regards the economic causes of capital flight, the policy response would require establishing a stable macroeconomic environment, avoiding an overvalued exchange rate, maintaining a fairly liberalized financial system and trade policy framework consistent with broader development objectives, effective property rights, investment incentives, and stable exchange rates. Last but not least, the establishment of greater political stability is also critically important. Where policies which meet these objectives have been sustained, there is evidence of a


reversal of capital flight. Among the 18 countries in the study cited earlier, there was a notable reversal of capital flight during the late 1980s and early 1990s in Côte d’Ivoire, Central African Republic, Sierra Leone, Uganda, Ghana, and Kenya in line with the achievement of political stability and macroeconomic stabilization there. As the macroeconomic situation improved in most African countries during the 1990s, further reversal of capital flight was expected. However, there is evidence from Latin American experience that capital flight reversal (or capital re-flow) has implications for macroeconomic stability because of the pressure exerted on exchange rate appreciation. This requires an appropriate policy response from Central Bank authorities. As regards capital flight that originates from corruption and graft, it has been proposed that what is required is a change in the banking regulations of those developed countries where these funds tend to be invested.54 This solution follows the observation that much of the capital flight from Africa appears to have originated from illicit diversion of public funds rather than from business incomes seeking economic stability or high incomes abroad. To that extent, market confidence and policy credibility probably play a minor role in decisions about where the capital is invested. It is also worth keeping in mind that the brain drain – the emigration of highly skilled personnel – is just as devastating to development prospects as capital flight. Like capital flight, policies that contribute to economic and political stability, as well as the attraction of inward investment are the crucial elements of a strategy of skill accumulation, including the return of skilled workers from abroad.55 While the reversal of brain drain must constitute a key element of development strategy, it needs to be conceded that in some cases the export of labour and associated remittances can contribute to solving the resource gap.

Savings As most African countries are in the low-income bracket, it is generally recognized that a significant autonomous increase in the domestic savings rate is not feasible as a way of accelerating growth. Rather, efforts would have to be directed at increasing output and income; greater utilization of existing resources including external financial flows; a satisfactory resolution of the debt burden; and improving the allocation, quality and efficiency of investment.


As was seen in the discussion of the various dimensions of the recovery in Chapter 1, savings rates in Africa have been low, as have investment rates. While savings performance varies between countries, African countries have lower savings and investment rates than other less developed countries. According to UNECA estimates, in 1997 domestic savings as a percentage of GDP was 17.6 per cent (compared to 24 per cent for all developing countries). Investment was 18.3 per cent of GDP in contrast to the over 32 per cent that is required to generate the level of growth required to meet international poverty reduction targets.56 Over and beyond this, a sustained increase in growth rates requires higher levels of savings and investment as well as increased investment productivity. The need for African countries to mobilize domestic resources as a medium- to long-term goal is now widely accepted.57 Thus, policies to promote savings have a central role to play in driving growth via investment and reducing aid. Identifying policies that promote savings (and the policy distortions that inhibit it) should be an essential element of the strategy of long-term development in the continent. Macroeconomic stability, financial deepening, financial and capital market reforms, terms of trade management, and fiscal reforms to generate public savings are among the key policy interventions that are required.58 The key issues are briefly outlined below. Macroeconomic stability is critical to stimulating savings. Various research findings have shown that the rate of saving is enhanced in an environment where the rate of inflation and level of budget deficits are low. Positive real interest rates also allow for an appropriate margin to the risk an investor/saver faces over the term of the savings/investment instrument. Uncertainty about the real returns on savings and the direction of macroeconomic policies has deleterious effects on savings. This conclusion calls for policy stability in addition to increased transparency in economic decision-making. Of critical importance is continued strengthening of macroeconomic policy modelling capacity in governments’ key economic and financial policy management agencies to determine a sustainable growth path for national income consistent with non-expansionary monetary policies and satisfactory balance of payments and budgetary positions. The process of financial deepening involves the monetization of a broad range of economic activities and transactions as well as the introduction of a variety of savings instruments. This is measured by the ratio of broad money to GDP. There is evidence that an increase in this ratio also has a significant effect on savings. To this extent, the process of financial deepening which is spreading throughout Africa


has a large pay-off in terms of domestic resource mobilization. Innovative, flexible, and targeted savings instruments, savings schemes, and savings mechanisms appropriate to different segments of the population should be introduced and promoted. In addition to measures to enhance financial deepening, financial and capital market reforms can enhance the process of generating savings in various ways. In particular, relative financial liberalization and capital market deepening may raise the efficiency of intermediation, thereby increasing growth and thus private savings. In terms of sequencing, however, experience has shown that capacity-building to raise the quality of regulatory and prudential supervision in the financial sector is crucial. With adequate attention to this issue, the increase in the geographical density and range of financial institutions that accompanies liberalization may lead to financial deepening that will be reflected in increased savings. In addition, the flexibility that investing in capital markets gives to all types of savers and the spreading of risks among them, suggests the need to pursue strategies aimed at the development of capital markets. This is also critical to attracting foreign savings to Africa in the form of foreign direct or portfolio investment.59 A major problem confronting many African countries, and one that is at the root of their external indebtedness, is the deterioration in the terms of trade associated with dependence on a narrow range of primary commodity exports. It has been estimated that for non-oil producing African countries south of the Sahara, besides South Africa, about three-quarters of the value of concessional loans and grants received during the 1990s were offset by deterioration in terms of trade.60 Improvement in the terms of trade should, therefore, be a major development objective. The management of terms of trade cycles during periods of booms and contractions can also have an important effect on the generation of both public and private savings. This is important for African countries where exports are limited to a few primary commodities and are sold in volatile markets. During periods of commodity price booms, savings mobilization campaigns and innovative hedge and insurance instruments should be developed as well as improved incentives to hedge against the risk of a possible contraction. Finally, fiscal reform to generate public savings is also important in mobilising financial resources for development. The implementation of tax reforms, cost sharing in the provision of goods and services, and enhancing public expenditure efficiency and effectiveness are among


the key policy objectives that should be pursued. Although taxes are a principal means of raising revenue, the adverse effects of particular taxes and the effect of the whole tax structure on relative prices and incentives warrants careful monitoring. Generally, tax reforms should aim at broadening the tax base, raising elasticity with respect to economic growth, and simplifying tax administration.

Summary In this chapter, I have been concerned to show that adequate levels of external financial flows – whether official or private – have not supported the recovery in African countries. The constraints of debt overhang, which most countries in the region face, have compounded this problem. While there is evidence of capital flight, it is clear that the manifestation of this phenomenon is not specifically related to the debt burden. There is very little evidence of borrowing to replace exported capital or of capital flight induced by debt overhang. Rather, capital flight appears to have been driven by policy distortions, political instability, corruption and graft. As policy reforms continue to be pursued by African countries, so it will also be incumbent on developed countries where these funds are mostly invested to adopt more stringent regulations in regard to incoming capital of dubious origin. While it is clear that current policies that African governments are putting in place will contribute to the generation of private and public savings, there is no alternative to the need for increasing levels of external financial flows in the short- to medium-term. If the downward spiral in official flows is set to continue, then African countries must position themselves better to attract private capital flows. In improving national policy frameworks for attracting investment flows most of the countries have already taken a wide range of actions. It is certainly the case that Africa must address the key issue of raising domestic savings rates, but in the short run, expectation of significant change is unrealistic in view of the existing low levels of income. Similarly, improvements in the terms of trade of African countries can contribute to reducing the need for financing development from external sources. However, the terms of trade of African countries as a group fell by an average of 5.1 per cent during the years 1985–9 and by a further 1.3 per cent during 1990–6. As is well known, and notwithstanding periodic cyclical movements, studies have shown that there is a general tendency for the terms of trade of the primary commodities which dominate Africa’s exports to decline over time. Moreover, a commodity


slump has been forecast for the early years of the new century.61 More generally, on the trade front, African countries are faced with several policy challenges in coping with the post-Uruguay Round trading environment. Indeed, it has become clear that the net impact of the Uruguay Round Agreements on the majority of African economies is unfavourable, thus underscoring the need for ODF and private flows to improve competitiveness in global markets and to diversify production. A recent study by the UN Economic Commission for Africa suggests that, to hit the Copenhagen World Social Summit target of reducing poverty by half by 2015 in Africa, would require a 4 per cent reduction in the ratio of people living in poverty each year from 1999. This would in turn require average GDP growth of 7 per cent per annum. To achieve this growth rate requires investment on average of 33 per cent of GDP. With a current domestic savings rate of around 15 per cent of GDP, a further 18 per cent would be needed from external sources. ODA flows to the continent average around 9 per cent of GDP, thereby leaving a financing gap of about 9 per cent.62 A key test for interdependence in international economic relations at the beginning of the new century will be its response to the challenges of economic recovery in Africa in the context of this paradox of financial resource flows.

3 New Priorities for Foreign Aid

For most African countries, it is a profound paradox that at precisely the time when a conducive environment for growth was being established through the sacrifices of difficult political and economic reforms, levels of ODA flows were cut back sharply. As indicated in Chapter 1, notwithstanding the increasingly sound macroeconomic fundamentals in African countries, the recovery has not only been weak but also very precarious. The recovery was in fact due partly to improvement in policies, leading to more efficient resource allocation, and partly to the relatively strong performance of commodity prices in 1996–7. Strong investment performance, diversification and build-up of productive capacity have not driven the recovery. To this extent, the sustainability of the recovery in the face of Africa’s deep-rooted economic difficulties, population and related pressures is in doubt. As was further noted in Chapter 2, the downward trend in ODA that became an established pattern during the 1990s is projected to continue in the foreseeable future. As we have also seen, the dependence on ODA by most African countries south of the Sahara is significant, as Africa has benefited little from the surge in global private capital flows. Nonetheless, at this juncture in Africa’s post-independence history and at the dawn of the new century, a window of opportunity is available for foreign aid and private flows to make an important contribution in strengthening economic recovery and addressing the main economic question in Africa. This opportunity, moreover, has been enlarged by two very significant developments during the 1990s that pertain to the policy and the process of ODA. These are the redefinition of the priorities of foreign aid and a fundamental rethinking of the way in which such assistance is to be delivered. The first of these developments is the focus of this chapter. The second will be addressed in Chapter 4. 61


The redefinition of the priorities for foreign aid is linked to international targets and goals set by the international community for economic and social development. These targets include the cutting of global poverty by half by 2015 and the improvement over time of various other indicators of human well-being. These priorities for development cooperation were established at a series of conferences that took place between 1990 and 1996 under the auspices of the United Nations. The Millennium Summit that was held in September 2000 revisited the issues and reaffirmed the targets.1 The conferences provided the international community with an opportunity to reappraise development issues and establish a new agenda for international development assistance in the new post-Cold War era. The redefinition of foreign aid priorities is a major step forward in the attempt to make ODA more effective and relevant in an age of globalization. To this extent, the new priorities are also directly pertinent to the main economic question in Africa. But this window of opportunity is in grave danger of becoming a lost opportunity. The financing of the internationally-agreed targets on poverty and human development remains uncertain in view of the current downward trend in ODA levels that was noted earlier. Yet the systematic implementation of programmes designed to meet these targets will go a long way in overcoming critical constraints on human development, productivity and other supply-side difficulties in African countries. Clearly, however, these programmes need to be complemented by increasing levels of investment in physical infrastructure and the productive sectors as well as more focused attention – as required in individual countries – to institutional capacity-building for policy development and implementation. This will better position African countries to attract private capital flows, which will continue to grow in importance in the context of the new global economy. Rising production and productivity will generate trade between African countries, enhance both regional integration within Africa as well as greater integration of African countries into the world economy. And, not least, a durable economic recovery is the most important ingredient for development, peace and political stability in the region. This chapter reviews the international programmes, and the related goals and targets on social and economic development, that have been adopted by the international community with a view to assessing their significance to economic recovery and long-term development in Africa.

New Priorities for Foreign Aid 63

International consensus on priorities for foreign aid During the 1990s, the international community examined various aspects of poverty, social deprivation, and sustainable development at several international conferences. The immediate background to these events was the end of the Cold War, which made it possible for a global view to be taken of both poverty and environmental degradation. In addition, widespread apprehension about these problems had been expressed especially through the activism of civil society in both developed and developing countries. Indeed, the growing prominence of non-governmental organizations (NGOs) in policy issues – as well as concerns about their internal accountability and bases of legitimacy – is one of the major developments of the 1990s. During the 1980s and early 1990s, the environmental movement in particular had steadily gained momentum following the pioneering work in 1974 by the Club of Rome, Limits to Growth, raising consciousness on environmental conservation. The message that environmental impact should be taken fully into account in economic and social policy decision-making was one that struck a deep chord. With overwhelming evidence of rising poverty and human deprivation, as well as fears about the future of the environment, concerns have grown about both the scale of global poverty and sustainable use of the planet’s resources. It is generally recognized that more progress was made during the post-World War II years in improving living standards globally than at any other time in human history. However, between 1987 and 1993, a substantial increase of over 100 million, to 1.3 billion, was recorded in the number of people living in extreme poverty: that is, the number of people living on an income of less than $1 a day.2 Asia and the Pacific region were estimated to have the largest number of people in poverty so defined: about 950 million. However, as a proportion of the population, Africa was estimated to have the most income-poor people – 220 million, well over a third of the population at the time. Moreover, projections showed that poverty was set to grow rapidly in Africa.3 The increase in world poverty during the early 1990s was the cumulative effect of the economic crises of the 1970s and 1980s that resulted in slow growth, stagnation and even decline in many countries. Only a handful of countries, mostly in East Asia, achieved significant economic growth and gains in incomes per head during this period. But even in these countries large numbers did not share in this progress and continued to live in poverty. In the former socialist countries,


immense personal hardships accompanied the transition from command to market economies. In Latin American countries, the full weight of the debt crisis was felt during this period resulting in stagnation and the further marginalization of the poorest groups. For the African countries, as was seen in Chapter 1, this period was characterised by a sharp fall in per capita incomes and the erosion of hardwon gains in social well-being – as expressed through such indicators as disease, literacy and mortality rates. The United Nations, to its credit, seized the initiative by convening a series of major international conferences in response to the growing concerns about poverty. This started with a UNESCO conference on education and literacy in Jomtien, Thailand in 1990. The Children’s Summit in New York, which addressed the plight of children in poverty, followed this, also in 1990. The Earth Summit in Rio de Janeiro in 1992 and major conferences on human rights (Vienna, 1993), population (Cairo, 1994), social development (Copenhagen, 1995), women (Beijing, 1995), food security (Rome, 1996) and human settlements (Istanbul, 1996) were among the other major events organized under the auspices of the United Nations. These conferences provided the international community with an opportunity to revisit development issues and to forge the necessary political commitment to a new policy agenda for international development assistance in the new post-Cold War era. This agenda is detailed and consists of the identification of priorities, action plans and target dates of implementation for further advance on the eradication of poverty. There is no doubt that the action plans from these conferences have widespread support among developing countries as well as among their development partners. Several developing countries and countries in transition responded to the challenge by formulating national human development policy frameworks and programmes.4 In addition, the OECD–DAC countries have based their manifesto for development co-operation in the new century on the goals adopted at these conferences.5 According to the OECD, the goals and targets ‘on poverty reduction; improved education, health and gender equality; environmental sustainability; and human rights and good governance are crucial to the security and well being of all who would inhabit the earth in the next century’.6 Similarly, the UK Government in a White Paper on ODA was unequivocal in its commitment to the targets. According to the White Paper: a clear set of internationally agreed policies and principles which promote sustainable development and encourage environmental


conservation…exist in the form of international targets for sustainable development based on UN Conventions and Resolutions. The key target is the reduction by half in the proportion of people living in extreme poverty by 2015 … We welcome and will promote them. In 2015, we will need to set further targets.7 Similarly, a White Paper of the Government of Canada on foreign policy makes this commitment: ‘The purpose of Canada’s ODA is to support sustainable development in developing countries, in order to reduce poverty and to contribute to a more secure, equitable and prosperous world’.8 At the May 1998 G8 Summit in Birmingham, England, the leaders reaffirmed their commitment to ‘a real and effective partnership to reach the internationally agreed goals for economic and social development as set out in the OECD’s 21st Century Strategy’.9 As a result, the UN Secretary-General could claim with satisfaction that, ‘taken together, the results of the conferences offer a strong conceptual basis for development co-operation (which) has been given a peoplecentred dimension, a sustainable dimension, a gender sensitive dimension and a social dimension’.10 Be that as it may, what is less clear is the extent to which resources will be made available to supplement and extend the efforts of reforming governments in implementing the programme from the UN conferences. Indeed, even the OECD has warned that ‘without a renewed commitment to invest adequate and well-targeted resources, progress cannot be expected and achievement of the internationally agreed goals will be jeopardized.’11 This surely is the crux of the matter. It is paradoxical that the renewed commitment of the international community and developed countries to alleviate poverty has been accompanied by a decline rather than a rise in ODA. A review of the main dimensions of the policy commitments made at the UN conferences follow. This is approached thematically rather than in relation to the sequence in which the conferences were held. Environmental sustainability At the 1992 UN Conference on Environment and Development, the international community reached agreement on two major issues encapsulated in the Rio Declaration signed by 178 countries as well as on a programme of action known as Agenda 21. First, the link between poverty and environmental degradation was recognized. Second, the Conference agreed that by 2005 each country should have in place a current national strategy for environmental protection. Individual


country strategies were to be aimed at the reversal of climatic change, the loss of environmental resources such as forests, fisheries, fresh water, soils, bio-diversity, stratospheric ozone, and the accumulation of hazardous substances. In addition, country strategies are to further encompass a programme for the implementation of international environmental conventions. The expectation is that ten years after this date, by 2015, all countries would have developed the experience and capacity – through the sensitization, mobilization and participation of all groups in society – to address environmental issues and to respond to environmental problems. At the Rio Conference, the activism of civil society in the environmental debate was very much in evidence. Over 2400 representatives of non-governmental organizations (NGOs) participated in the Conference and 17 000 people attended the parallel NGO forum.12 The UN General Assembly Special Session of 1997 – Rio plus five – that reviewed progress after five years in the implementation of the commitments that were made in 1992, concluded that substantial efforts had been made by countries around the world to integrate environmental objectives into their policy-making processes. However, in the context of the link between poverty and environmental degradation that was recognized at Rio, the issue of new and additional financial resources to be provided to assist developing countries to fulfil their responsibilities under Agenda 21 remained to be resolved. This issue was taken up again at the 1998 Summit of the Non-Aligned Movement (NAM). The communiqué of the Summit drew attention to the need for the resources allocated to the Global Environmental Facility (GEF) – that was set up after Rio to finance Agenda 21 projects – to be significantly increased in order to ensure that its objectives are fully achieved. The NAM also proposed greater transparency in the operations of the GEF as well as the need for other multilateral and bilateral channels of funding to support national expenditures on domestic programmes.13

Poverty eradication At the 1995 World Summit for Social Development in Copenhagen, Denmark, 117 heads of state and government were present with representatives from 186 countries. As in Rio, civil society was well represented by 2315 individuals representing 811 NGOs.14 The main outcome of the conference was the commitment made to the eradication of poverty as an ethical, social, political and economic imperative


of humankind. As a first step, it was agreed that the 1.3 billion people estimated to be living in extreme poverty in developing countries should be reduced by at least one-half by 2015. This target is to be achieved by putting in place policies and programmes – on a country basis – to address the root causes of poverty, giving special priority to the rights and needs of women and children and other vulnerable and disadvantaged groups. In practice, this requires improved access to education, health care and housing. It further requires initiatives to support income and employment opportunities to enable poor people to establish sustainable livelihoods, including the improvement of rural infrastructure, the facilitation of better access to land, training in skill development and the provision of micro-credit, especially targeted at women. And it also requires effective partnership between individual governments, the donor community, non-governmental organizations and the private sector. The UNDP has estimated the annual cost of reaching the target of cutting global poverty by half by 2015 including the provision for basic social services for all people in developing countries at US$40 billion.15 The goal of reducing world poverty by half over 20 years (1995–2015) is feasible. As recent history shows, countries such as China and others in East Asia have been able to accomplish this within two decades. The goal also provides the international community with a clearly defined objective to rally around an attainable target for the medium term. Moreover, success in achieving the target will reinforce international solidarity and determination to set further targets to rid the planet of the scourge of poverty. But the achievement of this target requires economic growth at a national level of at least 3 per cent per capita. With economic recovery in Africa being so weak, as we saw in Chapter 1, few African countries would grow by this much in the foreseeable future without adequate external financial support. This is all the more reason why increasing and directing appropriately external resource flows could make a major difference.

Human rights Issues relating to human rights were the specific focus of the 1993 World Conference on Human Rights. The main outcome of the conference was the adoption of the Vienna Declaration and Programme of Action, which reaffirmed the principles and purposes of the Charter of the UN and the Universal Declaration of Human Rights. Taking the provisions of these instruments further, the conference emphasized the


specific rights of vulnerable groups including women, indigenous people, refugees, children, disabled people, detainees, migrant workers and their families. Specific measures to protect these groups more effectively were recommended. The conference further recommended the establishment of a High Commissioner for Human Rights for the promotion and protection of all human rights and to ensure better coordination of all UN programmes related to the subject. Issues of good governance at national and global levels were also addressed with respect to the right to development. This was affirmed as a fundamental human right. But it was also recognised in the Vienna Declaration that lasting progress towards the implementation of the right to development requires effective development policies at the national level as well as equitable economic relations and a favourable economic environment at the international level. Reflecting again the world-wide constituency embedded in civil society for redefining the priorities of international cooperation in the post-war world, over 800 NGOs attended the conference in addition to 171 participating governments.16 Human development Targets to be attained on several indicators of human development and well-being were set or reiterated at the relevant UN sectoral conferences of the 1990s. These are as follows. Universal primary education in all countries by 2015 This target on a stepped-up programme to increase the coverage and quality of primary schooling and to expand adult education was initially set at the UNESCO Conference on Education for All that was held in Jomtien, Thailand in 1990. It was endorsed by the 1995 Copenhagen Summit on Social Development and also by the 1995 Beijing Fourth World Conference on Women. Universal primary education implies the attainment of basic literacy and numeracy skills. The attainment by individuals of these basic skills increases their participation in the economic, political, cultural and other aspects of life in their societies. It is also generally recognized that universal primary education is a very significant factor in reducing poverty. By 1995, five years after Jomtien, it was estimated that 100 countries had developed plans and strategies to achieve education for all, and about half of these countries had increased budgetary resources to support their plans. Total primary enrolment increased by about


50 million between 1990 and 1997 while the number of school age children out of school fell by 10 million to 130 million. In African countries, south of the Sahara, it was estimated that the primary education enrolment ratio had reached 72.5 per cent by 1995, with the ratio for girls’ enrolment at 65 per cent and boys’ at 80 per cent.17 However, it is significant that several African countries are featured in the UNDP’s Human Development Report 1998 among those countries that have made the slowest progress in reducing adult illiteracy and have the lowest adult literacy rate.18 This underscores the fact that gains in human development are reversible without sustained economic growth and if such other conditions as peace and stability are not favourable. The elimination of gender disparity in primary and secondary education by 2005 as a demonstration of progress toward gender equality and the empowerment of women The 1994 Cairo Conference on Population and Development, the Beijing Conference and the Copenhagen Summit recommended that by 2005, the gender gap in primary and secondary education should be closed. There is overwhelming evidence that investment in education of girls has a high return in terms of greater earning abilities for families, reduced fertility and infant mortality, and increased levels of public health. To this extent, the elimination of gender disparity in schooling is one of the most important determinants of development with positive implications for all other measures of progress. However, in its State of the World’s Children 2000 report, UNICEF estimated that on a world-wide basis, 130 million children were not in school in 1998, 60 per cent of them girls.19 The advancement of women At the Fourth UN Conference on Women that took place in Beijing, China in September 1995, 189 governments were represented and more than 5000 representatives from 2100 NGOs attended.20 The conference adopted a Platform for Action that contained a number of proposals to ensure that a gender perspective is reflected in policies and programmes at the national, regional and international levels for the advancement of women over five years until 2000. The main message of the Platform is that issues of women’s empowerment are universal and global, in view of the deeply entrenched attitudes and practices that perpetuate inequality and discrimination against women in all spheres of life. For this reason, measures to protect


and promote the rights of women and girls must be recognized as an integral part of universal human rights and must underlie all actions. To this extent, the main challenge is to enhance and facilitate changes in values, attitudes, practices and priorities at all levels. Governments and the UN agreed to promote the mainstreaming of a gender perspective in policies and programmes and to maintain monitoring mechanisms. A comprehensive assessment of the 1995–2000 programme was, at the time of writing, not available. However, as in the case with the other commitments on human well-being that were made in the 1990s, some progress but also reversals in gender inequalities and empowerment have been recorded. A measurement designed to capture these disparities is the UNDP’s gender development index (GDI) which generally lags behind its human development index (HDI),21 indicating that deprivation among women as a group is higher. The mortality rate for infants and children under the age of five years should be reduced in each developing country by two-thirds the 1990 level by 2015 and reduction by three-quarters in maternal mortality during the same period Human reproduction is a delicate process that requires access to timely and appropriate health services and medical care, nutrition, clean and safe water and sanitation for both mothers and infants. During the first few years of life, infants are the most vulnerable members of society. The 1994 Cairo Conference, extending the targets that were set at the 1990 World Summit for Children, established the goals of reducing the infant mortality rate to below 35 per thousand live births. The conference also established the goal of reducing under-five mortality to below 45 per thousand by 2015, and reducing the maternal mortality rate by one-half from the 1990 level by 2000. These targets were also confirmed at the Beijing Conference. UNICEF reported at the end of 1999 that while the number of under-five deaths continues to decline in the developing countries as a whole, children’s health in African countries, south of the Sahara in particular, is still under severe threat. An estimated 4.1 million children under the age of five died in the region in 1998 compared to 3.3 million in 1980.22 This also reflects the effect of HIV/AIDS, which has become a full-blown pandemic in the region. Making family planning universally available by 2015, or sooner, as part of a broadened approach to reproductive health and rights, thus reducing infant, child and maternal mortality levels At both the Cairo and Beijing Conferences, it was recognised that adolescents need access to reproductive health information and services to


make active choices about their reproductive behaviour. The objective of making family planning universally available is also related to integrating population concerns into economic and social policies with the aim of achieving sustainable development. It is further related to the empowerment of women and girls, providing them with more choices through expanded access to education and health services and to employment opportunities. It has been noted that since the Cairo Conference, many governments have started to re-orient existing policies toward the integration of family planning into reproductive health programmes. A diversity of approaches reflecting different cultural practices and the active involvement of NGOs in programme implementation has also been noted.23 In addition, the Cairo Conference made a number of recommendations on the control and prevention of the spread of HIV/AIDS. This epidemic is a serious matter for Africa where it was estimated at the time that 19.8 million of the world’s 31 million cases of HIV/AIDS could be found. The number of AIDS orphans and of children-headed households in eastern and southern Africa in particular is growing. Life expectancy rates are declining. According to the UNDP, in some parts of Uganda, for example, life expectancy has already been cut by 16 years. In Botswana, where 25–30 per cent of the population between 15 and 49 is infected with HIV, life expectancy is already at levels last seen in the late 1960s. By 2010, life expectancy in Zimbabwe is expected to be shorter by 25 years.24 The economic implications of the AIDS pandemic in Africa are devastating – with implications for a further weakening of the recovery – as the disease usually affects people in their most productive years. Indeed, this subject was the focus of an unprecedented examination of a health-related matter by the UN Security Council in January 2000. To the extent that a cure is yet to be found and the available palliatives remain expensive and beyond the reach of the majority of AIDS victims in Africa, public information on preventive measures remains the best option to prevent the further spread of the HIV virus. However, in the context of the weak recovery in Africa and government budgets that are already overstretched, well-targeted external assistance to combat the spread of the pandemic could make a difference. Improving the well-being of children At the 1990 World Summit for Children at which 159 countries were present, including 71 that were represented by heads of state and government, seven major goals were agreed upon for implementation by the year 2000. Two of these goals concern the reduction of child and


maternal mortality rates. Two other goals were related to universal access to primary education and reduction of adult illiteracy. A fifth goal was concerned with universal access to safe drinking water and to sanitary means of waste disposal. The remaining goals relate to reducing the extent of severe and moderate malnutrition among the underfives by half; and protection of children in difficult circumstances, particularly in situations of armed conflict. In practice, reduction of child mortality rates requires progress to be made in immunisation, polio, diarrhoeal diseases, iodine deficiency, guinea worm disease, access to safe drinking water and good nutrition including the promotion of breast-feeding. Thanks mostly to the leadership of UNICEF, rapid progress is being made in all of these areas and declining levels of child mortality are being recorded in all regions, with the exception of Africa, in which reversal has occurred as was noted above. For example, it is expected that polio will be completely eliminated by the year 2000. One hundred and ninety countries have ratified the UN Convention on the Rights of the Child that is concerned with broad issues of child welfare. A growing number are beginning to report regularly on implementation of the Convention.25 Nonetheless, it is noteworthy that during the 1990s, several armed conflicts, humanitarian emergencies and natural disasters engulfed hundreds of thousands of children. In particular, the phenomenon of child soldiers in several conflict situations in Africa became a major cause of concern.

The number of undernourished people in the world should be reduced by half by 2015 The World Food Summit, which took place in Rome in 1996, set this target. As in the setting of other targets, it was recognised that the primary responsibility for achieving food security rests with individual governments. In this regard, governments were specifically urged to facilitate better access by poor people to productive assets such as land, including recognition of the role of women in food production and their need for equal access to land. In addition, governments committed themselves to make available support services, information and knowledge to enable the people concerned to use these assets productively and with due attention to environmental sustainability. It was agreed that the international community has a supporting role to play in the implementation of these commitments at the national level. Beyond this, provisions were made to ensure the availability of food in


times of humanitarian emergencies. And it was agreed that progress is required on the liberalization of trade in agricultural products within the framework of the World Trade Organization and in establishing an effective mechanism to meet the needs of net-food importing countries. In an address to the conference on behalf of the OAU/African Economic Community, the need to promote native grains as the cornerstone of food security strategy in Africa was emphasized. Such grains are better adapted to environmental and ecological conditions as well as the vagaries of weather in Africa and facilitate the extension of production to marginal lands that would be needed for feeding a rapidly growing population.26 The conference did not call for the creation of new structures or financing mechanisms. Instead, each country was expected to fulfil its commitments to food security according to its respective possibilities. But it was understood that the FAO would act as a catalyst in mobilizing the international community to provide the necessary technical assistance and support to developing countries in their effort to implement the agreements reached at the Conference.27

The right to housing The main outcome of the 1996 Conference on Human Settlements (Habitat II), that was held in Istanbul, Turkey, is the recognition of the right to adequate housing as a universal human right. This was seen as a major impetus in the battle against homelessness. The conference interpreted the right to adequate housing in very broad terms. It implies not only the right to a roof over one’s head but also access to all the systems considered essential to a healthy life, particularly urban life, including access to safe water and sanitation, waste disposal, school, transportation and other infrastructural necessities of life. Recognizing the potential role of markets in regulating the supply of housing as well as the role of local authorities in regulating housing markets, the governments did not commit themselves to be responsible for directly providing housing to all citizens. Instead, they agreed to empower people to obtain shelter and to protect and improve their dwellings and neighbourhoods. They agreed to seek the participation of their public agencies (including local authorities), private and nongovernmental partners to ensure legal security of tenure, protection from discrimination, and equal access to adequate housing. In the context of the world-wide trend of increasing urbanization, it was further agreed to pursue urban policies that expand the supply of


affordable housing by enabling markets to perform efficiently in a socially and environmentally responsible way. The engagement of civil society in the issues was fully reflected at the Conference. Over 8000 individuals from 2400 organizations attended an NGO forum that was organized parallel to the conference.28

Assessment For African countries, the new agenda for development as highlighted above is to be welcomed. It is rooted in a profound recognition that development requires a comprehensive and integrated approach with simultaneous efforts on several fronts. It also reflects broad consensus on what constitutes critical development priorities in the post-Cold War globalizing world economy. Two decades of low growth in Africa resulted in limited gains in human welfare and the assault on poverty. The weakness of the current recovery underscores the scale of the problem confronting Africa. As is widely known, Africa lags behind most other developing regions in human development. Meanwhile, the policy environment in Africa has improved in recent years and is an important factor that has contributed to economic recovery. But the human-resource base remains a major supply-side constraint in providing healthy individuals with the range of skills – including, most critically, entrepreneurial dynamism and innovation in the small and medium-scale enterprise sectors – that are required for the effective functioning of a modern economy. Major gains in human development are required if the private sector is to be able to respond to the improved policy climate. This is surely part of the answer to the main economic question in Africa. But it is only part of the answer. As far as Africa is concerned, the international priorities for development, as defined through the series of UN conferences, do not go far enough. It is not an agenda that adequately addresses the issue of reversing Africa’s declining share of both world output and trade. To this extent, it is an agenda that is mostly silent on such other supply-side and structural constraints as the lack of physical infrastructure (especially in view of the relatively high number of land-locked countries in Africa), and the inadequacy of investment in productive activities including long-term FDI in support of export-oriented activities. In other words, the programme emanating from the UN conferences has set goals without the nexus between the goals and the development of infrastructure, economic integration,


investment, production, output, trade and growth. These are the elements missing from the goals and targets identified at the UN conferences. It is true that other UN programmes that have focused specifically on Africa such as the UN New Agenda for Development in Africa in the 1990s (UN–NADAF) make this connection. But particularly because of lack of resources, very few of the goals and targets of this programme have been achieved. Although there are missing elements from the perspective of the main economic question in Africa in the programme of the UN conferences, the importance of the policy commitments that were made should not be underestimated. Moreover, these commitments reflect widespread concern – as expressed particularly through the activism of civil society in both developed and developing countries – about the scale of global poverty, human rights and dignity and apprehensions about the environment. As a result, the issue of the accountability of NGOs and their appropriate role in the policy process has been raised. In addition, the conferences affirmed a legitimate role for ODA in post-Cold War international relations and provided the basis of a renewed effort to deal systematically with the key indicators of human deprivation. While individual countries are ultimately responsible for their own development, there is a growing understanding that their efforts can only succeed with external support, including foreign aid. The series of UN conferences held during the 1990s therefore provided the international community with an opportunity to look at the development issues afresh. Although ODA levels continued to decline throughout the 1990s, the consensus that emerged from the conferences was all the more remarkable because it was achieved at a time when foreign aid was in danger of being relegated to the sideline of the international agenda. Four main reasons for this can be identified. First, the end of the Cold War reduced motivation in the major industrialized countries to use foreign aid to secure political influence in the developing countries. There was diminishing need to maintain allies in certain regions or sub-regions based on strategic considerations. Second, the increasing globalization of the world economy and the remarkable success of some developing countries, particularly in East Asia, in diversifying their production and export bases were viewed as a threat in certain sections of the developed countries. Third, also a result of globalization, was the need for restructuring and adjusting the economies of the major industrialized (and donor) countries to enhance their own competitiveness in the new global context. Part of this process has been an attempt to bring fiscal deficits under control


and to contain the growth of public spending. Even though foreign aid accounts for a small proportion of public expenditure in these countries, it is more vulnerable to cuts than, for example, military spending. All major donors reduced aid relative to GNP during the 1990s. And, fourth, was the growing manifestation of aid fatigue, often based on a misconception and over-generalization that foreign aid had not worked in the countries that had lagged behind, especially African and other least-developed countries. Changing international relations at the end of the Cold War, the fears and constraints that emerged with the globalization of the world economy, and aid fatigue, threatened to confine foreign aid to the sideline of the international agenda. In view of current levels of ODA, this threat remains real. In this respect, a major challenge is whether the human spirit of solidarity and deeper moral commitment will prevail.

4 New Perspectives on Aid Delivery and Development Management

A fundamental rethinking of the way in which foreign assistance should be delivered and how the development process is to be managed took place in the 1990s alongside the redefinition of priorities for foreign aid. As we have seen with regard to the definition of priorities for foreign aid in the context of the emerging challenges of globalization, UN conferences provided the main vehicle both for rethinking the issues and for reaching agreed objectives. However, with respect to the delivery of foreign aid and the management of development, no UN conference was organized specifically to address this question. Yet given the fundamental changes being brought about by liberalization and globalization, aid delivery and development management have also been subjects for rethinking. In this respect, successful models of development in contemporary East and South East Asia and elsewhere, as well as other examples drawn from history, have proved instructive. The main outcome of this reassessment is the recognition that sustainable development requires local and national ownership of the development process. That is, the capacity of people through their public, private and non-governmental institutions, policies and practices to achieve their own development goals. This means the individual nation–states concerned must own, frame, and implement development strategies, support the interventions of the private and civil sectors and utilize appropriate support from external partners in this endeavour. This view stems from the realization that government, the private sector and civil society each has a distinct role to play in the development process, and interventions associated with foreign aid should not aim to replace these roles but rather to support, enhance and reinforce indigenous efforts. The recognition of these specific and 77


interrelated roles also underscores the view that development management is a process that requires the forging of partnerships at various levels and points of intervention. Indeed, the application of the idea of ‘partnership’ in place of such concepts as ‘donors’ and ‘recipients’ is one that gained ground during the latter half of the 1990s. So too should the idea of ‘partnership’ be used to describe the changing role of the state in society and economy as well as the distinctive yet complementary roles of government, civil society and the private sector. In recognizing the importance of local ownership of policies and programmes, and the need to support the build-up of the capacity of institutions and processes, foreign aid providers have been through something of a novel ‘prise de conscience’. As the 1995 Report of the OECD Development Assistance Committee noted: We have come to see that the key to successful development cooperation is to see that ownership is placed in the right hands, that is in the hands of a country’s citizens and in their institutions, both public and private. We have come to understand that this ownership is ensured only through the active participation of the country’s citizens. Enlightened development intervention can take place only with this understanding.1 In this regard, the late 1990s have seen the beginning of an effort among foreign assistance providers to forge partnerships at points of intervention; to engage partners in the formulation of ‘home grown’ long-term strategies aimed at the broader transformation of society; to retreat from the imposition of short-tern ‘solutions’ through conditionalities; and to embrace more effective coordination mechanisms among themselves. To be sure, this effort has some way to go before it can change the relationship between providers and their partners in many African countries and become the regular way of organizing development assistance. Moreover, it is an effort that is complicated by the fact that capacity-building in government, the private sector and civil society within African countries is itself an ongoing activity requiring foreign assistance. Yet it is an effort that recognizes the complexities of development and the need for developing-country actors and stakeholders themselves to drive the process forward as the constraints and opportunities of political, economic, social or other imperatives unfold. If 1989 – the year the Berlin Wall crumbled, marking the collapse of communism – is taken as the point marking the end of the Cold War, an event that was hastened by the revolution in information technol-

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ogy and the ongoing globalization of the world economy, rethinking the 1990s has been about drawing appropriate lessons from the past half century of experience with development practice. During the Cold War, the ideological divide distorted development efforts. Both sides used aid to tie developing countries to their interests, leading to the diversion of effort from sustainable development. With the collapse of the Soviet Union and its satellites, the appropriateness of the statedominated model of development was called into question. In China as well as in much of Southeast and East Asia, market-oriented reforms or a market-oriented approach to development yielded positive results in terms of growth and the deepening of economic transformation. Yet, even in this region, which has been described as the ‘most successful development experience in modern history’,2 it is well known that state intervention was employed to correct market failures while market mechanisms were employed to offset state failures. Moreover, the crisis in the region in 1997–8 has illustrated that markets can punish as well as reward. And, indeed, close examination of the historical record of development in Europe, North America and Japan reveals that the nexus between state and market was far more complex than it has sometimes been assumed to be. With the end of the Cold War, and in the emerging context of globalization, important lessons are being learned about this nexus. We have learned that development management must incorporate a stable macroeconomic framework to enhance and facilitate efficient resource allocation, even if the best means of achieving and maintaining such stability remains contested. Similarly, we have learned that relatively more open, less regulated, domestic and foreign trade and investment regimes are critical for efficient resource allocation even if the proper timing, sequencing and other aspects of liberalization are disputed. We have learned that the state has a key role to play in supporting economic arrangements that encourage human development, stimulate enterprise and savings, create the environment necessary to mobilise domestic resources, to attract international investment, and to redistribute resources in furtherance of equity. In regard to equity, as the decisions taken at UN Conferences during the 1990s revealed, there is broad agreement that governments must take the lead in creating the right political and economic framework for the attainment of this objective. Further, we have also learnt that effective development management requires the state to be responsive to the needs of its citizenry, to provide a framework of laws and regulations for the peaceful resolution of disputes, the enforcement of contracts, and within which


people can exercise their rights. And most importantly, we have learned that capacity is required in the institutions and agencies of the state, civil society, and the private sector, if a higher quality of economic growth is to be achieved, national economies are to become more fully integrated into the global economy, and development is to become sustainable over time. Indeed, the lessons from the experience of development during the fifty years since the end of World War II have been described as constituting altogether a new paradigm for aid effectiveness and development management.3 Certainly the lessons of the 1990s point to a ‘convergence’ of perspectives from the unfolding dialectical interplay of the forces at work.4 In the pages that follow, the ideas that are emerging on improving effectiveness of foreign aid delivery and development management will be reviewed to underscore the window of opportunity that has been opened by the convergence of perspectives in addressing the main economic question in Africa.

Aid effectiveness Aid alone cannot ensure that development takes place and should not be blamed whenever development fails to occur. Still, Africa’s need for aid remains high given the continent’s prevailing levels of poverty, low levels of domestic savings and limited capacity to attract private foreign capital. For the 34 LDCs in Africa, ODA on average accounts for up to 70 per cent of their capital budgets and 40 per cent of their recurrent budgets. This implies that short-term macroeconomic and fiscal stability in these countries as well as their growth prospects is dependent on aid flows.5 In this context, the need to make aid more effective is recognized. This need has become all the more urgent in view of the stagnation and decline of aid resources in real terms in recent years. Moreover, criticism and frustration in Africa with the limited impact of foreign aid interventions in reducing poverty as well as eliminating the underlying structural constraints to growth have been widespread. In the donor countries, too, aid managers have shown increasing concern about the development outcome of their efforts and have been forced to respond to a growing demand by parliaments, media and the public to demonstrate tangible results from aid. African frustrations and increased public interest in the donor countries on the impact of aid agencies also need to be seen as part of a general trend during the 1990s. In response to the challenges of the new global economy, the


activities of public institutions, including development management institutions and foreign aid agencies, have come under closer scrutiny. This reflects the growing influence of results-based management approaches in public agencies in general. While ODA flows remain important for a number of African countries, it is difficult to untangle aid specifically from other factors that have influenced the prospects of growth and development. A country’s macroeconomic and sectoral policies, its endowment of physical and human resources, the prevailing political system and trends in the international environment are among a host of factors that mediate the overall impact of aid. Moreover, as we saw in Chapter 1, some of the gains achieved in economic growth and development, and human well-being during the 1960s and early 1970s were negated by counterproductive policies of some African governments in the period that followed. These policies, as well as sharp decline in commodity prices, produced a debilitating economic crisis and placed governments under added pressures. Political instability and civil conflicts reversed the achievements made by some countries. Research on the experience of several African countries has shown four critical deficiencies that help to explain the disappointing performance of aid to Africa.6 These are (1) lack of local ownership; (2) poor coordination among donors; (3) the problem of recurrent cost; and (4) the proliferation of stand-alone projects. In each case, problems were either caused or exacerbated by weaknesses in the government’s own development management capacity. A discussion of each of these deficiencies follows.

Lack of local ownership The importance of local ownership of development projects and programmes is now widely recognized. Governments and beneficiaries can be said to own an aid activity when they have a leading and active role in formulating and designing the activity to meet objectives that they have themselves determined. Lack of local ownership of aid activities has been common across Africa. Foreign aid has rarely contributed to effective institution building because local institutions are bypassed in the design and implementation of projects. Providers have shown a tendency to dominate the aid process and to pay inadequate attention to local preferences. Indeed, the motivation of providers has often been foreign policy objectives and commercial considerations rather than economic development and poverty-reduction goals. Commercial


motives have led donors to adopt such practices as aid-tying or linking foreign aid to the purchase of goods and services from the providing country. More often than not, this has proved inefficient, and dealing with a wide range of providers on this basis has taxed the management capacities of aid-receiving governments. In addition, cash-strapped governments, with weak technical capacity, tend to defer to the ‘expertise’ of providers and have been less confident about identifying their own priorities for external assistance in an explicit fashion. Poor coordination of aid The number of aid providers and projects has increased significantly over the post-independence period. Many African countries receive aid from more than a hundred bilateral, multilateral, and nongovernmental organizations (NGO) agencies, each with its own procedures, priorities, planning cycles, and reporting requirements. Governments in the region have had to exhaust their limited managerial capacities to track these projects and integrate them into their own development strategies. In addition, the proliferation of projects and donors increases the risk of duplication and waste. Thus, the need to coordinate donor effort is well recognized. This requires planning. However, the planning capacities of many African governments were undermined by the emphasis of structural adjustment programmes on reliance on market forces. There is, therefore, need to rebuild planning capacity and for African governments to take the initiative in integrating the efforts of the donor agencies into a national development plan or strategy. Inability to cover recurrent costs The impact of aid in many African countries has also been undermined by the inability of governments to cover recurrent costs and counterpart obligations, due to the inadequacy of domestic resources. Too often, the achievements of aid-funded projects are not sustained when the donor funds end. In addition, governments and aid providers have failed to plan adequately for counterpart and recurrent expenditures. Few governments are able to employ effective mechanisms to control and monitor costs associated with donor projects as part of the overall framework of national development management. In many countries, aid activities have not been fully integrated into national budgeting and planning exercises. On their part, aid providers have often failed to recognize the problem of recurrent costs or to plan for the withdrawal of aid.


The proliferation of stand-alone projects The donor preferences for enclave projects and parallel management structures have been particularly destructive. Rather than integrate their aid within government ministries, aid providers have resorted to mechanisms and structures that demarcate their own activities. This has sometimes been due to the need to placate domestic critics of aid and to provide incentives to agency staffs. Similarly, some aid providers have been uncomfortable with the loss of discretionary control that government coordination of aid implies for their programmes. While the greater flexibility that many providers have preferred may have helped projects attain short-term goals, it complicates sustainability, undermines ownership, and makes overall government coordination of the aid effort virtually impossible. In sum, aid providers have often adopted practices that make it hard for governments to integrate aid into their own planning and budgeting structures. At the same time, this failure to integrate aid into the government’s own development management efforts is typically a root cause of many of the common problems that undermine the effectiveness of aid. Governments have often lacked the capacity to play an active role in the design, implementation, and evaluation of aid, thereby allowing providers to make key decisions regarding how aid moneys will be spent. Both tendencies have undermined the impact of aid. It was against this background that, within the framework of the OAU, African leaders at the beginning of the 1990s felt the need to affirm that ‘Africa’s development is the responsibility of our governments and peoples’.7 In Relaunching Africa’s Social and Economic Development: the Cairo Agenda for Action, which provides common and agreed objectives for development in OAU member states, African leaders further underscored that ‘priority focus should be given to increasing Africa’s capacity to implement its development plans’8 and inter alia reiterated their determination to ‘lay a firm foundation for a human-centred, equitable and sustainable development on the basis of sound economic policies, social justice and collective self-reliance in order to achieve accelerated structural transformation of our economies’.9 The ‘convergence’ of ideas on appropriate policy responses in the post-Cold War context of globalization will be evident in these broad objectives agreed upon by African leaders.

Improving development management The importance of local ownership of policies, and the need to support the build-up of the capacity of institutions and processes in Africa has


become widely recognized in the region. Critical lessons have also been learnt about the role of governments and markets as complements rather than as substitutes in the development process. Similarly, it is also better understood that the groups and organizations that constitute civil society play a vital role in mobilizing and articulating social demands and providing countervailing influences to elicit accountable performance on the part of the state. No challenge is more pressing than that of improving the institutional capacity for development management in Africa, at the level of government, the private sector and civil society. Governments need the capacity to analyse, plan, implement and monitor development policies and strategies. The private sector needs the capacity to be able to respond to government incentives to generate growth and structural change. Civil society requires the capacity to be able to contribute effectively to the planning, formulation and implementation of development policies and programmes. The issue is not just a shortage of technical and managerial personnel. Indeed, through the brain drain, Africa has, in fact, become a net exporter of skilled human resources. Rather, the issue is about choices made within the political arena to exercise and foster good governance as the basis of building viable institutions in the public sector, the private sector and civil society for the management of the development process. In other words, the technical and operational capability in these three spheres, and hence the capacity and ability to engage the development process is itself dependent on the political factors at play. To this extent, governance provides the framework for capacity building and effective development management. While ‘good’ governance cannot – and should not – be equated with multi-partyism or the specific institutional structures of the developed Western countries, it embodies certain requirements related to the exercise of political power. The lessons from the last five decades of post-World War II experience with various state–society formations suggest that, at the very least, these requirements include the extent to which a government is perceived and accepted as legitimate; committed to improving the public welfare; responsive to the needs of its citizens; competent to assure law and order and to deliver public services; able to create an enabling public environment for productive activities; and equitable in its conduct. These are the key prerequisites for building institutional capacity for development management. Recognition of the lessons from this experience prompted the Assembly of OAU Heads of State and Government to affirm support for


the principles underlying political accountability and popular participation in its Declaration on the Political and Socio-Economic Situation in Africa and the Fundamental Changes Taking Place in the Rest of the World, that was referred to previously. These principles were reaffirmed in the Relaunching Africa’s Economic and Social Development: the Cairo Agenda for Action that was adopted by the Assembly five years later, in 1995. The political reforms that swept African countries during the 1990s have been based on popular action for a return to a public agenda as expressed through political pluralism, popular participation, the rule of law, greater respect for individual rights, alleviation of economic hardship and improvement of social conditions. To this extent, these reforms have created the political context for improving development management capacity, thus paving the way for attention to be given to the key technical issues. In this regard, two critical areas of capacitybuilding can be identified. These are capacity-building in (1) the civil service in general and (2) the management of the economy in particular. Capacity-building in the civil service The first condition for improving development management is to reform and strengthen the civil service, which has been decimated by the effects of economic crisis. In particular, inflation and currency devaluation have reduced the real value of take-home pay. Low real wages and salaries have resulted in low levels of performance, widespread laxity at work, moonlighting, indiscipline, lack of care for public property, brain drain and a host of other problems. In many African countries, the adoption of structural adjustment programmes has led to retrenchment and limited the capacity of the civil service to attract and retain competent staff. There is, therefore, a need to raise the level of performance, improve morale and commitment to duty by providing appropriate incentives and compensation and taking other measures to enhance the corporate management of the civil service. A strong civil service will enable governments to forge the necessary partnerships with the private sector and civil society. A viable civil service is the key to local ownership of the development management process. It is the instrument that can enable governments to systematically assess needs, establish priorities, plan the use of resources and integrate the contributions of aid providers into national programmes to derive maximum benefit from the ‘fungibility’ of these contributions. It is also the instrument that could enable governments to take a more active role in the design, implementation and evaluation of projects, the overall coordination of aid contributions, and the delivery of


programmes. A civil service with the requisite capacity will ensure that the proper role of donors is to engage in policy dialogue, and provide technical assistance as needed, without intervening in the day-to-day implementation of policies and programmes. Capacity-building for economic management Capacity-building for the management of the economy constitutes a baseline condition for successful growth and development. At the macroeconomic level, there is a need to strengthen the skills and institutions which provide governments with local technical expertise for efficient management of economic reform programmes, timely and appropriate responses to the need for policy adjustment, good planning and budgeting, efficient short-to-medium forecasts of the behaviour of economic aggregates, and the design of responsive monitoring mechanisms and information systems. A similar institutional strengthening is required for interventions in the various sectors, ranging from human development to agriculture, industry, energy, infrastructure, and so forth. The need to overcome the prevailing weaknesses in capacity for both macroeconomic and sectoral management is crucial to the attainment of sustained transformation of African economies. If Africa is to move from economic crisis to growth and development, it is absolutely essential to strengthen, or create, the necessary skills and institutions. The task of building economic management capacity therefore involves a process by which skills and institutions are rehabilitated, developed, and insulated from short-term political pressures. Skills and institutions must respond to and reflect a country’s development needs. Capacity-building must be viewed as a dynamic and ongoing process.

Assessment The 1990s have seen a movement towards placing responsibility for the management of the development process back in the hands of Africans, whether at the level of government, the private sector or civil society. This is also a movement that underscores the view that national ownership of the development process is part of the effort required for sustained attention to the main economic question in Africa. It is a movement that complements the identification of priorities for foreign aid that also occurred during the 1990s mainly


through a series of UN conferences. And it is a movement that reflects the ‘convergence’ of ideas between the donor and recipient countries on appropriate policy responses to the emerging challenges of liberalization and globalization. However, a good system of education and training at various levels is required to build up the skills and practices necessary to maintain capacity. All of these elements are interrelated. Without an efficient and skilled public sector, the policies necessary for sustained growth cannot be effectively maintained. A weak private sector frustrates the aims of economic liberalization in the new global context and is unlikely to achieve its objective as the engine of growth. A fledgeling civil society is unable to effectively participate in safeguarding the process of democratization and enhancement of national dialogue about development issues.10 And, without a high quality education and training system, the skills required to support economic, political and social development cannot be developed and sustained in sufficient numbers. These are the challenges that lie ahead if the recovery of the mid-1990s is to be translated into vigorous growth and sustained transformation.

5 Conclusion

This book has brought the economic recovery of the mid-1990s in Africa into focus to illustrate the inadequacy of international support for dealing with the region’s deep-rooted and long-standing economic difficulties. The recovery itself was not only brief in duration but also limited in the depth and scope of its impact on African economies. It was not supported by a strong investment performance that could lead to sustainable change in the underlying structure of African economies. Much of the resumption of growth in real terms during this period was due largely to good weather and a temporary surge in export receipts. A 25 per cent increase in non-oil commodity prices from 1993 to 1996 was a major factor in the increase in export earnings. It is important to note that relative political stability, and reforms in governance and economic policy in most of Africa’s 54 countries also provided an appropriate environment for economic recovery and its sustenance. During the late 1990s, however, with a reversal of these favourable conditions, average growth barely kept pace with population growth. In particular, falling commodity prices, associated with the weakening of global demand in the wake of the East Asian financial crisis of 1997–8, droughts and floods were mainly responsible for the downturn in average growth. The downturn in growth in the late 1990s, which accompanied the reversal of the favorable economic conditions (good weather and export earnings), shows that the return to improved macroeconomic fundamentals was not sufficient to eliminate the bane of African economies. Putting into perspective the performance of African economies during the whole decade of the 1990s, the problems of vulnerability to such basic forces as inclement weather and fluctuations in commodity 88

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prices become obvious. In particular, the 1990s have exposed the limitations of high commodity dependence in a fast-changing global economy characterized by new technologies and a demanding regime of restructuring, productive efficiency, and international competitiveness. The experience of the decade has shown clearly that policy reforms may be necessary, but are not sufficient to overcome the problems of African economies and ensure sustained economic growth. Such reforms need to be complemented with other measures, including significant flows of resources from external sources – private and public. A major economic challenge facing Africa today, is how to break away from the grip of heavy reliance on primary commodities. It is a condition that cannot provide a stable basis for savings and export earnings needed to increase levels of investment, income and imports. This in turn impedes economic growth, structural change, and the capacity to launch an effective assault on widespread poverty in the region. Meanwhile, ongoing efforts to implement reform programmes have improved resource allocation in African economies, but debt relief has been slow while both private and official external financial flows, critical to support the improved policy conditions for strong growth, have not been forthcoming. In this book, this condition has been described as economic recovery in Africa and the paradox of financial flows. It is true that capital is not the only significant factor in economic development. But financial flows are crucial precisely because, in most African countries today, there is strong political will and commitment to deepen political and economic reforms. At the same time, there is also a growing sense of futility in the face of overwhelming social and economic difficulties that confront reform-minded leaders. It is widely acknowledged that the reforms of the last 15 years have created the best policy environment in decades for development in Africa. Yet, external support has been weak. Moreover, expectations in African societies continue to rise as images of lifestyles, patterns of consumption as well as production possibilities are transmitted via the new information technologies. Indeed, how to ensure that globalization becomes a positive force for the people marginalized by it, is a challenge not only for African policy-makers but also for the world as a whole. Rising expectations can only be met by economies with robust growth. Without such growth, and in the context of population pressures, a demographic structure mostly made up of young people, as well as competition for scarce resources in a context of low growth, widespread poverty, social inequalities and ethnic differences, conflict and instability can be the expected result.


It has not been surprising, therefore, that as globalization gathered momentum during the 1990s, various initiatives were taken to address the needs of those who were being left behind. The targets for human development that were set at various UN conferences during the 1990s, the rethinking of the Washington consensus leading to the formulation of the World Bank’s comprehensive development framework, the adoption by the IMF of poverty alleviation as a major policy objective, and efforts to remove all tariffs and quotas on the exports of the poorest or least developed countries within the framework of the WTO, can be seen in this light. But it has also become clear that the financial resources required to put African economies on a path leading to sustainable growth and to make the necessary impact on human development, poverty alleviation, and relief from commodity dependence have not been forthcoming. This dependence has assumed added significance, not only in the context of the new global economy but also in the light of forecasts of a commodity slump during the early years of the new century. In this regard, the high level event that is being convened by the United Nations shortly to review issues concerning development finance in the new global context could not be more timely. To the extent that Africa is the region lagging behind all others, as reflected by the various development indicators, how to respond to financial resource needs in Africa must inevitably become the main focus of this event.

The development finance gap Economic recovery and the paradox of financial flows must be seen as a metaphor for the development finance gap in the new policy environment prevalent in African countries. In the preceding chapters, this issue was examined from four main angles. Chapter 1 focused on the recovery of the mid-1990s from the perspective of the performance of African economies during the decade as a whole and, more broadly, during the whole post-independence period. In analyzing the paradox of financial flows in the context of the recovery, Chapter 2 examined the main dimensions of the development finance gap – external financial flows, debt, domestic savings and capital flight. Chapter 3 reviewed the targets for poverty reduction and human development that were set by the international community during the 1990s to illustrate that there has been slippage in attaining them mainly on account of the inadequacy of financial resources. Chapter 4 examined

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new ideas on development management that emerged during the 1990s in the post-Cold War globalizing context and, in particular, the recognition that sustainable development requires local and national ownership of the development process. While the new emphasis on ownership has provided vindication for African reservations on the conditions imposed through structural adjustments and other processes favoured by foreign aid agencies, external partners are yet to play fully their own part in providing effective support to meet financial resource needs. One of the most important insights from the assessment of the issues from these four angles is clear evidence of stagnation of investment in African countries, due partly to declining external financial flows, as the discussion in the next section underscores.

Stagnation in investment and declining external financial flows Chapter 1 demonstrated that stagnation in investment has been a major factor underlying the poor performance of African economies during the 1990s. Throughout the decade, the investment/GDP ratio in Africa hovered around 20 per cent, a much lower figure than the average of 33 and 25 per cent posted by Asian and Latin American countries respectively during the same period. For the least developed African countries, the investment ratio was even lower, at less than 15 per cent. This means that most African countries have not been investing enough to meet replacement needs, let alone to create new production capacity. It was also noted in Chapter 1 that the positive growth rates which African countries registered during the period immediately after independence were driven by strong investment performance. For example, the volume of investment grew on average by 6.4 per cent during 1965–73. However, from the early 1980s, the structural adjustment programmes implemented under the supervision of the Bretton Woods institutions, emphasized macroeconomic stabilization and mostly ignored investment. This approach was based on the assumption that, if macroeconomic fundamentals were right, then everything else – especially private and official financial flows – would fall into place. While macroeconomic stability and the removal of large price distortions have made a major contribution to economic recovery, much else remains to fall into place. In particular, the underlying constraints, especially the underdevelopment of human resources and physical infrastructure, continue to be severe. As a result, the response of the


private sector to the opportunities provided by the improved macroeconomic environment has been far from vigorous. It is not surprising, therefore, that when economic recovery was achieved by the mid1990s, it was weak, precarious and hedged by supply constraints. Hence the need for expanding investment in sectors, products and services where value-added is greater, productivity growth is faster and global export markets are growing. The expansion of investment in both primary and secondary industries and capacity-building in the public and private sectors, as well as in civil society as a vital prerequisite for enhancing structural change and productivity growth in Africa, await to be fully addressed. African economies have, therefore, generally been unable to make a positive and systematic adjustment to the changing global economy of the 1990s. Indeed, African countries continue to lose market shares in international trade even for traditional primary commodities. The region’s share of world trade now stands at less than 2 per cent. As noted in Chapter 1, the cost to Africa of its falling share of world trade is around $70 billion a year. In 1997, this was over a fifth more than what Africa received in net foreign aid transfers. With hindsight, the adjustment that was required in the 1980s and 1990s should have emphasized investment in human development and institutional capacity-building, the restructuring of agriculture and industry, as well as the transfer of skills, technology and marketing expertise, as a strategic response to the main economic question in Africa. The adjustment required should have given new impetus and support to fledgling schemes of regional cooperation and integration, in a collective effort by African countries and regional organizations, to derive and consolidate benefits from complementarities, economies of scale, and specialization. To this extent, the main policy weakness in African countries during the 1990s – associated with the dominant role played by the Bretton Woods institutions in economic policy management – was the failure to deal systematically with supply-side constraints and the failure to restructure the main economic sectors and to expand and develop new export products. This failure can be attributed mostly to the stagnation in investment, which policy interventions generally ignored. African economies, therefore, remained trapped within the existing production and accumulation structures that cannot generate the growth required for an effective assault on poverty or sustainable economic transformation. Key OAU documents of the 1990s such as Relaunching Africa’s Economic and Social Development: the Cairo Agenda for Action (1995) and

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OAU Assessment of the Implementation of the United Nations New Agenda for the Development of Africa (UN-NADAF) for the Mid Term Review of UNNADAF (1996), both of which are reproduced in the Appendix, drew attention to the inherent limitations of adjustment policies and the critical challenges that remained. Several public statements that were made on behalf of the OAU during the 1990s, a selection of which are also reproduced in the Appendix, underscored these themes. The Appendix further contains OAU documents on the debt crisis as well as excerpts from the Treaty Establishing the African Economic Community, a road map embodying Africa’s approach to regional economic integration. Taken together, these documents illustrate the general apprehension towards the economic trends of the 1990s as expressed within the councils of Africa’s premier inter-governmental organization, the OAU. They also illustrate that the OAU was prescient in emphasizing the imperative of pursuing regional cooperation and integration as an essential part of the overall response to the challenge of globalization. In the adoption of the New African Initiative and the launch of the African Union at the historic OAU Summit in Lusaka in July 2001, African leaders have signaled their commitment to this strategy. Key extracts relevant to this book from the New African Initiative and Articles 3 and 4 of the Constitutive Act of the African Union are also reproduced in the Appendix. The stagnation in investment during the 1990s was a byproduct of declining receipts from external financial flows. It was noted in Chapter 2 that most African countries rely heavily on trade for their economic prosperity, with imports and exports accounting for over half the region’s GDP. But loss of market shares, falling export receipts, little capacity to generate internal savings, a major problem of debt overhang, and a relatively high susceptibility to capital flight are the critical factors that have combined to make African countries, especially those south of the Sahara, increasingly dependent on foreign aid. During the 1990s, foreign aid from all sources accounted for 70 to 80 per cent of all resource flows into the region and for 9 to 11 per cent of the region’s entire GDP. However, from the early 1990s, official flows have declined significantly in both real and nominal terms. Private capital flows have not been sufficient to make up for the gap left by declining levels of foreign aid. As noted in Chapter 2, in 1997, Africa, south of the Sahara, received an average of $27 per capita of foreign aid and just $3 per capita of foreign direct investment. By contrast, Latin America and the Caribbean received $13 per capita of foreign aid and $62 per capita of FDI. In the absence of significant FDI flows, Africa is clearly


the region most dependent on ODA – a situation that has remained constant throughout the 1990s. This is a trend which underscores the need for foreign aid to be directed both to bridge the gap left by low levels of private capital flows and to serve as a lightning rod for FDI. It was also noted in Chapter 2 that depressed levels of savings, the debt burden, and capital flight are further constraints on Africa’s ability to generate funds for financing development and sustained economic recovery and expansion. The average national savings rate of around 17 per cent of GDP in Africa for the period 1988–96 was well below the 24 per cent average registered by developing countries as a group and the 30 per cent in Asia over the same period. Thirty-three of the forty-one countries identified by the World Bank as Heavily Indebted Poor Countries (HIPC) are in Africa. Given the rather tardy procedures that are still in place for debt relief, some of these countries are using up to 40 per cent of their export earnings to pay off debts. Even North African countries, none of which is an HIPC, are using up to a quarter of export earnings in debt servicing. As regards capital flight, it has been estimated that private citizens hold about 39 per cent of Africa’s stock of wealth overseas. The comparable figure for Asia is 6 per cent. Taking into account the low level of domestic savings in the region, the reversal of capital flight will stem the haemorrhage from this source and help to ease the development finance constraints on African countries. Good governance, political stability and macroeconomic fundamentals are some of the factors essential for the reversal. However, the impact of the reversal of capital flight should not be exaggerated in view of the relatively low domestic savings/GDP ratio in African countries. According to the recent study by the UN Economic Commission for Africa (UNECA) that was referred to in Chapter 2, to reach the Copenhagen World Social Summit target of reducing poverty by half by 2015 in Africa would require a 4 per cent reduction in the ratio of people living in poverty each year from 1999. This would in turn require an average GDP growth of 7 per cent per annum. To achieve this growth rate requires investment on average of 33 per cent of GDP. With a current domestic savings rate of around 15 per cent of GDP, a further 18 per cent would be needed from external sources. Net transfers from foreign aid to the continent average around 9 per cent of GDP, thereby leaving a financing gap of about 9 per cent. The study further suggests that this relatively high dependency on external sources could be reduced over time, assuming incremental output ratios (i.e. the efficiency use of capital) and increasing domestic savings to around the developing country average.

Conclusion 95

No simple panaceas Care has been taken in this book not to offer any simple panacea for the development problems faced by African countries. Nonetheless, the main challenge ahead is the need to strengthen the current recovery to provide the necessary conditions for more vigorous and self-sustaining growth. The expansion and diversification of agriculture, the promotion of industry and the development of key services sectors will be critical in changing the underlying structure of African economies. Inevitably, this will require external partners to find the political will necessary to mobilize the resources to assist African governments in raising levels of investment, as part of an overall effort of bridging the development finance gap in the region. But simultaneous action will be required on several fronts including the need to maintain policies that are consistent in the promotion of (1) macroeconomic stability; (2) development of infrastructure; (3) human development; (4) responsive governance, institution-building, peace and political stability; (5) private sector development, economic diversification, trade and export expansion; and (6) regional cooperation and integration. An outline of the key issues follows. Macroeconomic stability It has been emphasized throughout this book that the reforms of the 1980s and 1990s have generally been successful in removing serious macroeconomic imbalances and distortions that encourage rentseeking activities. A much-improved macroeconomic climate now exists in most African countries. However, these improved conditions now need to be accompanied by rapid and effective debt relief, as well as policies designed to stimulate and encourage savings and investment so as to raise productivity levels and initiate the necessary structural changes. A stable macroeconomic climate with flexible currency exchange rates is desirable, although actual rates of inflation, the size of the budget and current account deficits and the substance of other indicators consistent with high rates of investment fall within a wide band. But it is generally agreed that abrupt policy shifts should be avoided, so as to enable investors to take a long view. In addition, experience suggests that financial liberalization should be carefully sequenced with regulatory or prudential institutional capacity-building in the financial sector, while trade liberalization requires judicious sequencing with the development of productive capacity.


Peace, political stability, responsive governance and institution-building Although only a few, it must be emphasized, of the 54 African countries suffer from civil strife or conflicts and, torn apart by war, many of these countries still lack the basic social and political conditions necessary for initiating sustained growth. However, social conflict and division are not intrinsically an African problem, but rather are the debilitating effects of poverty, growing inequality and heightened factional competition in situations of severe economic decline. Indeed, history demonstrates that political and social instability tends to be greater where social stratification and inequality are associated with widespread poverty. Such a situation tends to generate a vicious circle whereby political instability and social unrest must give rise to greater uncertainty, lower investment and slower growth, which in turn lead to greater poverty and further instability. Given that African conflicts are attributable to the dynamic interplay of economic and social forces, there is room for political choice and action in the management of these forces and, more generally, in institutionalizing responsive governance. This is a challenge not only to the political leadership and civil society at large in the countries that at are in the throes of conflict but also to all countries in the region. It is worth recalling that OAU member states are signatories to the 1990 Declaration on the Political and Socio-Economic Situation in Africa and the Fundamental Changes Taking Place in the Rest of the World, which enunciated the key principles for responsive governance in the post-Cold War context. The Declaration is reproduced in the Appendix. During the 1990s, the OAU for its part built up capacity to provide a framework for political action through the establishment of its Conflict Prevention, Management and Resolution Mechanism. But external support continues to be crucial in regard to the logistics of conflict resolution, and in rebuilding war-torn societies. But most importantly, supporting sustainable growth in African economies remains the most effective means of conflict prevention in the region’s fragile societies. More generally, institutional capacity-building in the public and private sectors, as well as in civil society, to support investment, capital accumulation, the expansion of trade and exports as well as the social requirements of modernizing economies (see the discussion of human development below) remains a priority for many African countries. A sound legal structure and effective contract enforcement are also required to ensure rising levels of private investment. It will be recalled from the discussion in Chapters 3 and 4 that institutional capacity-

Conclusion 97

building initiatives need to focus on the creation of a competent and independent state bureaucracy and the building of closer ties between the bureaucracy and the private sector. The combination of public and private partnerships needed to stimulate rapid economic growth can be illustrated by the experience of East Asian and some Latin American countries, and in such African countries as Mauritius, Morocco, and Tunisia. The build-up of such partnerships requires political action to insulate the bureaucracy from narrow political interests. In this regard, there is further need for effective reform of the civil service aimed at facilitating personnel continuity and the development of the new skills that are required in a modernizing economy and society. This is to ensure that full benefit is derived from the accumulated knowledge of civil servants and to maximize the application of this knowledge. Not only must the current brain drain from the public sector in African countries be reduced, but so too must the practice of undue reliance for policy making advice on often inexperienced cadres from the international financial institutions. This requires putting in place a career structure that rewards ability in a manner competitive with the private sector, regional and international organizations. While remuneration need not be set at a level equivalent to the private sector, there must be a combination of salaries, job satisfaction, perquisites, security and prestige that ensures that public sector managers match those in the private sector. Human development The UN Conferences of the 1990s provided much valuable service to the international community in clarifying the priorities and in setting targets for human development and poverty reduction. These targets provide an essential focus for concerted action by African governments and development partners. The spread of HIV/AIDS and the re-emergence of the threat posed by such other tropical diseases as malaria in Africa require further strengthening of the capacity of national health systems to manage disease by unifying efforts across sectors such as education, water and sanitation and decentralized mechanisms for health care delivery at the local level. Sustained investment in human capital at all levels (including primary, secondary, tertiary, scientific, and information technology education) and targeting of women and girls, as well as more focused training for economic operators (such as enterprises in the same sector, farmers producing the same crops or informal sector entrepreneurs in urban centres) are imperatives. Indeed, much of the advocacy of the OAU/AEC in regard to the heavy


debt burden borne by many African countries has been consistent in pointing to the perverse situation in which governments are spending more on debt servicing than on human development. Such advocacy will continue until this matter is satisfactorily resolved, but African governments bear a responsibility to ensure that human development is accorded the necessary priority in budgetary allocations as resources are released through more effective debt relief initiatives. The growing practice of some governments in providing periodic reports on the state of human development in their countries – along the lines of the UNDP’s annual global report – is to be welcomed as an important tool in identifying priority and critical areas for intervention.

Private sector development, economic diversification, trade and export expansion While Africa’s share of world trade is relatively insignificant, the average trade component of GDP in African economies (that is, imports and exports in relation to GDP) is comparable to that of major trading entities such as the European Union. Trade is, therefore, of critical importance to African economies. It is widely acknowledged, however, that the tissue of a modern entrepreneurial class in most African countries is rather thin. To a large extent, this reflects the suspicion with which governments have viewed modern and large-scale enterprises in their countries because they were owned or managed by persons belonging to ethnic minorities or by nationals of the former colonial power. There is, therefore, need to support the development of a modern, indigenous entrepreneurial class willing to commit its savings and resources to investment rather than to personal consumption. It has to be recognized, however, that the vast majority of economic operators in African countries are engaged in subsistence activities in the rural areas and in the informal sector in urban centres. A particular challenge, therefore, is to engage these operators in exportled or trade-oriented poverty reduction schemes. More broadly, a take-off to sustainable growth requires that governments pursue policies aimed at raising the level of investment, together with a more limited number of selective interventions in certain import-substitution and export-oriented industries which contribute to the accumulation of capabilities and know-how. Initially, as has been the case in many countries, these policies will need to target resourcebased activities and some simpler labour-intensive manufactures, to facilitate learning on how to design sectoral policies, to find out what

Conclusion 99

incentives are effective and for what purpose, and to learn about policy loopholes. At this initial stage, there is also the need for policies to provide comprehensive technology support for productivity improvement and quality management to international standards. More sophisticated policies needed for promoting the next generation of industries can then build on these experiences. To this end, steps must also be taken to facilitate both proactive foreign investment strategies as well as support for indigenous enterprise development, particularly targeted at micro, small and medium sized enterprises and linked to exports. Indeed, African countries have taken steps during the last ten years to improve their foreign investment regimes and support to indigenous entrepreneurs. The new Partnership Agreement between the EU and ACP countries, the World Bank’s comprehensive development framework, and the IMF’s povertyreduction and growth facilities are among a core group of instruments that have been developed recently in response to the specificities of developing and low-income countries. African governments must take up the challenge of engaging the respective partners on how these various instruments could be utilized to coordinate investment, enterprise development and trade expansion. In addition, a trade regime designed to promote investment and exports should allow exporters to have easy and reliable access to inputs at world prices, facilitate investment, discourage luxury consumption and protect domestic producers from damaging competition. The attainment of such objectives requires selective liberalization and differentiated tariff structures, rather than the simple application of relatively uniform tariff structures with low tariff rates in the belief that this minimises distortions while generating budget revenues. Preferential tariff structures among African countries as part of regional integration schemes will also have the effect of opening up the African economic space to inward investment, facilitating competition with enhanced welfare effects. This requires African governments to exercise caution in the context of WTO trade liberalizing negotiations if such objectives are to be achieved. In particular, obligations undertaken by African governments at the WTO must not only be consistent with regional integration objectives but must also enhance the attainment of these objectives. In this context, there is also the need to open OECD markets to African agricultural and resource-based exports including products with significant value-added components. As noted in Chapter 1, OECD subsidies for agriculture total about $300 billion, about as much as Africa’s


GDP. Easing these supports and opening markets would go a long way towards helping Africa recapitalize itself. But as much as duty-free access for the exports of African LDCs as proposed within the WTO is to be welcomed, improvements in market access should be accompanied by the build-up of productive capacity if full advantage is to be taken of improved market access. In this regard, the importance to African countries of the six agency (IMF, World Bank, UNDP, WTO, UNCTAD and ITC) integrated framework for trade capacity-building, a programme aimed at overcoming supply-side bottlenecks, cannot be overemphasized.

Regional cooperation and integration Regional integration in Africa is not merely about reorganizing the terms on which African countries trade among themselves. It is also fundamentally a development strategy which encompasses the objective of diversification of the productive base of African economies, with learning opportunities to trade and export at the regional level, as part of the overall process of integration into the wider global economy. The achievement of these objectives requires African countries simultaneously to undertake economic liberalization on a preferential basis among each other and selectively with the outside world. Over time, this will enable African countries increasingly to overcome the limitations of relative small national markets; achieve a harmonized economic space; maximize scale economies; and promote increased efficiency by eliminating constraints on cross-border trade, investment and payments. African governments are already committed to such a work programme over the next three decades within the framework of the Abuja Treaty. Key elements of the Treaty are reproduced in the Appendix, as mentioned above. With the existing regional economic communities (or RECs) such as ECOWAS, COMESA, SADC, IGAD, UMA, ECCAS, and so on, designated as building blocks, the Treaty provides a legal and institutional framework as well as a systematic approach and benchmark for a gradual process of economic integration and cooperation. Although development partners have generally been sceptical about African efforts at regional integration and have rarely supported crossborder programmes or projects, much has already been achieved in terms of institution building within the RECs to manage the integration process. Gradual progress is also being made in regard to the establishment of preferential trading arrangements and in the harmonization of payment systems and investment policies. In this regard, COMESA, SADC and UEMOA stand out among the RECs that have made the most

Conclusion 101

progress. But several critical challenges remain. Among these is both the need to facilitate the emergence of strong public/private sector partnerships to take the integration process forward through investment, trade and exports, and the need to intensify macroeconomic and sectoral policy coordination. As far as partnerships are concerned, it will be vital for integration among African countries to be driven by investment opportunities created by preferential liberalization within the framework of the RECs. This requires a combination of appropriate policies and increasing levels of investment channeled not only through large-scale ventures but also through small- and medium-scale as well as informal sector enterprises. Indeed, economic and social interests at all levels – including the informal sector – as well as civil society/consumer groups should be seen as major stakeholders in the integration process. They should not only be empowered by the integration process but their ‘voice’ should be an essential input in the design of policies. In this regard, the role played by public/private sector partnerships in the stimulation of rapid economic growth in the East Asian experience and comparable contexts has already been noted. To the extent that economic and social operators provide an essential channel of information on the issues and forces at play, there is need for organized interaction between policy-makers, business, labour, and consumer interests not only at the national level but also under the umbrella of the RECs. This is also part of the challenge of institutions in the economic and social modernization of contemporary Africa. It should be noted that within COMESA, for example, a network of business associations is already in operation in such sectors as financial services and pharmaceuticals. This is commendable, but the voice of labour, consumer/civil society interests also needs to be heard. Networks of these interests as well as of business – created, ‘owned’ and sustained by those they represent – need to emerge and eventually to cover all sectors and sub-sectors at all levels. With regard to macroeconomic and sectoral policy coordination, as suggested previously, a stable macroeconomic environment is required to minimize distortions and to enable investors to take a long view. Similarly, the realization by investors of such benefits as economies of scale depends to a large extent on the coordination of sectoral policies. In particular, a harmonized approach to liberalization – at both the intra-REC preferential and multilateral levels – in key service sectors is required for the build-up of an efficient and cost-competitive infrastructure on a REC-wide basis, especially with regard to land, air and


sea transportation, telecommunications, energy, and financial services. These are critical sectors that impact directly on the development of other sectors such as agriculture and industry. The African Development Bank and the US–Africa Growth and Opportunity Act are among a growing number of development partners and initiatives that have identified infrastructure development as a leading priority for their interventions in Africa. It will be crucial for such interventions not only to create ‘space’ for entrepreneurial activities at various levels but also to be appropriately designed in order to support and reinforce policy harmonization within the framework of the RECs.

Summary As observed earlier, there are no simple panaceas to the challenges facing African countries. Simultaneous action is required along several fronts. But bridging the development finance gap is critical if the momentum of the economic recovery in Africa is to be sustained and if maximum benefits are to be derived from the improved policy framework and conditions of governance. It has been suggested here that economic recovery and the paradox of financial flows is the most critical issue in Africa today that needs to be fully addressed. Yet it is the handful of African countries in a state of conflict and instability on which the international media overwhelmingly focus their attention and endless regurgitation of Afropessimism. In the context of the pervasive poverty found in Africa’s fragile nation–states, however, support for recovery with adequate financial resources to raise the level of investment in African economies is what is fundamentally required to put the continent on a trajectory of sustainable growth. This is a major part of the answer to the main economic challenge in Africa at the dawn of the new century. In this regard, respect by external partners for African ownership of the development process as well as the transfer of skills and ideas required for capacity and institution building as part of the modernization process is vital. For these reasons, the UN high-level event in 2002 on development finance should be concerned not only with such technical issues as the volatility of capital flows in the new era of globalization but also about the development finance gap in the world’s most marginalized continent. The OAU, for its part, will continue its advocacy work to ensure that this question, so central to the future prospects of the continent, is given the attention that it deserves.

Appendix 1: OAU Charter, 25 May 1963 (Extract) Purposes Article II 1.

The Organization shall have the following purposes: (a) To promote the unity and solidarity of the African States; (b) To coordinate and intensify their cooperation and efforts to achieve a better life for the peoples of Africa; (c) To defend their sovereignty, their territorial integrity and independence; (d) To eradicate all forms of colonialism from Africa; and (e) To promote international cooperation, having due regard to the Charter of the United Nations and the Universal Declaration of Human Rights. 2. To these ends, the Member States shall coordinate and harmonize their general policies, especially in the following fields: (a) Political and diplomatic cooperation; (b) Economic cooperation, including transport and communications; (c) Educational and cultural cooperation; (d) Health, sanitation and nutritional cooperation; (e) Scientific and technical cooperation; and (f) Cooperation for defence and security.

103

Appendix 2: Organization of African Unity Treaty Establishing The African Economic Community, June 3 1991, Abuja, Nigeria (Extracts)

Chapter II: Establishment, Principles, Objectives, General Undertaking and Modalities Article 2: Establishment of the Community THE HIGH CONTRACTING PARTIES hereby establish among themselves an African Economic Community (AEC)

Article 3: Principles THE HIGH CONTRACTING PARTIES, in pursuit of the objectives stated in Article 4 of this Treaty, solemnly affirm and declare their adherence to the following principles: (a) equality and inter-dependence of Member States; (b) solidarity and collective self-reliance; (c) inter-State cooperation, harmonization of policies and integration of programmes; (d) promotion of harmonious development of economic activities among Member States; (e) observance of the legal system of the Community; (f) peaceful settlement of disputes among Member States, active cooperation between neighbouring countries and promotion of a peaceful environment as a pre-requisite for economic development; (g) recognition, promotion and protection of human and peoples’ rights in accordance with the provisions of the African Charter on Human and Peoples’ Rights; and (h) accountability, economic justice and popular participation in development. 104

Organization of African Unity 105

Article 4: Objectives 1.

(a)

The objectives of the Community shall be:

to promote economic, social and cultural development and the integration of African economies in order to increase economic selfreliance and promote an endogenous and self-sustained development; (b) to establish, on a continental scale, a framework for the development, mobilization and utilization of the human and material resources of Africa in order to achieve a self-reliant development; (c) to promote cooperation in all fields of human endeavour in order to raise the standard of living of African peoples, and maintain and enhance economic stability, foster close and peaceful relations among Member States and contribute to the progress, development and the economic integration of the Continent; and (d) to coordinate and harmonize policies among existing and future economic communities in order to foster the gradual establishment of the Community. 2. In order to promote the attainment of the objectives of the Community as set out in paragraph 1 of this Article, and in accordance with the relevant provisions of this Treaty, the Community shall, by stages, ensure: (a) the strengthening of existing regional economic communities and the establishment of other communities where they do not exist; (b) the conclusion of agreements aimed at harmonizing and coordinating policies among existing and future sub-regional and regional economic communities; (c) the promotion and strengthening of joint investment programmes in the production and trade of major products and inputs within the framework of collective self-reliance; (d) the liberalization of trade through the abolition, among Member States, of Customs Duties levied on imports and exports and the abolition, among Member States, of Non-Tariff Barriers in order to establish a free trade area at the level of each regional economic community; (e) the harmonization of national policies in order to promote Community activities, particularly in the fields of agriculture, industry, transport and communications, energy, natural resources, trade, money and finance, human resources, education, culture, science and technology; (f) the adoption of a common trade policy vis-à-vis third States; (g) the establishment and maintenance of a common external tariff; (h) the establishment of a common market; (i) the gradual removal, among Member States, of obstacles to the free movement of persons, goods, services and capital and the right of residence and establishment; (j) the establishment of a Community Solidarity, Development and Compensation Fund;

106 Appendices

(k)

(l)

(m)

(n)

(o) (p)

the granting of special treatment to Member States classified as least developed countries and the adoption of special measures in favour of land-locked, semi-land-locked and island countries; the harmonization and rationalization of the activities of existing African multi-national institutions and the establishment of such institutions, as and when necessary, with a view to their possible transformation into organs of the Community; the establishment of appropriate organs for trade in agricultural and cultural products, minerals, metals, and manufactured and semimanufactured goods within the Community; the establishment of contacts and the promotion of information flow among trading organizations such as State commercial enterprises, export promotion and marketing bodies, chambers of commerce, associations of businessmen, and business and advertising agencies; the harmonization and coordination of environmental protection policies; and any other activity that Member States may decide to undertake jointly with a view to attaining the objectives of the Community.

Article 5: General Undertakings 1. Member States undertake to create favourable conditions for the development of the Community and the attainment of its objectives, particularly by harmonizing their strategies and policies. They shall refrain from any unilateral action that may hinder the attainment of the said objectives. 2. Each Member State shall, in accordance with its constitutional procedures, take all necessary measures to ensure the enactment and dissemination of such legislation as may be necessary for the implementation of the provisions of this Treaty. 3. Any Member State which persistently fails to honour its general undertakings under this Treaty or fails to abide by the decisions or regulations of the Community may be subjected to sanctions by the Assembly upon the recommendation of the Council. Such sanctions may include the suspension of the rights and privileges of membership and may be lifted by the Assembly upon the recommendation of the Council.

Article 6: Modalities for the Establishment of the Community 1. The Community shall be established gradually in six (6) stages of variable duration over a transitional period not exceeding thirty-four (34) years. 2. At each such stage, specific activities shall be assigned and implemented concurrently as follows:


(a)

First Stage:

Strengthening of existing regional economic communities and, within a period not exceeding five (5) years from the date of entry into force of this Treaty, establishing economic communities in regions where they do not exist;

(b) Second Stage: (i)

(ii)

(iii)

at the level of each regional economic community and within a period not exceeding eight (8) years, stabilizing Tariff Barriers and Non-Tariff Barriers, Customs Duties and internal taxes existing at the date of entry into force of this Treaty; there shall also be prepared and adopted studies to determine the time-table for the gradual removal of Tariff Barriers and Non-Tariff Barriers to regional and intra-Community trade and for the gradual harmonization of Customs Duties in relation to third States; strengthening of sectoral integration at the regional and continental levels in all areas of activity particularly in the fields of trade, agriculture, money and finance, transport and communications, industry and energy; and coordination and harmonization of activities among the existing and future economic communities.

(c) Third Stage: At the level of each regional economic community and within a period not exceeding ten (10) years, establishment of a Free Trade Area through the observance of the time-table for the gradual removal of Tariff Barriers and Non-Tariff Barriers to intra-community trade and the establishment of a Customs Union by means of adopting a common external tariff.

(d) Fourth Stage: Within a period not exceeding two (2) years, coordination and harmonization of tariff and non-tariff systems among the various regional economic communities with a view to establishing a Customs Union at the continental level by means of adopting a common external tariff.

(e) Fifth Stage: Within a period not exceeding four (4) years, establishment of an African Common Market through: (i) the adoption of a common policy in several areas such as agriculture, transport and communications, industry, energy and scientific research;

108 Appendices

(ii) (iii)

(iv)

the harmonization of monetary, financial and fiscal policies; the application of the principle of free movement of persons as well as the provisions herein regarding the rights of residence and establishment; and constituting the proper resources of the Community as provided for in paragraph 2 of Article 82 of this Treaty.

(f) Sixth Stage: Within a period not exceeding five (5) years: (i) consolidation and strengthening of the structure of the African Common Market, through including the free movement of people, goods, capital and services, as well as, the provisions herein regarding the rights of residence and establishment, (ii) integration of all the sectors namely economic, political, social and cultural; establishment of a single domestic market and a Pan-African Economic and Monetary Union; (iii) implementation of the final stage for the setting up of an African Monetary Union, the establishment of a single African Central Bank and the creation of a single African Currency; (iv) implementation of the final stage for the setting up of the structure of the Pan-African Parliament and election of its members by continental universal suffrage; (v) implementation of the final stage for the harmonization and coordination process of the activities of regional economic communities; (vi) implementation of the final stage for the setting up of the structures of African multi-national enterprises in all sectors; and (vii) implementation of the final stage for the setting up of the structures of the executive organs of the Community. 3. All measures envisaged under this Treaty for the promotion of a harmonious and balanced development among Member States, particularly, those relating to the formulation of multi-national projects and programmes, shall be implemented concurrently within the time period specified for the attainment of the objectives of the various stages outlined in paragraph 2 of this Article. 4. The transition from one stage to another shall be determined when the specific objectives set in this Treaty or pronounced by the Assembly for a particular stage, are implemented and all commitments fulfilled. The Assembly, on the recommendation of the Council, shall confirm that the objectives to a particular stage have been attained and shall approve the transition to the next stage. 5. Notwithstanding the provisions of the preceding paragraph, the cumulative transitional period shall not exceed forty (40) years from the date of entry into force of this Treaty.


Chapter XIX: Relations between the Community and regional economic communities, regional continental organizations, african non-governmental organizations and other socio-economic organizations and associations Article 88: Relations between the Community and regional economic communities 1. The Community shall be established mainly through the coordination, harmonization and progressive integration of the activities of regional economic communities. 2. Member States undertake to promote the coordination and harmonization of the integration activities of regional economic communities of which they are members with the activities of the Community, it being understood that the establishment of the latter is the final objective towards which the activities of existing and future regional economic communities shall be geared. 3. To this end, the Community shall be entrusted with the coordination, harmonization and evaluation of the activities of existing and future regional economic communities. 4. Member States undertake, through their respective regional economic communities, to coordinate and harmonize the activities of their subregional organization, with a view to rationalizing the integration process at the level of each region.

Article 89: Relations between the Community and African continental organizations The Community shall closely cooperate with African continental organizations including, in particular, the African Development Bank and African Centre for Monetary Studies in order to ensure the attainment of regional and continental integration objectives. It may conclude cooperation agreements with these Organizations.

Article 90: Relations between the Community and African non-governmental organizations 1. The Community, in the context of mobilizing the human and material resources of Africa, shall establish relations of cooperation with African Non-Governmental Organizations, with a view to encouraging the involvement of the African peoples in the process of economic integration and mobilizing their technical, material and financial support. 2. To this end, the Community shall set up a mechanism for consultation with such Non-Governmental Organizations.

110 Appendices

Article 91: Relations between the Community and socio-economic organizations and associations 1. The Community, in the context of mobilizing the various actors of socio-economic life, shall establish relations of cooperation with socio-economic organizations and associations including mainly, producers, transport operators, workers, employers, youth, women, artisans and other professional organizations and associations with a view to ensuring their involvement in the integration process of Africa. 2. To this end, the Community shall set up a mechanism for consultation with such socio-economic organizations and associations.

Chapter XX: Relations between the Community, Third States, and international organizations Article 92: Cooperation agreements 1. The Community may conclude cooperation agreements with third States. 2. In the pursuit of its objectives, the Community shall ensure the establishment of relations of cooperation with the United Nations System, particularly, the United Nations Economic Commission for Africa, specialized agencies of the United Nations and any other international organization, with a view to attaining the objectives of the Community. 3. Cooperation Agreements to be concluded pursuant to the provisions of Paragraphs 1 and 2 of this Article shall be submitted to the Assembly for approval upon the recommendation of the Council.

Chapter XXI: Relations between Member States, Third States, regional and sub-regional organizations and international organizations Article 93: Agreements concluded by Member States 1. Member States may conclude economic, technical or cultural agreements with one or several Member States, and with Third States, regional and sub-regional organizations or any other international organization, provided that such agreements are not incompatible with the provisions of this Treaty. They shall transmit such agreements to the Secretary-General who shall inform the Council thereof. 2. In the event of incompatibility of agreements concluded, prior to the entry into force of this Treaty among Member States or between the Member States and Third States, sub-regional or regional organizations or any other international organization, with the provisions of this Treaty, the Member State or Member States concerned shall take the appropriate


steps to eliminate such incompatibility. To this end, Member States shall, where necessary, assist each other and adopt a common position.

Article 94: International negotiations 1. Member States undertake to formulate and adopt common positions within the Community on issues relating to international negotiations in order to promote and safeguard the interests of Africa. 2. To this end, the Community shall prepare studies and reports designed to help Member States to better harmonize their positions on the said issues.

Article 95: Protocols on Chapters XIX, XX and XXI Member States hereby agree to conclude the Protocols relating to Chapters XIX, XX and XXI of this Treaty.

Appendix 3: Constitutive Act of the African Union (Extract), 11 July 2000 Article 3 Objectives The objectives of the Union shall be to: (a) achieve greater unity and solidarity between the African countries and the peoples of Africa; (b) defend the sovereignty, territorial integrity and independence of its Member States; (c) accelerate the political and socio-economic integration of the continent; (d) promote and defend African common positions on issues of interest to the continent and its peoples; (e) encourage international cooperation, taking due account of the Charter of the United Nations and the Universal Declaration of Human Rights; (f) promote peace, security, and stability on the continent; (g) promote democratic principles and institutions, popular participation and good governance; (h) promote and protect human and peoples’ rights in accordance with the African Charter on Human and Peoples’ Rights and other relevant human rights instruments; (i) establish the necessary conditions which enable the continent to play its rightful role in the global economy and in international negotiations; (j) promote sustainable development at the economic, social and cultural levels as well as the integration of African economies; (k) promote co-operation in all fields of human activity to raise the living standards of African peoples; (l) coordinate and harmonize the policies between the existing and future Regional Economic Communities for the gradual attainment of the objectives of the Union; (m) advance the development of the continent by promoting research in all fields, in particular in science and technology; (n) work with relevant international partners in the eradication of preventable diseases and the promotion of good health on the continent.

112

Constitutive Act of the African Union 113

Article 4 Principles The Union shall function in accordance with the following principles: (a) sovereign equality and interdependence among Member States of the Union; (b) respect of borders existing on achievement of independence; (c) participation of the African peoples in the activities of the Union; (d) establishment of a common defence policy for the African Continent; (e) peaceful resolution of conflicts among Member States of the Union through such appropriate means as may be decided upon by the Assembly; (f) prohibition of the use of force or threat to use force among Member States of the Union; (g) non-interference by any Member State in the internal affairs of another; (h) the right of the Union to intervene in a Member State pursuant to a decision of the Assembly in respect of grave circumstances, namely: war crimes, genocide and crimes against humanity; (i) peaceful co-existence of Member States and their right to live in peace and security; (j) the right of Member States to request intervention from the Union in order to restore peace and security; (k) promotion of self-reliance within the framework of the Union; (l) promotion of gender equality; (m) respect for democratic principles, human rights, the rule of law and good governance; (n) promotion of social justice to ensure balanced economic development; (o) respect for the sanctity of human life, condemnation and rejection of impunity and political assassination, acts of terrorism and subversive activities; (p) condemnation and rejection of unconstitutional changes of governments.

Appendix 4: A New African Initiative (Extract), 11 July 2001 C. Mobilising resources 54.7

The capital flows initiative

To achieve the estimated 7 per cent per annum growth rate needed to meet the IDGs – most importantly, to halve poverty incidence by the year 2015 – Africa needs to fill an annual resource gap of 12 per cent of its GDP, or US $64 billion. This will require increased domestic savings, as well as improvements to the public revenue collection systems. However, the majority of the needed resources will have to be obtained from outside the continent. The African initiative focuses on debt reduction and ODA as complementary external resources required in the short to medium term, and addresses private capital flows as a longer-term concern. A basic principle of the Capital Flows Initiative is that improved governance is a necessary accompaniment to increased capital flows, so that participation in the Economic and Political Governance Initiatives is a prerequisite for participation in the Capital Flows Initiative.

(i)

The debt initiative

The African initiative seeks to extend debt relief beyond its current levels (based on debt ‘sustainability’), which still require debt service payments amounting to a significant portion of the resource gap. The African initiative’s long-term objective is to link debt relief with costed poverty reduction outcomes. In the interim, debt service ceilings should be fixed as a proportion of fiscal revenue, with different ceilings for IDA and nonIDA countries. To secure the full commitment of concessional resources – debt relief plus ODA – that Africa requires, the African initiative leadership will negotiate these arrangements with creditor governments. Countries would engage with existing debt relief mechanisms – the HIPC and the Paris Club – before seeking recourse through the African initiative. The Debt Initiative will require agreed poverty reduction strategies, debt strategies and participation in the Economic Governance Initiative to ensure that countries are able to absorb the extra resources. In addition to seeking further debt relief through the interim debt strategy set out above, the African initiative leadership will establish a forum in which African countries will exchange experiences and mobilise for the improvement of debt relief strategies. 114

A New African Initiative 115

Actions. •

•

(ii)

The African initiative heads of state will seek to secure an agreement, negotiated with the international community, to provide further debt relief for countries participating in the African initiative, based on the principles outlined above. The African initiative leadership will establish a forum in which African countries may share experiences and mobilise for the improvement of debt relief strategies. They will exchange ideas that may end the process of reform and qualification in the HIPC process.

The ODA reform initiative

The African initiative seeks increased ODA flows in the medium term, as well as reform of the ODA delivery system, to ensure that flows are more effectively utilized by recipient African countries. The African initiative will establish an ODA forum of African countries so as to develop a common African position on ODA reform, and to engage with the Development Assistance Committee (DAC) of the OECD and other donors in developing a charter underpinning the development partnership. This charter will identify the Economic Governance Initiative as a prerequisite for enhancing African countries’ capacity to utilize increased ODA flows, and will propose a complementary, independent assessment mechanism for monitoring donor performance. The African initiative will support a Poverty Reduction Strategy Paper (PRSP) Learning Group to engage in the PRSP process together with the IMF and the World Bank.

Actions. • •

• •

(iii)

Constitute an ODA forum for developing a common African position on ODA reform, as a counterpart to the OECD DAC structure; Engage, through the ODA forum, with donor agencies to establish a charter for the development partnership, which would embody the principles outlined above; Support the ECA’s efforts to establish a PRSP Learning Group; Establish an independent mechanism for assessing donor and recipient country performance.

The private capital flows initiative

The African initiative seeks to increase private capital inflows from outside Africa, as an essential component of a sustainable long-term approach to filling the resource gap. The first priority is to address investors’ perception of Africa as a ‘high risk’ continent, especially with regard to insecurity of property rights, regulatory weakness and markets. Several elements of the African initiative will help to lower these risks gradually, and include initiatives relating to peace

116 Appendices

and security, political and economic governance, infrastructure and poverty reduction. Interim risk mitigation and reduction measures will be put in place, including credit guarantee schemes and the strengthened investment-related regulatory and legislative frameworks. The next priority is the implementation of a PPP capacity-building programme through the African Development Bank and regional development banks, to assist national and subnational governments in structuring and regulating transactions in the provision of infrastructural and social services. The third priority is to promote the deepening of financial markets within countries, as well as cross-border harmonization and integration, via a Financial Market Integration Task Force. Initially, this will focus on the legislative and regulatory environment for the financial system.

Actions. •

• • •

Establish a task team to carry out audits of investment-related legislation and regulation, with a view to risk reduction and harmonization within Africa; Carry out a needs assessment of and feasibility study on financial instruments to mitigate risks associated with doing business in Africa; Establish an initiative to enhance the capacity of countries to establish PPPs; Establish a Financial Market Integration Task Force that will serve to fast-track financial market integration through the establishment of an internationally competitive legislative and regulatory framework and the creation of a single African trading platform.

Appendix 5: Declaration of the Assembly of Heads of State and Government of the Organization of African Unity on the Political and Socio-Economic Situation in Africa and the Fundamental Changes taking place in the Rest of the World, Addis Ababa, 11 July 1990

We, the Heads of State and Government of the Organization of African Unity, meeting at our Twenty-sixth Ordinary Session of our Assembly in Addis Ababa, Ethiopia, from 9–11 July 1990, have undertaken a critical review of the political, social and economic situation of our Continent in the light of the rapid changes taking place in the world and their impact on Africa as presented in the Report of the Secretary-General on the fundamental changes taking place in the world and their implications for Africa: Proposals for an African Response. 2. In particular, we have noted the changing East–West relations from confrontation to cooperation, the socio-economic and political changes in Eastern Europe, the steady move towards political and monetary union of Western Europe, the increasing global tendency towards regional integration and the establishment of trading and economic blocs as well as the advances in science and technology. These, we found, constitute major factors which should guide Africa’s collective thinking about the challenges and options before her in the 1990s and beyond in view of the real threat of marginalization of our continent. 3. We noted with satisfaction, the achievements of Africa in the struggle for the decolonization of the Continent and in the fight against racism and apartheid, as well as the positive role played by the OAU in this respect. The independence of Namibia has pushed further Africa’s frontiers of freedom. 4. We took note of the measures taken by Mr de Klerk, which provide ground for optimism. We caution however, that these changes fall far short of our common objective of totally dismantling apartheid. Unless and until the 117

118 Appendices

racist minority Government is irreversibly committed to the eradication of this anachronistic system, the International Community must continue to exert all forms of pressure including, in particular, economic sanctions against South Africa. This, our collective view, is also the demand of the National Liberation Movements of that country. We wish at the same time to reaffirm our solidarity with the oppressed people of South Africa and to assure them of our undivided support at this crucial phase in their struggle. At the same time, we urge them to close their ranks and unite their forces. 5. The socio-economic situation in our continent remains precarious today despite the many efforts made by our countries, individually and collectively. At our second Extra-Ordinary Assembly in Lagos, Nigeria in April 1980, we adopted the Lagos Plan of Action for the Economic Development of Africa up to the Year 2000 and the Final Act of Lagos. At the Twenty-first Ordinary Session of our Assembly held here in Addis Ababa in July 1985, we also adopted the Africa’s Priority Programme for Economy Recovery 1986–1990. Equally, in the face of the excruciating external debt burden, we convened the Third Extra-Ordinary Session of our Assembly and adopted the African Common Position on Africa’s External Debt Crisis. In all these endeavours, we were guided by the principle of collective selfreliance and self-sustaining development. 6. These represented our collective attempt to institute measures to arrest and reverse the steady decline in Africa’s economic performance. Despite these attempts and strong political commitment to them, it has not so far been possible to achieve our objective of laying a firm foundation for self-sustained development of our countries. On the contrary, throughout the decade of the 1980s most of our productive and infrastructural facilities continued to deteriorate. The per capita incomes of our peoples fell drastically and so did the volumes of our exports as well as imports. There has been sharp decline in the quality of life in our countries as spending on public health, housing and education and other social services had to be severely curtailed. Food production has also fallen in proportion to the expanding population. All this contrasted sharply with the alarming rise in Africa’s external debt stock which shot up from about US$50 billion in 1980 to about US$257 dollars by the end of 1989. As a result of this combination of acute economic problems and external indebtedness, the number of African Member States classified as least developed rose from 21 to 28 during the same period. 7. Our countries have made serious efforts to cope with the most adverse consequences of this difficult economic situation. Most of our countries have entered into structural adjustment programmes with the international financial and monetary institutions, mostly at heavy political and social costs. But we realize that these are short-term measures and are by themselves insufficient to completely restore our economies to a sound footing and lay firm foundation for future growth. We are very much concerned that, in addition to these problems, there is an increasing tendency to impose conditionalities of a political nature for assistance to Africa.

Declaration of the Assmbly of Heads of State 119

8. We reaffirm that Africa’s development is the responsibility of our governments and peoples. We are now more than before determined to lay a solid foundation for self-reliant, human-centred and sustainable development on the basis of social justice and collective self-reliance so as to achieve accelerated structural transformation of our economies. Within this context we are determined to work assiduously towards economic integration through regional cooperation. We are also determined to take urgent measures to rationalize the existing economic groupings in our continent in order to increase their effectiveness in promoting economic integration and establishing an African Economic Community. 9. These are objectives we set for ourselves in Lagos in 1980. We reaffirm their continued validity as well as the fundamental principles of the Lagos Plan of Action and Africa’s Priority Programme for Economic Recovery, including the sectoral priorities contained in them; in particular, the urgent need to attain self-sufficiency in food production, to promote science and technology for development and to establish a viable industrial base on the continent. In this context, we commit ourselves to the pursuit of sound population and environmental policies conducive to economic growth and development of our continent. 10. We are fully aware that in order to facilitate this process of socio-economic transformation and integration, it is necessary to promote popular participation of our peoples in the processes of government and development. A political environment which guarantees human rights and the observance of the rule of law would assure high standards of probity and accountability particularly on the part of those who hold public office. In addition, popular-based political processes would ensure the involvement of all, including, in particular, women and youth in the development efforts. We accordingly recommit ourselves to the further democratization of our societies and to the consolidation of democratic institutions in our countries. We reaffirm the right of our countries to determine, in all sovereignty, their system of democracy on the basis of their socio-cultural values, taking into account the realities of each of our countries and the necessity to ensure development and satisfy the basic needs of our peoples. We therefore assert that democracy and development should go together and should be mutually reinforcing. 11. We realize at the same time that the possibilities of achieving the objectives we have set will be constrained as long as an atmosphere of lasting peace and stability does not prevail in Africa. We, therefore, renew our determination to work together towards the peaceful and speedy resolution of all the conflicts on our continent. The resolution of conflicts will be conducive to the creation of peace and stability in the continent and will also have the effect of reducing expenditures on defence and security, thus releasing additional resources for socio-economic development. We are equally determined to make renewed efforts to eradicate the root causes of the refugee problem. It is only through the creation of stable conditions

120 Appendices

that Africa can fully harness its human and material resources and direct them to development. 12. At this crucial juncture when our continent is emerging with difficulty from a phase in its history that focused mainly on political liberation and nation building, and is about to embark on a new era laying greater emphasis on economic development, we need to strengthen the Organization of African Unity so that it may also become a viable instrument in the service of Africa’s economic development and integration. Consistent with this goal, we rededicate ourselves to the principles and objectives enshrined in its Charter, to our faith in ourselves and to our continent with greater determination to be masters of our destiny. In this spirit, we reaffirm our commitment to revive the ideals of Pan-Africanism and commit ourselves, individually and collectively, on behalf of our governments and peoples to maintain and strengthen our unity and solidarity and to pool our resources and wisdom in order to face the challenges of the decade of the 1990s and beyond, change the bleak socioeconomic prospects of our continent and guarantee a better life for all peoples and future generations yet unborn. These objectives are well within our capabilities. We, therefore, pledge to apply ourselves fully to the achievement of these objectives. 13. The achievement of these objectives will also require international cooperation and solidarity as well as fundamental changes in the international economic system. The continuing plummeting of the prices of Africa’s commodities, skyrocketing of prices of manufactured goods and the growing burden of external debt and the attendant reverse flow of resources constitute external factors which severely constrain our efforts for economic recovery. The developed countries bear a major responsibility for the transformation of the present inequitable international system. On our part, we will continue to strive for the establishment of a just and equitable international economic system. In this connection, a revitalized NonAligned Movement can play a decisive role. 14. We recommit ourselves to strengthen the North–South Cooperation and to play a lead role in this regard. We also wish to express our readiness to work in concert with other countries and regions of the developing world to reactivate North–South dialogue and cooperation. We do believe that an increasingly interdependent world calls for greater international solidarity and that peace and prosperity should be shared for the common good of humanity. 15. We request the Secretary-General to monitor the implementation of this declaration and to take all necessary actions in this respect in collaboration with the United Nations Economic Commission for Africa, African Development Bank and other African and International Institutions. We also request him to ensure the widest possible dissemination of this Declaration and to sensitize African public opinion and the International Community on its content.

Appendix 6: Relaunching Africa’s Economic and Social Development: The Cairo Agenda for Action. Adopted by the ThirtyFirst Ordinary Session of the Assembly of Heads of State and Government of the Organization of African Unity, 26–28 June, 1995, Addis Ababa, Ethiopia I

Preamble

1. We, the Heads of State and Governments of the Organization of African Unity Meeting at the Thirty-first Ordinary Session of the Assembly of Heads of State and Government in Addis Ababa, Ethiopia, from the 26th to 28th of June, 1995, have undertaken an in-depth and critical review of the political, economic and social situation in our continent, as presented in the Report of the Secretary-General to the Special Session of the Council of Ministers on Economic and Social Issues in African Development. 2. Since the beginning of the 1990s, changes have occurred in the world, particularly in the political, economic and social arena. These include a growing tendency, especially in the developed countries, to establish, strengthen and enlarge economic groupings in the form of trading blocs such as the Single European Market; the conclusion of the Uruguay Round Agreements; the establishment of the World Trade Organization; and the further advances in information science and production technology. These developments have been buttressed by the dominance of the free market economic system based on competition, efficiency and productivity. These criteria were emphasized in both the bilateral and multilateral conditionalities of the Structural Adjustment Programmes. Consequently, Africa must take new steps to ensure that it becomes an active partner in the world economic system. In this regard, Africa must adopt a new vision for its development and translate this vision into appropriate programmes. This approach will place Africa in a position to fully participate, as a credible partner, in the world system. In this new spirit, Africa will be able to promote its fundamental interests and concerns. 121

122 Appendices

3. For many years, we have adopted at the national, regional and continental levels many plans, strategies and programmes for the development of our countries, individually and collectively. Unfortunately, these plans and programmes were not adequately implemented by the majority of our countries and in some cases were completely paralysed and jeopardized by incessant civil strife and natural calamities. To rectify this situation, African countries must take effective measures within a specified time frame to ensure the satisfactory implementation and follow-up of decisions that we have made for the development of the continent. In this context, people should be the centre and object of development of our continent. To this end, governments should ensure the involvement of the people in the conception, implementation and monitoring of development plans, programmes and projects. Special attention should be paid to the full involvement of women in the social and economic development efforts. We should make all efforts to attract and retain African expertise and reverse the ‘brain drain’ from our countries. 4. At the international level, numerous plans and programmes have been adopted by the UN General Assembly and other fora with the expressed intention of providing greater support for the development of Africa. Unfortunately, the achievements in this area have been unsatisfactory due particularly to the lack of adequate external resources. 5. We are deeply concerned that the socio-economic situation in Africa has remained precarious despite the many efforts made by our countries, individually and collectively, to lay a solid foundation for Africa’s development. In all these endeavours, we have been guided by the principle of collective self-reliance in order to achieve self-sustaining development of our countries. We reaffirm our commitment to this principle. 6. These and other recent developments have prompted us to meet in Cairo in an Extra-Ordinary Session. It is an opportune occasion to seriously review, analyze and reassess the root causes of economic and social problems with a view to recommending remedial measures and lasting solutions that should be taken by African governments and peoples, with the support of the international community. 7. In assessing these problems, we are convinced that Africa’s underdevelopment can be overcome. Africa is a resilient continent. Indeed, Africa is a continent in transition. It has immense human and natural resources. With a strong will, more determination, planning and vision, we can make Africa the economic power that it ought to be. 8. We reaffirm that Africa’s development is first and foremost the responsibility of our governments and peoples. We are determined to lay a firm foundation for a human-centred, equitable and sustainable development on the basis of sound economic policies, social justice and collective selfreliance, in order to achieve accelerated structural transformation of our economies.

Relaunching Africa’s Economic and Social Development 123

9. On the basis of the above considerations, while reaffirming our commitment to the Lagos Plan of Action, we have adopted The Cairo Agenda for Action which offers recommendations for consideration and action by our governments and peoples, as well as by the international community for relaunching Africa’s economic and social development.

II

What we can do for ourselves

(a) Democracy, governance, peace, security, stability and sustainable development 10. We recognize and resolve that democracy, good governance, peace, security, stability and justice are among the most essential factors in African socio-economic development. Without democracy and peace, development is not possible; and, without development, peace is not durable. In this regard, we recall the relevance of the Declaration of the Assembly of Heads of State and Government of the OAU of 11 July, 1990 on the Political and Socio-economic Situation in Africa and the Fundamental Changes Taking Place in the World. We are, therefore, committed to take the following actions: (i) launch programmes to promote national unity especially through the politics of inclusion and a culture of tolerance among the various segments of our people and among the countries of Africa, based on the principles of respect of human rights and dignity, free and fair elections, as well as respect for the freedom of the press, speech, association and conscience; (ii) ensure the speedy promotion of good governance, characterized by accountability, probity, transparency, equal application of the rule of law, and a clear separation of powers, as an objective and a condition for rapid and sustainable development in African societies. A policy of regionalization and decentralization is essential for ensuring the full participation of all the people, particularly the rural population at the grass-roots level, in their own development, and for promoting a feeling of belonging; (iii) it is essential to clearly define the role of government and the private sector in development. Governments should make special efforts to encourage the participation of the private sector in the development process; (iv) take measures for the eradication of the root causes of refugees and displaced persons in our continent as well as for their speedy return and re-settlement in their countries of origin and expediting the search for lasting solutions to this problem of refugees; (v) give the maximum political and financial support to the OAU Mechanism for Conflict Prevention, Management and Resolution, for

124 Appendices

its effective peace-making operations, by involving all segments of the population and mobilizing adequate official and private resources for the OAU Peace Fund.

(b) Food security 11. Africa is essentially an agricultural and pastoral continent. Yet, food and agricultural output has declined substantially since the 1960s. Consequently, most of our countries are net food importers. While civil strife, drought, desertification and other environmental factors have contributed to the decline in food production, policies which did not give enough attention to food crops are an important part of the explanation. 12. An improvement in agricultural performance is required to provide food supplies essential to raising nutritional standards and to feeding the rapidly growing population without excessive dependence on external sources. The benefits of economic growth should be expanded to the whole population particularly in the rural areas where poverty is more pronounced. In this regard:– (i) agricultural promotion should not be excessively centred on traditional export commodities. Food crops, especially those produced and/or consumed by poor people should be given special attention; (ii) Appropriate measures should also be made to develop and extend livestock and fisheries as part of the overall food security strategy and the African Regional Nutrition Strategy (1993–2003); (iii) efficient and standardized means of stock-piling of surplus food should be devised for use in times of famine, drought and other hardships; (iv) appropriate means should be made for the national management of the water resources and the preservation of water against pollution; (v) reforestation programmes should be vigorously pursued as a means of checking the rate of desertification of arable lands and preserving their fertility; and (vi) current initiatives to formulate a framework for the development and operationalization of a Common African Agricultural Programme (CAAP) should be finalized as soon as possible.

(c) Capacity-building and human resources development 13. The development of human resources is fundamental to the sustainable and equitable development of Africa. The primacy of human resources development must, therefore, be maintained in all African Member States’ economic and social policies. In this connection, the educational and training systems which remain the key to economic and social development should be adapted to the needs of our societies, with emphasis on technical, scientific and technological education, thereby ensuring that education and training are commensurate with the exigencies of the 1abour market.


Priority focus should be given to increasing Africa’s capacity to implement its development plans. Human resource development also entails the elimination of gender-based discrimination. Necessary legislation needs to be passed at national level to remove all such discriminatory practices that exist to provide for the protection of the girl child and women in Africa while extending to them equal opportunities as regards health, education, employment and other civic rights. In the same vein, the situation of children should be seriously addressed in compliance with the African Charter on the Rights and Welfare of the Child as well as the Consensus of Dakar. 14. Member States should give priority in their development programmes to the basic needs of the people by developing appropriate infrastructure (such as rural roads, potable water supply), meeting basic food requirements, providing primary health services, education and skills and generating productive and remunerative employment opportunities as a means of eradicating poverty. African countries should endeavour to implement the African Common Position on Human and Social Development; the OAU Declaration of 1991 on the Employment Crisis in Africa; the Dakar/NGOR Declaration on Population, Family and Sustainable Development; the Programme of Action of the ICPD (1994); the Plan of Action for the Promotion of Cultural Industries (1992); the Declaration of the Heads of State and Government on Health as a Basis for Development (1987), as well as the Declaration and Programme of Action of the Copenhagen World Summit for Social Development (1995). African countries should also endeavour to protect their cultural heritage as provided for in the African Cultural Charter (1976). 15. Africa’s low science and technology base is highly inadequate for the requirements of modern development processes such as agriculture, health, etc. There is therefore an urgent need to build up and strengthen Africa’s capacity in the field of science and technology, if Africa is to be efficient and competitive in its production and thus participate in the increased flows of advanced technologies and globalization of production processes. African governments are therefore called upon to: (i) give high priority to building national and regional capacities in the area of science and technology as the basis and means for all development activities and hence create conditions for more vigorous adaptation and application of science and technology for sustainable development. Each Member State should therefore devote a minimum of one per cent of its GDP to the development of science and technology and foster co-operation between national and regional institutions. Special attention should be given to the strengthening of the existing centres of excellence and other specialized technical institutions; (ii) formulate effective national policies for education and training in science and technology for development, with emphasis on liberalization of technology flows, including advanced technologies and

126 Appendices

the promotion of indigenous technologies. To this end, African experts should be encouraged to remain in Africa and contribute to its developments.

(d) Structural transformation of African economies industrialization 16. Industrialization is of great importance as we move into the 21st century. Industrial development is central to structural change and transformation of African economies, to the increase in incomes and employment, to the diversification of our exports and to the satisfaction of the needs of the African peoples. African industrialization is still at a rudimentary stage, with outmoded processes and low technology input and high operating costs. In this connection, African governments are called upon to give priority attention to the following: (i) the formulation of a programme for industrial restructuring, recognizing the changing world economy, in particular the implications of the Uruguay Round Agreements, globalization of production processes, and the need for Africa to be competitive, if it is to participate in the world economy; (ii) the effective implementation of the Programme for the Second Industrial Development Decade for Africa and strengthening subregional and regional institutions that are capable of supporting our efforts in the fields of engineering, technology, management and standardization, and related fields; (iii) the contribution and support of UNIDO to Africa’s industrialization will continue to be crucial to our industrial development. The current extraneous attempts to abolish UNIDO and UNCTAD are, therefore, of serious concern to our countries. We, therefore, call upon all our Member States to strongly resist such attempts. In this respect, the international community is called upon to respect and fully implement commitments made in the Yaoundé Declaration adopted by the 5th General Conference of UNIDO. 17. Member States who have not done so should formulate policies and programmes for the development and strengthening of indigenous entrepreneurial capability with special focus on the establishment of micro, small and medium-scale enterprises so as to develop the industrial middle class which is the engine for sustained development.

Mineral resources and energy 18. In order to promote their industrial development, African countries should build and strengthen their capacity for exploration, development and utilization of the continent’s abundant energy and mineral resources, and the formulation of effective cooperation policies in this regard. In particular, African countries are called upon to:


(i) (ii)

promote the exports of high value-added mineral exports; encourage private sector investment in the extraction and downstream processing of mineral resources; (iii) encourage specialized training in mineral processing technology, mineralogy, and extractive metallurgy, foundry technology, material science and metal fabrication. 19. In Africa, a major hindrance to industrial development is the inadequacy of energy resources. The Secretary-General of the OAU, in close cooperation with the Executive Secretary of the ECA and the President of ADB should therefore undertake, urgently, measures for establishing the African Energy Commission, stipulated in the Lagos Plan of Action, taking into account, inter alia, the ADB Study on the African Energy Programme.

Transport and communications 20. The importance of the transport and communications sector for Africa’s development cannot be overemphasized. African countries have in the past accorded priority to this sector in their development plans as a sine qua non for national social and economic development as well as for the integration of regional markets. However, despite the substantial progress made over the past 30 years of concerted efforts by African countries individually and collectively, Africa’s transport and communications capacity is still inadequate to support sustainable development. In view of the critical importance of this sector, especially with regard to regional integration, action must be taken immediately in the following areas for the implementation of the Programme of the United Nations Transport and Communications Decade in Africa (UNTACDA II): (i) undertake reforms of the sector including granting autonomy to the operators and introducing competition in order to improve efficiency; (ii) encourage both private local and foreign investment, with particular attention to expanding services to the rural areas; (iii) organize sub-regional consultations on coordination of airlines operations, as called for in the Yamoussoukro Declaration on a New African Air Transport Policy (1988); (iv) make all efforts to complete the missing sections in the TransSaharan Highway. To this end, every effort should be made to mobilize the required resources to promote closer cooperation and integration across the Sahara; (v) establish as soon as possible the single bureau of the Trans-African Highways Authorities in order to integrate the African roads network; (vi) establish linkages between our telecommunications systems and RASCOM as well as with the other systems, especially the ARABSAT, in order to participate effectively in the information superhighway; (vii) African countries should sign and ratify the African Maritime Transport Charter so that African policies in all areas connected with

128 Appendices

International Maritime Transport and Ports are harmonized and coordinated as soon as possible, including the harmonization of maritime legislation and regulations in the continent.

Trade 21. The Uruguay Round Agreements will certainly worsen the situation with the erosion of the preferences that Africa’s exports have been enjoying under the Lomé Convention and the Generalized System of Preferences as well as the negative impact on net food-importing countries. In fact, the impact of the Uruguay Round Agreements goes beyond trade to cover such issues as technology and investment flows. In recognition of Africa’s special handicaps, in particular its commodity-based economy and inadequate capacities for participating and benefiting from the anticipated increases in global trade, technology and investment flows, we call on African governments to take the following actions: (i) assess the full implications of the Uruguay Round Agreements, including policy, legal and administrative requirements for compliance, as well as the new market access conditions facing the exports of individual African countries; (ii) launch a programme to restructure Africa’s export and expand intraAfrican trade in particular through trade liberalization programmes. Special attention should be given to the development of tourism in view of its development potential. The Regional Economic Communities (RECs) should play an increasingly important role in this matter; (iii) support and effectively utilize AFREXIM BANK. In this connection, we call on the Member States and the Board of Directors of AFREXIM BANK to make it fully operational; (iv) national banks should also establish innovative instruments to promote trade and development; they should also cooperate among themselves.

Environment 22. Equally important are the environmental factors in African development. The rate of degradation of Africa’s environment and loss of genetic resources and biodiversity threaten the very survival of the peoples of Africa. The rapid population growth, increased poverty, displaced people as a result of conflicts, coupled with frequent droughts, have increased pressure for improved management of the environment. African countries are called upon to give priority to the elaboration of the Protocol on Environment as called for in the Abuja Treaty and establish a national coordinating machinery to ensure integration of environmental issues into national development programmes, as defined in Agenda 21 and the African Common Position on Environment and Development.


(e)

Effective mobilization and efficient utilization of resources

23. Africa faces problems in effective mobilization of both domestic and foreign resources for its development. Domestic resource mobilization and its effective utilization have not been carried out optimally. This resulted in a marked decline in both the volume and productivity of investment in our countries. 24. To reverse this situation, African governments should take the following measures: (i) create an enabling environment for domestic resource mobilization so as to encourage our people to have more confidence in the economies of our countries, including setting up saving systems built on the basis of population practices and capacities, especially for rural areas; (ii) enact specific legislation to enhance the autonomous power of the central banks on monetary policy, including monitoring of credit creation and its allocation; and the supervision and regulation of financial institutions and instruments, so as to ensure and maintain a stable macroeconomic environment implying price, interest rate and exchange rate stability; (iii) institute measures that increase public sector revenues through an effective tax collection and government securities; and to rationalize government expenditures through practices of programmes-performance budgeting, and adequate auditing; (iv) refrain from entering excessively into internal debts as a way of financing budget deficits, particularly those directed towards speculative and unproductive activities, so as to maintain fiscal stability while promoting economic growth; 25. To promote private domestic investment in Africa, the following measures should be taken: (i) strengthen the country reform programmes, so as to encourage investments in productive sectors and harmonize these programmes and investment codes so as to facilitate the process of regional economic integration; (ii) create an enabling environment that encourages human and physical investment and help retain human capital in African countries; (iii) steps should be taken to strengthen capital markets institutions where they exist and to create new ones where they do not exist in order to promote equity investment and achieve internal resource mobilization and utilization; (iv) in order to enhance the capacity of the financial sector to effectively channel the resources into productive investment, governments should intensify efforts to secure the full monetization of African economies; to widen the instruments and services offered by financial institutions; and to ensure an effective link between the informal and formal sectors.

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26. The Foreign Direct Investment (FDI) inflows to Africa account for only about 2 per cent in the total FDI inflows to developing countries. In order to reverse the trend and attract more FDI to Africa, measures should be instituted by African governments to ensure a favourable investment climate including the following: (i) provide clear procedures and rules regarding registration, protection and transferability of property rights in all their forms and efficient enforcement of contractual obligations by the judicial system; (ii) define clear incentives for investors in investment priorities in areas such as agro-food processing, conservation, storage, improvement of the transport and communication infrastructure, better linkages within industry and between energy, minerals and industry, with strategic targeting of both external and domestic resources towards these priorities. 27. To counter the negative perceptions about the continent and the misinformation that investors receive on Africa, governments should endeavour to undertake an information campaign by highlighting the progress in economic reform and growth in our countries.

(f)

Regional economic cooperation and integration

28. Our review of the economic condition in Africa shows that African countries need to pool their resources and enhance cooperation, in order to achieve regional economic cooperation and integration in order to be competitive in world trade. In this respect, African countries should take full advantage of the opportunities of South/South Cooperation and forge partnerships with the countries of the South. This process can be enhanced through a firm commitment to honour the obligations we enter into in our continental and regional cooperation institutions, implement the programmes we collectively adopt and provide them with the required moral, material and financial support they deserve. Furthermore, the strengthening of the RECs, the intended building blocs of the African Economic Community (AEC) should be insured. In order to achieve this aim, African countries are urged to take the following steps: (i) to accelerate the process of rationalizing the institutional framework for economic integration at the regional level; (ii) for the RECs to be on a strong financial footing and secure their viability, their Member States should establish as soon as possible for each one of them a self-financing mechanism, with the support of the Joint OAU/ECA/ADB Secretariat and a self-enforcing mechanism to ensure prompt payment of assessed contributions; (iii) in the same spirit, African countries are invited to direct financial assistance destined to economic integration activities in Africa, including Regional Fund under Lomé Convention to furthering relevant regional programmes and projects and to pay special attention


to regional integration for mutual benefit in human and natural resources development as well as in the area of infrastructure, particularly transport and communications, information, electricity grids and hydraulic power generating stations; (iv) for the purpose of ensuring a proper coordination of national sectoral policies and effective follow-up, implementation and monitoring of regional and continental decisions, African States which have not yet done so should set up at the national level a machinery in charge of all questions related to economic integration; (v) the special circumstances of the African small island countries should be given due recognition in Africa’s integration efforts; (vi) in order to operationalize the Abuja Treaty as soon as possible, Member States should adopt and ratify the priority Protocols by the end of 1997, at the latest, and to take necessary measures at the national level, including integrating the Protocols into their legislations, to make these Protocols applicable by competent authorities; (vii) Member States should popularize the Abuja Treaty and all relevant documents in order to make African populations the genuine actors in the process and facilitate cross-border dialogue towards the attainment of pan-Africanist ideals. To this end, they must engage all media, both public and private, in their endeavours to increase awareness of the larger public vis-à-vis the aims, mechanisms and requirements of economic integration. To facilitate the efforts of Member States, the OAU is requested to expeditiously finalize and distribute to Member States a popular version of the Abuja Treaty. 29. In order to set up the much needed regional productive capacities, the Member States and the Regional Economic Communities (RECs) are urged to: (i) speed up African integration through the implementation of common projects that will form an integrated development pattern leading to sustained economic growth, based on common interests and mutual benefits; (ii) formulate lists of common projects that can attract international, governmental and private investments. The projects and programmes to be promoted by the Regional Economic Communities should be under the co-ordination of the OAU Secretary-General; (iii) in this regard the African Development Bank is urged to play a leading role in financing regional studies, programmes and projects.

III

What we require from our development partners

(a) Understanding, appreciation and support of Africa’s development efforts 30. A new international system is evolving. This development offers a unique opportunity for the international community to agree on a set of

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principles governing international relations. On our part, we firmly believe that some of the most important principles include the democratization of the international system, the right of our countries to decide on their own priorities and programmes, respect for and implementation of international commitments. Member States of the United Nations should refrain from any unilateral measures not in accordance with international law and the Charter of the United Nations that create obstacles to trade relations among States. These principles should be incorporated in the UN SecretaryGeneral’s Agenda for Development. 31. Development aid that had been provided had not always been used for the priority programmes of countries assisted. What is more, we are witnessing an increasingly marked trend of rivalry between African governments and Non-governmental Organizations (NGOs). Sometimes the governments were even robbed of their responsibilities. The NGOs should play a supportive role by complementing government efforts but, given their fragility and lack of requisite resources, these organizations cannot assume the responsibility for the development of the continent. There is, therefore, an urgent need for our development partners to significantly increase resource in-flows to African countries especially through Official Development Assistance (ODA) and foreign direct investment. 32. The United Nations New Agenda for the Development of Africa (UN–NADAF) has not received all the expected support from the international community, especially in the areas of external debt and resource flows. Specifically, the commitment to establish a Diversification Fund for African Commodities has not yet materialized. Also, the UNECA should be strengthened to fully play its coordinating role in the mobilization of the UN System for the implementation of UN–NADAF.

(b)

Trade and development

33. The recently concluded Uruguay Round of negotiations and the establishment of the World Trade Organization constitute a new development in world trade relations, with serious implications to Africa. We are seriously concerned about the potential impact of the Agreements on Africa. Our preliminary assessment of the impact of this development is that Africa will stand to lose heavily because of the stringent conditionalities imposed by the Agreements and which African countries will not be able to meet. There is a need to ensure that transparency in the liberalized world market, devoid of conditionalities and other non-tariff barriers, is applied universally and in a sustainable manner. To mitigate the negative impact of the Uruguay Round Agreements on Africa’s development, we appeal to our development partners to discuss with us those aspects of the Agreements, which are detrimental to the development of our countries. In this regard, the outcome of the International Conference on the implications of the Uruguay Round Agreements on Africa, held in Tunis, Tunisia


on 27 October 1994, could serve as a framework for action. Meanwhile in implementing the provisions of the Final Act, off-setting measures must be adopted to obviate likely adverse effects that will arise from the erosion of special preferences currently enjoyed by African countries. 34. We call upon the international community to ensure that the UN Agenda for Development addresses the urgent development needs of Africa as one of the most seriously affected continents by the present international economic environment and support the diversification programmes in Africa and the establishment of the Commodity Diversification Fund.

(c)

Africa’s external debt

35. Africa’s external debt stock and its rapid growth are a deterrent to increased non-debt generating resource flows. It diverts the resources generated by African economies already negatively affected by the continuous deterioration of terms of trade. In spite of the efforts made by African States, by adopting structural reforms and promoting alternative programmes with the assistance of multilateral and bilateral financial institutions, and in spite of the various initiatives (Toronto, Brady, France and USA initiatives, etc.) the debt problem still remains one of the main constraints in the renewal with economic growth. 36. Africa’s external debt affects negatively, in the long run, not only the African economic capacity to meet the basic needs of the African population, but also its capacity to contribute significantly to the revival of world growth, by increasing the African economic capacities to absorb more goods and services from outside, and by reversing the declining trends of transfers to Africa. 37. The need to reverse the declining trends of transfers to Africa has been stressed. Even in African countries where some progress has been registered in 1994, increased inflows of resources are still required to generate sustainable development. For this to happen, coordinated action on debt and flows from multilateral financing institutions should take place, with particular emphasis on the provision of concessional resources, through the International Development Association (IDA), African Development Fund (ADF) and the European Development Fund (EDF), which are the three major multilateral windows through which concessional resources are channeled to Africa. Furthermore, the rules of international relations should be observed, and there should be no attempt to destabilise the economies of African countries by imposing embargoes and economic blockades, freezing assets, preventing them from obtaining technology and starving them for political reasons. 38. For economic reforms to succeed in Africa, all creditors including multilateral institutions should adopt enhanced measures, which should go beyond debt re-scheduling. International commitment to Africa’s recovery can be shown by reducing the debt burden to a point where it ceases to

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inhibit investing in Africa. In this regard, while subscribing to the recent Jakarta Non-Aligned Movement’s Declaration on Debt and Development: Sharing of Experience, Africa calls on its bilateral and multilateral creditors including the former Soviet Union countries to enter into a dialogue in order to coordinate their efforts for identifying ways and means by which they could reduce the continent’s debt burden, particularly for the current debt servicing levels. Specifically, African governments call on the G7 through the Paris Club to extend additional relief beyond the Naples Terms particularly for severely-indebted low income countries. Further, we call on G7 to consider innovative ways to deal with multilateral debt along the lines proposed by the UK regarding the sale of IMF gold and to ensure that multilateral debt relief is not achieved at the expense of official grant financing. Within this context, urgent support and assistance from International Development Agencies and Donor Countries to war and natural disaster affected countries are particularly needed to generally move them from a state of reliance on relief and humanitarian assistance to sustainable development. To this end, Africa should approach the G7 Summit, scheduled for June 1995 in Halifax, Canada, on this matter.

IV

Follow-up mechanism

39. The follow-up and implementation mechanism to these recommendations lies largely with the Member States at the national, sub-regional, regional and continental levels. At the national level, governments should institute measures for increased national dialogue in order to reach broad consensus on development objectives and how to reach the goals sought. The following specific measures are proposed: (a) the Cairo Agenda for Action should be tabled in the national cabinets of African governments, in order to involve the entire government machinery in the implementation of the Agenda; (b) the Agenda should also be tabled by the government in national parliaments for debate in order to allow parliamentarians to deliberate on the development issues contained in the Agenda, thereby giving the Agenda wide publicity and national attention; (c) the governments should involve various groups in organizing national and regional seminars and workshops on the Cairo Agenda, with participants drawn from all segments of society: organized private sector groups, especially the African Chambers of Commerce, the African Business Round Table, Employers and Workers Organizations, political and professional organizations, women groups, youth, NGOs, teachers, university professors, etc. 40. At the regional level, the Cairo Agenda for Action should be submitted to the RECs and their respective authorities for implementation.


41. At the continental level, we request the OAU Secretary-General to work together with the ECA Executive Secretary and the President of the ADB, within the framework of the Joint Secretariat, to monitor and report regularly to the Council on the implementation of these decisions. Specifically, the Economic and Social Commission (ECOSOC) and the Specialized Technical Committees established under the Abuja Treaty should monitor the implementation of these matters. 42. Political will and determination of the Member States will be required to effectively tackle and solve the economic and social problems facing our continent. Close personal attention of Heads of State and Government of the OAU is indispensable in the solution of these problems.

Appendix 7: Declaration of the Third Extra-Ordinary Assembly of Heads of State and Government of the Organization of African Unity on Africa’s External Debt Crisis, Addis Ababa, December 1987 1. We, the Heads of State and Government of the Organization of African Unity, meeting at our Third Extra-ordinary Assembly in Addis Ababa, Ethiopia, from 30 November to 1 December, 1987, have examined in depth the African debt crisis with a view to adopting, on behalf of our governments and peoples, a common position in the spirit of solidarity and unity of our people. We are gravely concerned that Africa’s external debt and excessive debt-service payment is a major impedient to the full implementation of the Africa’s Priority Programme for Economic Recovery 1986–1990. 2. We have, since 1984, persistently urged the international community to address, in a comprehensive manner, the critical economic situation confronting our countries as a result of the mounting debt-service burden. Considering the seriousness of the external debt crisis, successive chairmen of the OAU have, since 1985, pleaded our case with our partners for the convening, as a matter of urgency, of an International Conference on Africa’s External Indebtedness to provide a forum for international creditors and African debtor countries to discuss the debt problem with a view to arriving at appropriate emergency, short, medium and long-term concrete and comprehensive measures to alleviate the excruciating debt-service crisis that our countries are faced with. 3. We continue to believe that a viable debt strategy should take fully into account our economic and social development needs and, in particular, the need to mobilize the necessary resources required for the implementation of the United Nations Programme of Action for African Economic Recovery and Development 1986–1990, which was adopted by the 13th Special Session of the United Nations General Assembly. 4. We wish to recall solemnly that, for our part, the economic and social development of our peoples remains our primary objective. We reaffirm further that our external debt constitutes contractual obligations entered into individually by our Member States, and which they intend to honour. However, despite our willingness to pay, our present economic crisis, 136

Declaration of the Third Extra-Ordinary Assembly 137

particularly the low level of our export earnings, makes it extremely difficult for us to honour our obligations. The problem of indebtedness is historically linked with that of development; its solution lies primarily in Africa’s ability to engender real development. Consequently, developed countries and international financial institutions have the duty and responsibility to contribute to the solution of Africa’s external debt problem through, in particular, a substantial increase in resource flows to African countries on concessional terms. 5. We believe that the debt crisis of Africa will only be solved by an overall and equitable approach within the framework of an integrated, cooperative, development-oriented strategy that takes into account the particular characteristics of the debt crisis in Africa. In view of the inter-dependence between the economies of the debtor and the creditor countries, the strategy for the solution of the debt problem will need to be based on co-operation, continuous dialogue, and shared responsibility, and should be implemented with flexibility in an environment of strengthened international co-operation, bearing in mind the General Assembly and UNCTAD Resolutions adopted in that respect. 6. In full solidarity with the Group of 77 and the Non-Aligned Movement, we reiterate our common position that a lasting solution to the external debt problem of developing countries can only be found within the framework of comprehensive and parallel actions in the major economic sectors, in recognition of the interdependence among the external debt issues, flow of development assistance, improved international trading system, improved commodity prices and the reform of the international monetary system. 7. We wish to recall that the present economic backwardness of our continent is the direct result of colonialism, the effects of which are still being felt. We reaffirm that the development of our continent is the primary responsibility of our governments and peoples. In fulfilling this responsibility, we adopted in 1985 the Africa’s Priority Programme for Economic Recovery 1986–1990. We have taken appropriate measures to implement the commitments we made individually and collectively in that programme. We have instituted reforms at great social and political costs to our peoples and governments. We have adopted economic reforms and structural adjustment measures that are aimed at redressing our present weak economic structure and have re-ordered our priorities and have also adopted strategies to facilitate an accelerated recovery and long-term development of our economies. However, our efforts are being undermined by the exasperating and excruciating debt service payments, the hostile international economic and political environment, including destabilization acts of Apartheid South Africa against Southern African States and the failure of the international community to live up to its commitment to provide Africa with substantial increase in resources. 8. We note, with appreciation, that governments of a few developed creditor countries have taken or announced measures to cancel debt owed to

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them by some African countries. We urge all governments of creditor countries to extend to all African countries and particularly, to the least developed and low-income countries, these measures, which should be implemented unconditionally, as a matter of urgency. We further urge the creditor countries, which have not yet done so, to emulate this example. 9. We, therefore, call upon the international community, in particular the developed countries, international and regional financial institutions and private commercial banks to take immediate measures, as set out in the African Common Position on Africa’s External Debt Crisis, to alleviate the debt burden of our countries and, in particular, to reduce the stock of our debt in order to help our countries resume growth. Such measures should include: (a) contributing effectively to improved international economic environment that will be conducive to economic recovery and accelerated development, through, in particular, improved export prices for African primary commodities and the removal of protectionist, quota and tariff measures impeding the export of African raw materials, manufactured and semi-processed goods to developed countries and freezing of African funds in foreign banks; (b) increase resource flows to Africa through: • increase in grants in bilateral assistance; • increase in the grant element in the financing of International and Regional Financial Institutions; • reduction in interest rates and extension of the repayment period and grace period of financial and commercial loans for all types of new loans; • granting 50 years repayment and 10 year grace period for the repayment of all new loans; (c) the total amount of the debt service of a debtor country should not exceed a reasonable and bearable percentage of its export earnings; (d) conversion of all past official bilateral loans into grants; (e) suspension of external debt service payments for a period of 10 years, starting from 1988, the scheduled date for the holding of the International Conference on Africa’s External Debt; (f) adoption of the following principles within the framework of the renegotiation of Africa’s debt payment of part of official bilateral debt in loan currency, reduction of real interest rates on existing loans; (g) multi-year rescheduling of a minimum of 5 years should be the norm, with maturities of at least 50 years, 10 years grace period, and at zero rate of interest. 10. With a view to having a constructive dialogue that should lead to the adoption and implementation of the measures embodied in the African Common Position on Africa’s External Debt Crisis, we renew our call for the convening of an International Conference on Africa’s External Indebtedness.

Declaration of the Third Extra-Ordinary Assembly 139

11. We mandate the current chairman of the OAU to bring the African Common Position on Africa’s External Debt Crisis to the attention of the international community, with a view to convening an International Conference on Africa’s External Indebtedness in 1988. 12. We request the Permanent Steering Committee, with the assistance of the Secretariat of the OAU, the Secretariat of the ECA, the ADB and ACMS to intensify the technical preparations for the international conference.

Appendix 8: African Common Position on Africa’s External Debt Crisis, Addis Ababa, December 1987 African common position on Africa’s external debt crisis Preamble 1. We, the Heads of State and Government of the Organization of African Unity, meeting at our Third Extra-ordinary Assembly in Addis Ababa, from 30 November to 1 December, 1987, having examined in depth the African debt crisis, have adopted the following common position: 2. The magnitude of the debt of developing countries (1,020 billion US dollars) and the burden of the debt servicing (250 billion US dollars) are a glaring manifestation of the imbalances currently existing in the international monetary and financial relations which, if not corrected, will continue to jeopardise future development prospects. Africa is the most impoverished continent in the world, with twenty-seven out of the world’s thirty-seven least developed countries, and a constantly declining per capita income. At a time when Africa is involved in the implementation of Africa’s Priority Programme for Economic Recovery (APPER) and the United Nations Programme of Action for African Economic Recovery and Development (UNPAAERD), we are still in no position to mobilize adequate resources to honour our obligations. In the majority of our countries, the question is not that of a liquidity crisis but of solvency. Our Ministers of Finance and in solidarity with other members of the Group of 77 have continuously attempted to impress it upon the creditor countries and international financial institutions to view the debt crisis from the concept of shared responsibility. 3. Since the early 1980s, we have been concerned about the external debt situation of our countries. In 1984 our Ministers of Finance adopted the Addis Ababa Declaration on Africa’s External Indebtedness, which we endorsed. The escalating debt burden has progressively grown from bad to worse, to a point where the magnitude of the debt and debt-service obligations have threatened the very foundation of our economies. We have taken steps to improve and rationalize external debt management. We sought to address this serious problem by calling for an international conference on African external debt when adopting the Africa’s Priority Programme for Economic Recovery during our Twenty-First Summit, July 1985. Since then, we have been trying to persuade the creditor countries and international financial institutions to sit together with us to find solutions to the excruci140

African Common Position on Africa’s External Debt Crisis 141

ating debt problems of our countries. Despite our persistent efforts, our endeavours have not been responded to. We decided, during our Twentythird Summit, to meet in an Extra-ordinary Session to exchange views and adopt a common position on Africa’s external indebtedness. 4. When we adopted Africa’s Priority Programme for Economic Recovery 1986–1990 (APPER), we pledged, (to take concrete actions and measures individually and collectively for the achievement of the economic development of our continent in unity and solidarity of African peoples and Member States.) We reaffirm that the development of our continent is the primary responsibility of our governments and peoples. It is now recognized by all that we are living up to our commitments. We have instituted significant reforms at great social and political costs to our peoples and governments. We have reordered our priorities and adopted new strategies to facilitate an accelerated development of our economies. We have adopted economic reforms and structural adjustment measures. We have taken measures to improve our economic efficiency and our macro-economic management. We have rationalized our public sector and reduced the share of public expenditure as a proportion of GDP. 5. In response to the serious debt situation facing our countries, we immediately took radical policy measures aimed at the reduction in our current account balance of payments deficits in order to generate foreign exchange for debt service payments. These measures included drastic cuts in our imports and also sought to substantially increase our exports. Due to structural rigidities of our economies, worsening terms of trade, inelasticity of demand for our commodities and protectionist measures practised by the developed countries, most of the resources needed to honour our debt service obligations had to be raised through reduction of imports which, in some cases, were as high as 55 per cent. We have also reduced drastically our new commitments to external debt and have strengthened our debt management machinery. Despite these drastic measures, our debt service ratio continues to rise. 6. The general international economic environment in which we were carrying out these measures has continued to be unfavourable. The prices of our main export commodities have suffered a serious collapse resulting in a loss in our export earnings in 1986 of more than US$19 billion. Official development assistance to some countries has decreased and, to some others, has stagnated in real terms. The developed countries and international financial institutions have, in general, not lived up to their commitments entered into in UNPAAERD. 7. The magnitude of our debts, which we have to service from drastically reduced foreign exchange earnings, is estimated to have reached US$200 billion by the end of 1986. The greater part of this debt was simply the result of fluctuations in exchange rates and increases in interest rates based on decisions in which our countries did not participate in making and over

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which they had no control. In 1985 our debt-service obligations stood at about US$24 billion. The average debt service ratio has reached over 40 per cent per annum with many of our Member States having debt-service ratios exceeding 100 per cent. Furthermore, our projections, based on the continuation of the current trend, indicate that unless comprehensive measures are taken to deal with the African debt issue by 1995, our total debt will reach US$313 billion, our annual debt repayment US$31 billion, and our debt service ratio over 48 per cent, with the debt service ratio for some of our countries far exceeding 100 per cent. By the year 2000, the situation is expected to be even more serious, our total debt service on both short- and long-term loans will reach about US$46 billion, and our debt service ratio is projected to reach an average of about 72 per cent of our export earnings, with ratios for some of our countries far exceeding 100 per cent. Most ominous still is the fact that this high level of indebtedness will be a reflection of past loans, capitalization of interest arrears and accumulated charges, rather than new loans intended to promote development. 8. Clearly, this situation cannot be allowed to continue; yet current remedies are inadequate. Debt rescheduling, as currently carried out, while providing temporary relief, add to the medium- and long-term debt problem. Official and commercial debt rescheduling are adding over a billion US Dollars annually to the total African debt, as a result of service charges and higher interest rates arising from them. The substantial increase of rescheduling our countries had to go through is a further indication of the seriousness of the African debt problem. The excruciating debt service burden is depriving our economies of resources needed not only for development but also in many countries for the survival of our peoples. The result of this devastating debt burden is that our economies are grinding to a halt and in many cases are actually regressing. 9. Our position has all along been that external debt is a commitment made individually by Member States and which they have to honour. We are also still convinced that the developed countries and international financial institutions have the duty and responsibility to contribute to the recovery of the economies of African States to enable the latter service their debts. It is also our considered view that current international strategies have failed to address the core of the African debt issue. We believe that to deal with the structural nature of the African debt, new and bold initiatives and measures have to be taken by the creditor community to deal with the African debt in a context that will allow the continent to implement its priority programme for economic recovery and development. In the absence of such a comprehensive approach, we might eventually find ourselves in a situation where we could no longer honour our debt obligations, in spite of all our good intentions. 10. We believe that the debt crisis of Africa will only be solved by an overall and equitable approach within the framework of an integrated, cooperative, development-based strategy that takes into account the particu-


lar characteristics of the debt crisis in Africa. The strategy for the solution of the Africa’s debt problem should be based on co-operation, continuous dialogue and shared responsibility, and should be implemented with flexibility in an environment of strengthened international co-operation, bearing in mind the UN General Assembly and UNCTAD resolutions adopted in that respect. 11. It is with a spirit of international co-operation and interdependence that we are presenting this common position to the international community. We acknowledge, with appreciation, the efforts of some developed countries, which have adopted measures to alleviate the debt burden of African countries and hope that more countries will follow their example. It is our hope that this common position will open a constructive dialogue between us and our partners.

Part I: Evolution, magnitude and structure of Africa’s external debt (a) Definition 12. Africa’s external debt is defined broadly as all its external financial obligations outstanding at a particular point in time. These financial obligations are those contracted either by the government or are guaranteed by the government for a public corporation, or are contracted directly by public corporations and by the private sector. This definition is understood to cover such items as principal on public and publicly guaranteed debts; long, medium and short-term commercial loans and credits; suppliers’ credit; private non-guaranteed debts; undisbursed debts; obligations to multilateral institutions including the International Monetary Fund and the World Bank; arrears on interest; and other related payments.

(b) Evolution and magnitude 13. The analysis of the evolution and magnitude of the debt indicates that Africa’s total external debt increased from US$128 billion at the end of 1982 to US$169 billion by the end of 1985. The ratio of debt to GDP increased from 40 per cent to 50 per cent, and the ratio of debt to exports of goods and services increased from 194 per cent to 260 per cent, over the same period. The lack of up-to-date and adequate statistics on all African countries makes it difficult to estimate accurately the magnitude of Africa’s external debt beyond 1985. However, at the end of 1986, Africa’s total debt was estimated to be US$200 billion. This represented 45 per cent of the Gross Domestic Product (GDP) and 293 per cent of export earnings. The rise in the debt to export ratio shows that the growth in export earnings was exceeded by that of debt. 14. The total debt service obligations for all countries for which data were available increased from US$19.0 billion in 1982 to US$24 billion in 1985. For nearly all African countries, the debt service as a percentage of exports of goods and services is now well over 40 per cent and in some cases it

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exceeds 100 per cent. Given the bleak prospects in export expansion, the number of countries with the latter debt service ratio is expected to rise significantly by the end of 1995. By this date, the annual average debt service payments are expected to reach about US$31 billion or 48 per cent of export earnings, with some of our countries far exceeding 100 per cent. 15. The fact that debt service payments have increased faster than actual disbursements means that the net resource transfer has declined sharply and it did so from US$20 billion in 1978 to US$3 billion in 1985. As for commercial banks, there was a net resource transfer from Africa of US$3 billion in 1984 alone. The IMF also extracted more resources from Africa than it provided in 1986 and this situation persisted up to February 1987. The clear implication of these developments is that a large and increasing portion of Africa’s export earnings and new disbursements are going into servicing debt, leaving little or nothing for rehabilitation and new investments required to fully implement Africa’s recovery programme.

(c) Structural changes in Africa‘s debt 16. The developments mentioned above have been accompanied by structural shifts in Africa’s external debt. First, there has been a shift from non-debt creating to debt creating flows, particularly over the period from 1970 to 1982. Although this shift appears to have been reversed since 1982, the seeds for the debt-servicing crisis had already been sown. Of the debt outstanding, official sources constituted 63 per cent at the end of 1978 and 47 per cent by the end of 1983. Thus, there was a shift from official to private sources. Within official bilateral sources, concessional flows as a percentage of the total from this source declined from 84 per cent in 1975 to 62 per cent in 1985 for Sub-Saharan African countries only. This shift towards non-concessional debt was reinforced by the fact that, while financial market sources accounted for 15 per cent of the total debt in 1974, the share from this source rose to 36 per cent by the end of 1985. However, the concessionality of debt appears to have increased between 1983 and 1985. This improvement has not been adequate to alleviate the debt-servicing problem of African countries. This notwithstanding, the above shifts implied the hardening of the terms and conditions of new loans. For instance, the average interest rates on new lending increased from 5 per cent to 10 per cent between 1974 and 1985, while the grant element dropped from 32 per cent to 16 per cent, over the same period. 17. All the above mentioned adverse developments contributed to a situation where African countries were forced to reschedule their external debts at the Paris and London Clubs 83 times between 1979 and 1986.

Part II: Major causes of Africa’s external debt crisis 18. Several factors have combined to precipitate the African debt crisis. They are both external and domestic in nature, and the debt phenomenon initially manifested itself in the structural dis-equilibrium, between import


requirements and export earnings which forced many African countries to resort to increased borrowing from external sources in order to meet the resource gap. As was indicated in APPER, the following are the major causes, which have aggravated the external debt crisis.

(a) External causes: (i)

Decreased flows of concessional resources to African countries resulting in a dramatic shift in debt structure from concessional to nonconcessional loans, with their hardened lending terms. (ii) The significant flight of capital and other resources resulting in net outflow of resources from Africa. (iii) Insistence of the creditor community that African countries meet their debt service obligations without consideration to their ability to do so. (iv) Unprecedented collapse of the prices of Africa’s commodities and the consequential deterioration in the terms of trade which have undermined Africa’s capacity to service its debt. (v) Deteriorating terms of borrowing including sudden increases in the real interest rates paid on long term debts, particularly commercial loans, and reduced grace and repayments periods. (vi) Subsidies, mounting protectionist measures and restrictive business practices in the markets of the developed countries against exports from Africa. (vii) Strict conditionalities, high cost and short term nature of some IMF facilities. (viii) Activities of transnational corporations in African countries, especially inflated contracts, over-invoicing of imports and under-invoicing of exports; manipulations of commodity prices and of transfer pricing; excessive transfer of profits and other capital gains; and their preference for external borrowing instead of bringing in new equity capital. (ix) Exchange rate fluctuations, especially the volatility of the US dollar vis-à-vis the other vehicle currencies, particularly as witnessed in the recent international financial and monetary turmoil. (x) Consequence of past reschedulings which only serve to increase the debt burden, since such reschedulings are done at market related interest rates. (xi) Aggressive economic destabilization policies by external forces and freezing of African funds in foreign banks. (xii) Military, economic and political destabilization by the racist South African regime against the Frontline and other independent States in Southern Africa.

(b) (i)

Domestic causes: Rigidities in production structures, dependence on the export of a few raw materials and commodities and low complementarity of the African economies.

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(ii)

Excessive reliance on external sources for financing development and balance of payments. (iii) Loan funds channeled to low-return projects. (iv) Inadequate external debt management capacity at the national level. (v) Excessive resort to budget deficit financing through external borrowing both for recurrent and developmental expenditures. (vi) Poor design, execution and monitoring of projects that lead to increased costs. (vii) Low level of domestic resources mobilization due to lack of appropriate incentives to encourage savings. (viii) Drought, natural calamities and environmental degradation, resulting in reduced food production and leading to increased food import bills. (ix) Economic dislocations that distort economic projections and necessitate diversion of resources, because of national disasters. (x) Inadequate negotiating capacity of African countries vis-à-vis complex international financial mechanisms with respect to debt contracting and renegotiations. (xi) Difficulties for African countries to adopt appropriate exchange rate policies.

Part III: Impact of external debt of African economies 19. The vast majority of African countries have adopted far-reaching measures to deal with the rapidly deteriorating external debt situation. Recovery and rehabilitation plans have been drawn up and follow-up mechanisms have been established by many governments. Twenty-eight African countries accounting for three-fourths of Africa’s population are implementing structural adjustment and reform programmes at considerable social costs, resulting in intolerable political pressures. These programmes, in the absence of adequate external resources to support them, have not achieved their objectives; rather, they have imposed severe conditions and constraints on African economies, thus worsening the socio-economic conditions. The impact of external debt on African economies can briefly be summarized as follows:

(i)

External shocks

The impact of external shocks (such as variable interest rates, fluctuations in exchange rates of major currencies, increase in import bills and the decline in export earnings) was estimated to result in a loss of well over US$43 billion, particularly between 1980 and 1984. This means that African countries incurred heavy losses of foreign exchange greater than is indicated here, a development which seriously undermined the capacity of our countries to service their external debt and to implement their economic recovery programmes.


(ii)

Reduction and distortions in growth rates

As a result of mounting debt servicing obligations (principal plus interest) which presently stand at over US$24 billion annually, substantial resources are diverted from essential development projects for debt servicing. Agricultural projects, on which both APPER and UNPAAERD are anchored, cannot be implemented in the face of dwindling resources. These factors have significantly slowed down the rate of capital formation in African countries, many of which have registered stagnant or negative growth rates. This has been particularly so in rural areas where growth has hardly taken place.

(iii)

Problems of structural adjustment and policy reforms

It is a fact that many African countries have put in place wide-ranging structural adjustment programmes and economic reforms. However, these efforts are being thwarted by the diversion of resources to service debts, and their economies are, therefore, still unable to generate or sustain reasonable economic growth. This is being aggravated by the lack of additional resources, especially on concessional terms. Consequently, this situation has created serious problems in implementing economic policy reforms, which would have engendered self-sustaining growth and recovery.

(iv)

Disruption of the social and cultural structures

Increasing external debt servicing obligations within the present international constraints will result in serious disruption of the present socio-economic, political and cultural structures. The 1980s have witnessed a further reduction in the living standards of African countries. This is explained partly by the curtailment of social and infrastructural investment programmes in the wake of net transfer of resources out of Africa through debt servicing. Mass unemployment and poverty, which were largely confined to rural areas, have now spread to most major urban centres thereby threatening the very foundation of the African social and cultural structures, retarding the effective development of human resources and reducing the level of involvement of the population in national development projects.

(v)

Creditworthiness

The creditworthiness of many African countries has been put to severe test in the wake of mounting debt servicing obligations. Many African countries are experiencing great difficulties in borrowing on reasonable terms and conditions, at the very time when external resources are most needed.

Part IV: Measures to alleviate Africa’s external debt crisis A

Measures to be implemented by African countries

20. We reaffirm our determination to implement at the national, regional and continental levels, all the measures likely to contribute to an effective

148 Appendices

solution of the debt problem, particularly those contained in APPER. In addition, we express our commitment to examine and implement, as appropriate, new or supporting measures as may be dictated by the growing burden of Africa’s external debt and the demands for economic recovery and accelerated development. 21. More specifically, we propose to adopt and implement the following measures at the African level to deal with the external debt crisis: (i) The external debt management mechanisms at the national level should be strengthened with the active support of the international community, so as to enable all African countries to exercise more effective and centralized control of external borrowing by the public sector, and to monitor private sector borrowings. To this end, sub-regional and regional organizations, in particular the African Centre for Monetary Studies (ACMS), African Development Bank (ADB), the Economic Commission for Africa (ECA) and the Organization of African Unity (OAU) are called upon to organize themselves, so as to contribute to a better harmonization of African countries’ positions and assist the Permanent Steering Committee in deciding upon the guidelines on which such positions should be based. They are also called upon to organize, in cooperation with UNCTAD, training workshops, courses and seminars on management of external debt for African countries. (ii) We fully recognize that no economy can achieve a fast and self-sustaining growth rate, if it depends entirely or largely on uncertain external resources. We hold the view that Africa’s economic recovery and development will be enhanced largely by increased use of domestic resources. Therefore, we are determined to adopt appropriate policies and measures for domestic resource mobilization, in accordance with the commitment made by Africa in its submission to the Special Session of the United Nations General Assembly. We shall also continue our efforts to reduce inflation and improve efficiency in our economic and financial management. We, therefore, count on African countries with longer experience in this area to be willing to assist others to launch new and more effective domestic resource mobililization programmes. A change in policy and attitude should be introduced in African development planning, to ensure that we depend primarily on domestic resources for our economic recovery and growth. We reconfirm our commitment to intensify efforts to use more efficiently our domestic resources for development. To this end, concrete measures should be taken to improve the quality of investment in both the public and private sectors. Further, we should give adequate incentives to projects that generate or save foreign exchange, and should also formulate and implement programmes on the development and effective utilization of human resources, with a view increasing labour productivity and to promoting scientific and technological development.


(iii)

(iv)

(v)

(vi)

Within the framework of African solidarity, African countries with net surpluses should endeavour to invest part of these surplus funds in Africa through, for instance, participation in joint investment projects and the establishment of multinational companies. African governments are urged to support and assist these multinational joint ventures, with a view to encouraging the expansion of such activities. As a long-term objective, another approach to this end is that sub-regional capital markets need to be developed as an effective mechanism for tapping African surplus funds currently invested abroad. We express satisfaction with the solidarity shown by other developing countries towards our continent and hope they would keep it up in this crucial phase of our economic development and take into account the real situation of the least developed countries. The system of incentives should be improved to encourage African public investors as well as individual private investors, to invest their resources in other African countries, either on a bilateral basis or through projects being implemented by existing sub-regional, regional and continental financial institutions. This would not only improve the liquidity of the borrowing country, but would also promote further cooperation as envisaged in the Lagos Plan of Action and Final Act of Lagos. The possibility of establishing an African investment guarantee scheme or company should be studied for this purpose. African governments should adopt new measures aimed at increasing their trade through the existing sub-regional and regional payments and clearing arrangements and credit insurance in all intra-African trade transactions, thereby reducing the need for foreign exchange and hence external borrowing. This implies that the regional payments and clearing houses should find new ways of encouraging the use of these arrangements; and efforts aimed at facilitating the establishment of an African Monetary Fund should be pursued. Joint ventures among African countries provide new opportunities for developing Africa’s capabilities for diversifying Africa’s export base. Therefore, we intend to encourage African parastatal organizations through appropriate incentives, to participate in sub-regional and regional joint ventures. To this end, African development finance institutions are urged to increase their financing of subregional and regional projects, especially those that directly contribute to the increase in exports. They should also play an increasing role in the identification and preparation of sound and economically viable investment projects in the Member States. In this regard, the ADB, as the Continental financial institution, should accord special attention to strengthening its role as a catalyst for mobilizing financial resources to Africa.

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(vii) We commit ourselves to intensify intra-African co-operation and consultation through the exchange of information and harmonization of positions on debt negotiations and reschedulings. The Permanent Steering Committee should, therefore, expedite its indepth study of all aspects of establishing an African Debtors Club which should serve as a forum for these matters. (viii) We direct the Secretary General of the OAU, the Executive Secretary of ECA, the President of ADB, the Director General of ACMS, to increase their efforts in collecting, disseminating information on African indebtedness and in harmonizing an African position in this regard. These institutions should continue to assist the Permanent Steering Committee in monitoring the African debt situation. We urge all Member States to provide the Joint Secretariat of these institutions regularly with all available information on their external indebtedness.

B. Measures to be implemented by the developed countries and international financial institutions 22. We note, with appreciation, that a few developed creditor governments have taken or announced measures to cancel debts owed to them by some African countries. We strongly urge that these measures be extended to all African countries, particularly the Least Developed Countries and low-income countries, and be implemented as a matter of urgency without imposing undue conditions. Those developed creditor countries, which have not yet done so are strongly urged to emulate this example. 23. However, other initiatives announced, such as those relating to debt rescheduling and interest rate reduction, would not be adequate to address the African debt problem, both in its nature and magnitude. The developed creditor countries are called upon to demonstrate the needed political will to implement the relevant resolutions of the United Nations General Assembly and UNCTAD on debt relief and transfer of resources, and to provide effective support and positive responses to Africa’s economic recovery effort, as agreed in the UN Programme of Action for African Economic Recovery and Development 1986–1990. They are also invited to bring about a more appropriate international economic environment by increasing the growth rate of the world economy and by promoting a more equitable international monetary and trading system. 24. In order to alleviate the heavy debt burden of African countries and enable them devote a bigger share of their export earnings to development efforts, the ratio of their debt servicing to their export earnings should not exceed a reasonable proportion of their foreign exchange earnings. To this end, we urge the creditor countries and international financial institutions to adopt the following measures as a matter of urgency.


(1)

Official bilateral and officially guaranteed loans

(i)

Creditor countries are urged to waive the repayment of past loans by converting them into grants. We call upon the creditor countries to allow African countries to repay part of their bilateral debts in local currencies which should be used for financing development projects and programmes under agreed conditions. The terms of officially guaranteed debts should be adjusted to the currently prevailing terms of the African Development Fund Credits. Developed creditor countries are urged to take urgent measures to consolidate non-ODA officially guaranteed debt and debt service payment due from January 1987 into long-term loans at lower interest rates, in real terms.

(ii)

(iii) (iv)

(2)

Multilateral loans

25. The share in debt-service obligations of multilateral institutions has grown rapidly in many countries over the past few years and is expected to continue to grow; this situation clearly calls for action with respect to debt alleviation. At the same time, we recognize that multilateral institutions provide the best potential for increasing future financial flows to African countries. It is, therefore, essential that the potential be mobilized for the effective solution of the debt problem of African countries and for the resumption of economic recovery and growth. 26. Multilateral development institutions, including the World Bank Group, that provide long-term funds should ensure increasing and positive net flows to African countries at conditions compatible with their economic situation. These resources should, as a matter of priority, be directed to projects, sectoral programmes and quick disbursing non-project lending for recovery and development. This mode of financing will generally ease the pressure on balance of payments and strengthen economic growth, thereby increasing the capacity of African countries to service their debt. The concessionary windows of these institutions should play a much greater role in Africa. In view of the rising debt service burden from this category of loans, we urge these institutions to explore, as a matter of urgency, all possible ways and means for alleviating the African debt burden, including the creation of Special Funds to refinance maturing loans of African countries on more concessional terms. 27. With regard to the IMF, we are gravely concerned that it has become a net recipient of resources from Africa precisely at a time when net financial inflows to Africa are most critically needed. The IMF should, therefore, as a matter of urgency, accelerate its efforts to reverse the negative flow of funds from Africa. It is in this spirit that we support the initiative of the Managing Director of the International Monetary Fund to triple

152 Appendices

the resources of the Structural Adjustment Facility, even though this might not be adequate. The IMF should also seek innovative ways to increase net flows of its ordinary resources to Africa, at terms and conditions appropriate to African economies. As the cost of these funds also remain high, we call for the enlargement of the interest–subsidy facility and the softening of the conditions thereof, in order to lower the cost of IMF funds, especially to the low-income countries. In recognition of the severe hardships these low-income countries are going through, the IMF is strongly urged to grant those members with overdue obligations, the benefit of lengthened or extended repurchase period of Fund resources as provided for in Article V, Section 7(g) of the Articles of Agreement. In addition, the following measures should be taken: (i) The IMF should urgently consider rescheduling the credits it has extended to developing countries in general and African countries in particular; (ii) Establishment of an additional mechanism for concessional financing in order to compensate developing countries for increased debt service payments arising from the increase in interest rates, without increasing conditionality; (iii) Conditionality applied by the multilateral institutions should be responsive to the growth and development needs of African countries.

(3)

Commercial loans

28. We are seriously concerned that, in spite of the recognition of the serious situation of African countries, the commercial banks still impose stringent conditions on African countries during debt renegotiations. We, therefore, call for the following measures in respect of commercial loans: (i) The governments of industrialized countries should adopt appropriate regulatory measures to encourage their commercial banks to apply more flexible conditions, including lower interest rates, longer maturity and grace periods on rescheduling, and provision for loan losses. (ii) Commercial Banks should adjust to lower level of interest rates and longer periods of amortization that take account of funds available in African countries for debt repayments. Such funds should be assessed on the basis of overall resource requirements needed for countries to recover and resume normal growth. (iii) Commercial debts should be converted into transferable securities, with maturities of at least 25 years and at lower interest rates. (iv) Arrears on short-term loans should be converted into long-term loans as a way of debt relief.

(4)

Reschedulings

29. Official bilateral and commercial bank debt reschedulings have become the most widely used method of debt relief for African countries.


During the period 1980 to 1986, not less than 22 African countries have negotiated debt rescheduling under the Paris and London Clubs. The large number of reschedulings within these few years, and their frequency, reveal a serious problem of debt servicing by many African countries. As was stated earlier, this indicates deep structural problems requiring more effective and comprehensive long-term solutions. Our experience, however, has shown that reschedulings do not in themselves provide real debt relief, but merely postpone debt service payments while at the same time increase the debt burden by applying market-related interest rates. The reschedulings also do not adequately deal with the issue of how the portion of the principal not rescheduled should be financed in future; nor do they always, provide for rescheduling of previously rescheduled loans. Moreover, reschedulings carry heavy costs in terms of fees and additional interests on rescheduled debts. 30. We strongly urge that the rescheduling method adopted should be based on the development and investment needs of each country, as well as on a realistic assessment of the country’s repayment capacity, taking into consideration expected growth of export earnings, import requirements, and expected financial inflows as well as budgetary situation. We specifically urge that: (i) in the event of the need to reschedule, multi-year rescheduling of a minimum of five years should be the norm, with maturities of at least 50 years, ten years grace and zero rate of interest; (ii) mechanisms should be explored whereby debt service payments agreed after rescheduling could be applied to effectively address both the interest rate and the principal; for example, the creation of Sinking or Redemption Fund to amortize the principal; (iii) the removal of the conditionality of implementation of stabilization programmes with IMF in order to obtain debt relief from creditors; (iv) within the framework of debt rescheduling, the creditor countries should not require African debtor countries to adopt measures and economic doctrines that are incompatible with their economic and social systems; (v) individual creditor countries which are members of the Paris Club should be allowed to negotiate and grant better rescheduling terms to African debtor countries than those obtainable within the framework of the Club; (vi) previously rescheduled debts in general should be made eligible for further rescheduling to ease the debt servicing burden of the debtor countries; (vii) action should be taken to expedite the bilateral negotiations which follow, and which give validity to agreements reached in the multilateral fora; action should also be taken for improving the internal procedures and systems.

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(5)

Resources for development

31. One of the most critical aspects of the solution to Africa’s external debt crisis is to increase the flow of external resources to the continent, especially on concessional terms. We, therefore, urge the developed countries to recognize the high degree of interdependence between Africa and the industrialized countries in addressing the African external debt problem. In particular, action should be taken to reverse the decline in net capital inflows to a number of African countries, especially since 1982; the stagnation of official development assistance (ODA); the contraction in financial flows from commercial banks and foreign direct investment; and the net outflow of resources from Africa. 32. We, therefore, urge the international community to adopt the following measures as a matter of urgency: (i) Developed countries should take action to substantially reduce international rates of interest on existing and future loans. There should also be an agreed formula for stabilizing exchange rates of the major currencies in which external debt is denominated; and where a debt burden increases as a result of the appreciation of the donor countries’ currencies (exchange rate volatility) through no fault of the borrowers, that percentage of exchange rate appreciation should be treated as debt relief, so as to control the random growth of the borrowers’ debt burden. (ii) For African countries, ODA continues to play an important role in their development efforts. Therefore, the internationally agreed target of 0.7 per cent of the Gross National Product of industrialized nations should be implemented as a matter of priority preferably before 1990. To this end, there should be a substantial increase in quick-disbursing lending by the Development Assistance Committee (DAC) countries as well as the East European countries. (iii) Creditor countries and multilateral development and financial institutions such as the World Bank and the IMF should adopt urgent measures to avoid their becoming net recipients of resources from Africa. (iv) The World Bank should raise the eligibility ceiling to enable more African countries to qualify for IDA resources. We urge that at least 50 per cent of these resources should be set aside for assistance to Africa. Measures should be taken to complete the contribution under IDA–7 which are still outstanding. We are also concerned that the present US$ 12.4 billion level of IDA–8 resources is inadequate to meet the needs of African countries. We urge that the approval procedures and commitments should be speeded up, taking into account Africa’s urgent needs for resources. Furthermore, we deplore the shortening of the repayment period for IDA loans from 50 years to 40 years for low income countries, and from 50 years to 35 years for other IDA eligible countries. We, therefore, appeal to the World Bank


to restore the earlier terms of IDA loans, that is, 10 years grace and 50 years repayment period and a service charge of 0.75 per cent. We also call on the World Bank to review its practice of suspending disbursements to other Bank-funded projects, simply because of arrears on one project. (v) In order to ease the liquidity shortage experienced by developing countries, a new and substantial SDR allocation totaling not less than 15 billion SDRs should be agreed upon. The unconditional nature of SDRs should be assured and their allocations linked to the development needs of developing countries. (vi) The conditionality criteria of the international financial institutions should be substantially eased and any coordination between the IMF, the World Bank and other multilateral financial institutions should not lead to cross-conditionality. (vii) The capital of the World Bank should be doubled in order to enable the bank to increase its lending to levels commensurate with the needs of developing countries. (viii) There should be a predictable and higher replenishment of the resources of the International Fund for Agricultural development (IFAD) through increased contribution by developed countries. (ix) The World Bank should re-establish the Special Facility for subSaharan Africa with additional resource commitments from donor countries. (x) We urge the countries and international financial institutions to contribute to the replenishment of the African Development Fund at an adequate level and to contribute also to funds existing in other African institutions.

(6)

Improving African primary commodity export earnings

33. The most critical aspect of Africa’s external debt crisis continues to be the considerable reduction in Africa’s export earnings as a result of the low prices of primary commodities which collapsed in 1980 and have continued since then to deteriorate steadily. African countries have lost huge amounts of revenue due to the deterioration of terms of trade, and this has increased the need for external borrowing. We, therefore, call upon the international community to adopt and implement urgently, measures agreed to in the Final Act of UNCTAD VII, including, in particular, the following measures: (i) Concrete efforts should be exerted to stimulate the growth of the world economy in order to improve the demand for Africa ‘s exports and thus increase Africa’s export earnings. Developed market economy countries should implement their commitments to halt and reverse protectionism and to eliminate the escalation of tariff and non-tariff barriers affecting exports of African countries.

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(ii)

Developed countries should negotiate with the major producing countries with a view to stabilizing the prices of the major export commodities at remunerative levels as well as the revision and strengthening of the existing commodity agreements and concluding new ones. (iii) Financing agricultural diversification programmes and projects by increasing investments in agriculture, including the use of private capital. (iv) Facilitating access of African products to world markets at sufficiently remunerative prices. (v) Industrialized countries should support new programmes for agricultural processing, including food production, not only for the domestic markets, but also for export, and access to world markets for these products should be improved. (vi) More advanced technology should be made available to African countries at reasonable costs to facilitate the local processing of Africa’s commodities and to take the necessary measures to encourage industrial and commercial partnership between African enterprises and those of the North. (vii) The Compensatory Financing Facility (CFF) of the International Monetary Fund (IMF) constitutes an additional source of income to compensate for short-falls in commodity earnings. We welcome the general review of the CFF to make it responsive to existing conditions in the world economic and trading environment, and we urge that such a review should take into account the serious short-falls in Africa’s export earnings at a time when more resources are needed to finance the recovery programme. We, therefore, urge the IMF to increase substantially the resources available under this facility. At the same time, there should be a relaxation in the conditionality, so as to enable African countries to have timely access to these resources. We also urge the IMF to revoke the ‘cross-conditionality’ requirement by which access to CFF is sometimes lined with the approval of Stand-by Agreements and further appeal for the lengthening of the repayment period and the introduction of concessionality in the CFF especially for the poor African countries. (viii) The developed countries should take urgent action to allow an increased volume of Africa’s exports into their markets especially agricultural processed and semi-processed goods. (ix) Developed countries should take urgent measures to eliminate subsidies they give to agriculture which impede exports from African countries. (x) In order to alleviate the commodity export problem facing African countries, consultations should be instituted between African governments and the industrialized countries on policy issues relating to the disposal of national strategic stockpiles, production of other sub-


stitutes, with a view to safeguarding the African exports which are now threatened by these developments. This should be done in the context of a policy framework which could encourage competitiveness of African exports. (xi) We welcome the possibility of the implementation of the Agreement on the Common Fund for Commodities following the signing of the agreement by some of the major industrialized countries, and other countries, thereby enabling all conditions required for its coming into operation to be fulfilled. We call upon the Secretary-General of UNCTAD to speed up the measures to bring the Common Fund into operation. At the same time, we urge that the coverage of the Common Fund be extended to include all African primary commodities. (xii) We urge the developed countries to establish a global scheme, parallel to the STABEX, that will ensure the stabilization of earnings of all primary commodities.

(7) Measures to support efforts of the least developed and other disadvantaged countries in Africa 34. The debt problems of the least developed, landlocked, Sahelian, Island and the Frontline countries in Africa are indeed very serious and require special treatment in dealing with their external debt problems. We note that the Venice Summit gave recognition to the poorest countries, particularly those in Sub-Saharan Africa, which are exceptionally difficult and deserve special treatment. In the LDCs in particular, the debt-service ratios are very high and a substantial portion of their export earnings goes to service their external debts. In addition, per capita incomes continue to be very low and, in some cases, declining; domestic savings are almost nonexistent; the ability to attract external resources from commercial sources is highly limited; and investment opportunities are limited, both in the public and private sectors. In order to alleviate the problems of external debt of these countries, we call on the international community to implement, urgently, the measures contained in paragraphs 134–140 of the Final Act of UNCTAD VII. (i) While we greatly appreciate the cancellation of ODA debts and the adoption of other equivalent measures by some developed countries under the terms of UNCTAD’s Trade and Development Board Resolution 165 (S-IX) of 1 March 1978, we feel that more needs to be done for the poorer and the LDCs in Sub-Saharan Africa. Therefore, we earnestly urge other donor countries from both the OECD and the socialist countries of Eastern Europe which have not yet done so, to implement their commitments undertaken under this resolution to cancel the debts of all African Least Developed Countries, as defined by the United Nations without any discrimination in implementing the above resolution.

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(ii)

Bearing in mind the structural adjustment and economic reforms being undertaken by these African countries, creditors should accord longer maturity and grace periods to their loans by granting credits on very concessional terms similar to ADF. All Assistance to the LDCs should be in the form of grants. (iii) Suitable schemes, such as interest subsidies and refinancing on very concessional terms, should be considered as part of the debt relief package. (iv) Immediate implementation by the international community of the recommendations adopted during the evaluation of the Substantial New Programme of Action for the Least Developed Countries. (v) Donor countries should increase the transfer of financial resources to the LDCs on concessional terms in order to reach the target of 0.15 per cent of the Gross National Product as agreed in UNCTAD VI. This would enable the recipient countries to stimulate economic growth and solve their debt problems. Special investment programmes should be envisaged with non-debt-creating capital flows in order not to exacerbate an already difficult debt servicing situation. (vi) Special effort should be made on behalf of these countries with a view to cancelling all debts relating to endangered projects on account of external constraints and natural disasters. (vii) Donors should endeavour to finance project studies, designs and technical assistance in the form of grants as well as the total cost of social projects. (viii) Donor agencies should delete the cross-default clause used when a borrower country fails to meet date-limits of payment under a given project.

Conclusion 35. In putting forward the above-mentioned measures, we are convinced that the international community, especially the developed creditor countries and their commercial banks as well as the multilateral institutions, will give them urgent and careful consideration, in recognition of the seriousness of Africa’s external debt crisis. We stress that the solution to this crisis must be situated within the general context of Africa’s accelerated socio-economic development, as the Priority Programme will come to an end in three years. We urge developed creditor countries and international financial institutions to envisage suspending Africa’s External Debt Service obligations for a period of 10 years, starting from 1988, the date scheduled for the holding of the International Conference on Africa’s External Debt. 36. The measures we have proposed in this Common Position are, indeed, the minimum that we feel are necessary to enable our countries recover and resume normal growth. We note, with appreciation, the mutuality of interests with our creditors, in terms of the objectives of African


economic recovery for the resumption of normal growth and accelerated developments, and in particular, the individual initiatives they have taken in this direction. It is important, therefore, that we, together with our creditors, intensify our efforts in this direction, in a spirit of North–South cooperation for development, within an appropriate forum that will be fully representative of the interests of all African debtor countries, the developed creditor countries, the private commercial banks and the multilateral institutions. Such a forum will facilitate frank and constructive dialogue that will take into account the various proposals, initiatives and actions on the part of Africa’s creditors as well as the measures that are contained in the African Common Position. Furthermore, we believe that the elements of a new external debt strategy as defined in the Final Action of UNCTAD VII should be speedily implemented so as to find a just, lasting and mutually acceptable solution to the external debt crisis of developing countries. 37. It is in this spirit of constructive dialogue, and with the objective of finding an effective solution to the external debt crisis of African countries, that we renew our call for convening, in 1988, an International Conference on Africa’s External Indebtedness.

Appendix 9: The African Debt Crisis: Strategies Towards Sustainable African Debt Relief Addis Ababa, 31 January 1997 (Extract) Executive Summary Triggered by Latin American countries, led by Mexico, the global debt crisis of the early 1980s posed a systemic threat to the global banking system. This was because the inability of such countries to honour their debts generated a liquidity crisis which threatened the collapse of the banking system. On the other hand, the debt of African countries, which constituted 17 per cent of all developing countries’ debt, seemed relatively small to warrant threat to the banking system. African debt has been seen as more of a structural problem than one of liquidity. The African debt crisis has been heightened by her marginalization following the collapse of the Soviet Union. The emergence of the new Eastern European states which have considerable need for financial flows and economic support has relegated the African debt problem to the background. Donor fatigue seems to be creeping in and there has been the doubt that forgiveness of African debt will create a ‘moral hazard’ which will reward the bad conduct of countries which have failed to reform their economies. It is within this scenario that the African debt problem, which has grown, seeks solutions for its amelioration, within the constraints of several factors which are internal and external to Africa. African countries have continued to abide by Structural Adjustment Programmes, yet the debt problem has continued to worsen. The African debt has grown from US$ 111 billion in 1980 to US$ 306 billion in 1995. The debt to export ratio for all developing countries in 1995 was 170 per cent, for Africa it was 239 per cent. While the debt service ratio for all developing countries was 16 per cent in 1995, that for Africa was 27.3 per cent. Since 1980, the OAU has been raising issues concerning the streamlining of aid and the cancellation of the debts of African countries. The OAU has since 1985 suggested an International Conference on Africa’s External Indebtedness as a matter of urgency. To date, aside from the Cairo International Seminar of 1989, no forum has been held by creditors and debtors on the continent’s debt crisis. The third Extraordinary Session of the Assembly of Heads of State and Government of the OAU adopted the African Common Position on Africa’s 160

The African Debt Crisis 161

External Indebtedness in 1987. The objective of the Common Position was to find a long-lasting solution to Africa’s debt crisis. In connection with this, an OAU Contact Group on the African Debt Crisis of 12 member states was formed to sensitize creditor countries, institutions and noncreditor groups for support on the International Conference on Africa’s External Indebtedness. The Contact Group worked at several levels: heads of state, ministerial and experts levels. It is fairly evident that the Contact Group has worked fervently and assiduously at all levels to address the African debt problem. Sensitization efforts have been fairly positive; however, the work of the Contact Group has seemed to wane. It has faced difficulties as indicated by the OAU Secretary-General’s Report to the 64th Ordinary Session in Yaoundé in July 1996. Prior to this, the envisaged Kampala International Seminar of 1990 could not take place for reasons beyond the control of the OAU. The last OAU Summit in 1996, however, recommended the expansion of the Contact Group membership to 24, and the strengthening of its activities. The African Common Position of 1987 has been the continent’s clearest and most explicit policy framework on the African debt problem. It was received enthusiastically by African countries but generated heated debate in other fora. Much of the misapprehension exercised in its reception may have originated from the aversion for a ‘debtor’s cartel’. However, it can be said that the African Common Position has been an important catalyst for new creditor initiatives today. The major shortcoming of the Position is its ‘accusatory tone’ and exceptional demands from the viewpoint of creditors. The call for an International Conference on the African debt has not been openly welcomed by creditors. Creditors have, however, come forward recently with new initiatives on debt relief on a global basis. Initiatives on Official External Debt relief have been pioneered by the Paris Club, offering up to 80 per cent debt relief in recent instances. It has been realized now that such debt relief is quite marginal. Uganda, for example, after going through the Paris Club mechanism of 67 per cent debt stock reduction, earned only a 17.3 per cent reduction in its Paris Club debt but was left with an outstanding debt comprising 77 per cent multilateral debt. The most recent initiative in this class is the Highly Indebted Poor Countries (HIPC) Initiative advocated by the Bretton Woods Institutions. It draws its strength from Paris Club stock of debt reduction of a hopeful 90 per cent, but is adamant about its own multilateral debt forgiveness. Other initiatives in the area of commercial debt are the ‘Brady type’ which involve debt-swaps such as debt for development, cash and nature swaps. African countries have partaken in a number of such swaps. The cash swaps have often imposed liquidity strain on fragile economies and have often been a windfall for creditors. It is now becoming clearer to Africa to avail itself of strategies to reduce the debt burden. First, Africa needs to harness the new initiatives advocated

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by creditors, and secondly Africa must look inwardly for self-reliant strategies which will provide a sustainable solution. This report looks at some of these strategies, such as international lobbying, the attraction of private capital flows, strengthening internal macroeconomic and debt management, and regional and sub-regional initiatives. An important conclusion of the report is the recommendation of the setting up of an OAU/African Economic Community Debt Management and Coordination Unit (OAU/AEC-DMCU) within the OAU Secretariat. The vacuum of its need was realized during an OAU Mission on the African External Debt (November 1996 to January 1997). Much of the problems of the Contact Group stems from its inability to coordinate activity between its various levels and the time constraint it faces. It is inevitable that without a central coordination unit and with a membership which is constrained by busy non-debt related issues, the OAU may be faced with repeated enthusiasm at the subject matter and repeated slumps and failure to operationalize its agenda.

Appendix 10: Report of the Meeting of Ambassadors and Experts of Members States of the OAU Contact Group on the African Debt Crisis, Addis Ababa, 16 June 1999 (Extract) Recommendations With increased debate and openness on the HIPC Initiative by the Bretton Wood institutions, recommendations on strategies for debt relief from the perspective of the Bank and the Fund, G7 countries, other creditors, multilateral development banks and civil society have increasingly been linked to the HIPC Initiative. This is more so because much of the debt owed by very poor developing countries are owed to the Bank and Fund. It is recommended that: 1. Countries should make full use of traditional debt-relief mechanisms to be eligible for debt relief under the HIPC Initiative. Six African countries, namely, Ghana, Kenya, Liberia, Malawi, Somalia and Sudan have never received a concessional rescheduling from the Paris Club and should make use of the opportunity in the face of global advocacy to lower debt sustainability indicators for the inclusion of a greater number of debtor countries in the Initiative. 2. Three African countries, Liberia, Somalia and Sudan possess very poor debt databases and will have to take steps to improve their databases to be included in debt relief schemes. 3. Eight African countries, Angola, Burundi, Democratic Republic of the Congo, Equatorial Guinea, Liberia, São Tomé and Principe, and Sudan are yet to meet their entry requirements for the HIPC Initiative. The countries will need to have Fund and Bank supported programmes in place by year 2000 to qualify for the HIPC Initiative. 4. Formal debt sustainability analysis (DSAs) by the Bank and Fund are unavailable or currently out-of-date for Burundi, Democratic Republic of the Congo, Liberia and Somalia. Available data is unreliable and renders DSAs uncertain. These countries will require assistance to improve their debt database. 5. Following the return of Nigeria to democracy, the lifting of sanctions and the impending return to Fund and Bank programmes, Nigeria would need to review its eligibility for the HIPC Initiative. 163

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6. African countries are encouraged to make use of traditional debt relief mechanisms, especially the Paris Club, to qualify for the HIPC Initiative in the face of proposals of changes to the Initiative. 7. Following the Initiatives tabled by the G-7 countries, it is proposed that African countries which have special bilateral relations with them explore the possibilities of bilateral debt relief to lower their debt burdens, and also make a case for countries emerging from crises. 8. African countries should support their multilateral development banks such as the BCEAO and the AFDB in advocacy of debt relief especially from the human development and poverty reduction dimensions. 9. African countries should continue to support civil society in the quest for outright cancellation of debt by the next millennium. 10. African countries should continue to press for wider actions to support debt relief, such as large ODA flows and trade liberalization, which will allow them access to industrial countries’ markets. 11. African countries should continue to lobby the major creditor countries on greater and better reforms on debt relief frameworks if not outright cancellation of debt by the next millennium. 12. African countries should continue to advocate for an international conference on the African External Debt Crisis to find a lasting solution. The current global environment favours such a dialogue.

Appendix 11: Meeting on Africa’s External Debt Crisis. Brief on the Implementation of the Sirte Declaration on Africa’s External Debt Crisis, Addis Ababa, 13 January 2000 A.

Background

1. At the Extraordinary OAU/AEC Summit in Sirte, Libya on 9 September 1999, the Assembly of OAU/AEC Heads of State and Government mandated the Current OAU/AEC Chairman, President Abdelaziz Bouteflika of Algeria and President Thabo Mbeki of South Africa, to engage Africa’s creditors on the issue of Africa’s external indebtedness, with a view to securing total cancellation of Africa’s external debt, as a matter of urgency and to coordinate their efforts with the OAU/AEC Contact Group on Africa’s External Debt. They also requested the Secretary-General of the OAU/AEC, as a matter of priority, ‘to take all appropriate measures to follow up the implementation of these decisions’. 2. In compliance with the above decisions and directive, the OAU/AEC Secretariat convened a meeting of the experts of the Joint OAU/UNECA/ADB Secretariat in Addis Ababa over 29 November–1 December 1999 to deliberate and prepare a paper on the issues and matters relating to the mandates of the Contact Group and the Heads of State and Government. This paper, by the Group of Experts, will therefore highlight the nature of the problem, its impact and advocacy for debt cancellation as well as strategies to be adopted.

B.

The nature of Africa’s external debt problem

3. Of all the developing regions of the world, the African Region has been the most adversely affected by the problem of external debt. The growth and development of African countries, with the exception of a few, has been constrained by this problem. In spite of various efforts to address the crisis at the national, regional and international levels, the crisis has been deepening. Africa’s external debt, which stood at 111 billion US dollars in 1980, increased to 350 billion US Dollars in 1998; this reflects a very high rate of growth of about 12 per cent per annum over that period. In addition, Africa’s debt as a percentage of GNP almost doubled from 38 per cent 165

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in 1980 to 66 per cent in 1998. The associated debt to export ratio more than doubled from 126 per cent to 303 per cent over the same period. The debt service to export ratio also nearly doubled from 16 per cent to 31 per cent in the same period. 4. The deterioration in the debt/export ratio is a reflection of, inter alia, the poor performance of African exports on the world markets. The terms of trade for primary products have been declining over the longer term. In addition, limited capacity to attract non-debt creating capital inflows such as foreign direct investment (FDI), lapses in domestic policy reforms and debt management, and the decline in official development assistance (ODA), have contributed to the accentuation of the debt problem. In recent years, a significant contributive phenomenon in the deterioration of the African debt crisis has been the capitalization of arrears. There is evidence that, in nominal terms, Africa has more than repaid the debt owed to its creditors.

C.

The composition of Africa’s external debt

5. In earlier years, the bulk of Africa’s external debt was owed to official bilateral lenders. Over the years the debt structure has changed. In 1980, the composition of Africa’s external debt was 14 per cent multilateral, 33 per cent bilateral and 53 per cent private. In 1987 this had changed to 20 per cent multilateral, 41 per cent bilateral and 39 per cent private. Since then this structure has remained virtually the same over the years. However, in 1997 there was a marked change in the composition of Africa’s total debt stock, which now stood at 28 per cent multilateral, 48 per cent bilateral and 24 per cent private. This trend indicates that, historically, the multilateral and bilateral composition of Africa’s debt has been increasing at the expense of private debt. It further illustrates and confirms that Africa has become increasingly less creditworthy and has less access to private capital markets and investment flows.

D.

Impact

6. The debt crisis has had a devastating effect on the growth and development of African economies. A significant amount of available resources devoted to debt servicing has been at the cost of investment in infrastructure and social services, which are critical for sustainable development. This diversion of resources for debt servicing has also led to the retrenchment of critical imports to satisfy basic consumer needs. 7. The consequences of the above have been the deepening of poverty, rising unemployment, social conflict and political instability. For most African countries the Human Development Index (HDI) has deteriorated while an increasing number of African countries have been reclassified as

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‘Least Developed Countries’, and a number of others are not far from that category. In addition, the high indebtedness of African countries erodes investors’ confidence and leads to a very limited flow of FDI to African countries.

E.

Advocacy

8. Unless the African debt crisis is resolved, and soon, all attempts to eradicate poverty and achieve sustainable development will remain inconclusive. 9. Over the last two decades, in an attempt to eradicate poverty and to achieve sustainable development, most African countries have embarked on the painful implementation of the structural adjustment programme (SAP). African countries also have increasingly shown their commitment to good governance, a critical element in creating a conducive environment for attracting FDI and encouraging private sector participation in developing the domestic economy. 10. The commitment of the international community to reduce extreme poverty, by at least half by the year 2015, will require, inter alia, providing adequate levels of ODA, promoting an increase in the inflow of foreign investment to Africa, improving market access of African products and, most importantly, seeking lasting solutions to Africa’s external debt burden. The lasting solution must be the cancellation of Africa’s external debt. This will require significant improvements and deepening of the existing debt initiatives as well as the search for more creative solutions. 11. The eradication of poverty and promotion of sustainable development call for additionality of resources. Debt cancellation must not be at the expense of official development assistance. According to United Nations New Agenda for the Development of Africa in the 1990s (UNNADAF), for the continent to attain an average growth rate of 6 per cent per annum of GNP, it will require, (i) the provision of a minimum of 30 billion US Dollars after which the real net ODA receipt will need to grow at an average rate of 4 per cent per annum and (ii) the allocation of 0.7 per cent of GNP to ODA by DAC countries. The attainment of these targets requires greater efforts by development partners in view of the need to support African economic recovery especially in the prevailing circumstances of high debt service, non-cancellation of debt by creditors, the precarious situation of African economies, and very low resource flow to the continent. 12. The idea that debt cancellation will create a moral hazard as argued by some creditors is not strictly valid because African countries have shown their commitment to pursue credible domestic policies designed to prevent the re- emergence of another serious debt crisis. The growing political will on the part of creditor countries, as evidenced in their support of the enhanced-HIPC Initiative tabled at the 1999 IMF/World Bank Annual

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Meetings, should be firmed up and concluded through the cancellation of the African debt to support the efforts of the continent. For example, much of African official debt is valued at 10 per cent of its book value or less. These debts would have been written off banks’ books if they were commercial debt. There is also an urgent need to address Africa’s debt owed to multilateral institutions in view of the fast growth of that category of debt.

F.

Recommendations

13. Economic Reform, Poverty Eradication and Debt Cancellation: Debt cancellation is a fundamental condition for growth and the eradication of poverty in Africa. At the same time, for sustainable development, African countries have to continue with the implementation of economic policy reforms, the institution of good governance and the creation of an enabling environment for the mobilization and efficient utilization of resources, and for the effective participation of the private sector in the development process. It is important that African countries continue to prepare their programmes of poverty eradication (in conjunction with their economic reform programmes) in a transparent, democratic and participatory manner, involving the relevant stakeholders and in partnership with African regional institutions, and the Bretton Woods Institutions. 14. To ensure that debt cancellation has the desired positive effect, African countries are committed to ring-fencing of debt relief savings for the rehabilitation of infrastructure and the improvement of social sectors. 15. It is proposed that the Contact Group should recommend the following actions for consideration by the two designated Heads of State and Government: (i) Letter to the Chairman of the G7/G8: A letter signed by the two mandated Heads of State and Government, between December 1999 and January 2000, should be addressed to the Chairman of the G7/G8 raising the issue of Africa addressing the June 2000 G7/G8 Meeting in Okinawa, Kyushu, Japan. (ii) Letters to the G7/G8: Letters are to be addressed jointly by the two leaders, between December 1999 and January 2000, to the individual Heads of State and Government of the G7/G8 countries in which they would, inter alia, raise the issue of support for the cancellation of the African debt at the June 2000 G7/G8 meeting. It is to be recalled that the Cologne Initiative of June 1999 for substantial debt relief to eligible highly indebted poor countries was at the instance of Heads of State and Government of the G7/G8 countries. They provided the political momentum that resulted in the enhanced commitment to debt relief by bilateral, multilateral and commercial creditors.

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(iii)

Content of Letters: Elements to be included in the letters are the following: a) A review of the African debt problem and its impact on growth and poverty and the attainment of the OECD/DAC 2015 targets; b) The current international financial situation; its impact on commodity markets and prices; market access; supply-side constraints, and the availability of resources; c) The expression of appreciation for the efforts of the creditor countries, in particular the various initiatives, especially as culminating in the HIPC Initiative; d) The need to consider the Initiative’s shortcomings, which include: 1) 2) 3) 4)

e)

f)

the country coverage is restrictive; the work out period for the Initiative is quite long; the inadequacy and limitations of the Initiative in reducing the debt burden; the inadequacy of resources for funding the Initiative.

These problems call for the total cancellation of the African debt. In this regard, an African Specific Fund is being proposed and the G8 countries are being called to consider this within the African debt cancellation initiative. Other new mechanisms are welcomed. The commitment of Africa through ongoing efforts to reform its economies and improve governance.

4. OAU mission of foreign/finance ministers: An OAU Mission of Foreign/Finance Ministers from Algeria and South Africa should discuss the African debt problem with their counterparts in the G8 (USA, UK, Canada, France, Italy, Germany, Japan and Russia) between March and April 2000. Consideration should be given to the inclusion of Ministers from other Member States, selected on certain agreed criteria such as experience with the HIPC Initiative, continuity, and the level of indebtedness. 5. Contact with NGOs and Bretton Woods institutions: The OAU Ministerial delegation should engage other stakeholders such as the NGOs and the Bretton Woods institutions. 6. Other creditor countries: Following the engagement of the G8, action should be initiated to engage non-G8 creditors. With regards to creditors from developing countries, action should be situated in the context of South-South Cooperation. The Joint ECA/OAU/ADB Secretariats should carry out a study on the level of debt owed to non-G8 creditor countries. 7. Advocacy at international fora: The African debt issue should continue to be raised at subsequent G8 meetings and other fora such as the UN General Assembly, the Bretton Woods institutions’ meetings, and the Millennium Fora, to ensure that Africa’s message is consistent and well disseminated.

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8. Commercial debt: The principle of burden-sharing should apply and action in this regard should be a natural follow-up to any understanding reached with the G8 countries on the issue. 9. Multilateral debt: With regard to the debt owed to multilateral institutions, a special mechanism such as an African Specific Fund should be established to provide debt relief, including debt cancellation. 10. African panel of experts on debt: To provide the necessary technical support to the Contact Group on Africa’s External Debt, a panel of experts should be set up as soon as possible. Such a panel should co-opt experts from Member States as the need arises. The panel should provide technical support to the OAU Mission and be available to undertake technical studies and analyses in support of the continent’s efforts. 11. International Conference on Africa’s Debt Crisis: In the event that the current efforts to engage creditors for total debt cancellation do not succeed, the decision to hold an international conference on Africa’s External Debt Crisis in 2000 should be vigorously pursued.

Appendix 12: OAU Assessment of the Implementation of the United Nations New Agenda for the Development of Africa (UN–NADAF) A.

Introduction

1. The Forty-sixth Session of the United Nations General Assembly unanimously adopted the New Agenda for the Development of Africa in the 1990s (UN-NADAF, General Assembly resolution 46/151), following an indepth terminal review of the United Nations Programme of Action for African Economic Recovery and Development [(UN-PAAERD), 1986–1990 (Resolution S-13/2, Annex). The UN-NADAF represents a unique agreement between African States and the international community, with both sides committing themselves to specific and far-reaching efforts to accelerate Africa’s development process. In this programme, the international community has accepted the principle of shared responsibility and full partnership with Africa, and has expressed its commitment to give full and tangible support to the African effort. The UN-NADAF recognizes that Africa’s development is primarily the responsibility of Africans, and that the international community can lend support to the African endeavours. Although the goals and commitments stated in the UN-NADAF, were defined in a general form, they constituted policy guidance and points of reference for further action. 2. The circumstances which led to the adoption of UN-PAAERD and UNNADAF are as valid in 1996 as they were in 1986 and 1991. Assessments made by African countries themselves or by other organizations and independent observers point to the fact that Africa’s social and economic conditions actually deteriorated over the past decade. Poverty and unemployment have increased and these have been accentuated by increasingly restricted access of the majority of Africans to basic social services, such as education and health. To reverse this negative trend and promote development, there is need for solidarity among Member States of the United Nations to act in concert to address and find lasting solutions to the socioeconomic problems facing Africa. The UN-NADAF provides an important framework for cooperation between Africa and the international community to address these problems. The international community and the countries of Africa should therefore renew their determination and commitment 171

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to the implementation of the UN-NADAF so as to achieve its social and economic development goals set for Africa in the 1990s and beyond. 3. The New Agenda, which is founded on the principles of shared responsibility and global partnership between Africa and the international community, is specific and focuses on goals and targets to be achieved during the period 1991–2000, as follows : (a) African countries should attain an average real growth rate of at least 6 per cent per annum of gross national product (GNP) throughout the period of the UN-NADAF; (b) There should be accelerated transformation, integration, diversification and growth of the African economies; (c) Special attention should be paid to human development and increased productive employment, and to the promotion of rapid progress towards the achievement of human-oriented goals by the year 2000 in the areas of life expectancy; integration of women in development; child and maternal mortality; nutrition and health; water and sanitation; basic education; and shelter. (d) The New Agenda calls for the achievement of peace in Africa as a prerequisite for Africa’s development. The international community as a whole is called upon to cooperate with and support the efforts of African countries for a rapid restoration of peace, normalization of life for uprooted populations and national socio-economic reconstruction. 4. In order to achieve these objectives, the international community entered into a new accord with Africa, which spelled out clearly the firm commitment of the international community to support and assist Africa in its efforts to implement successfully its development agenda and to reduce, if not eliminate, external impediments and obstacles to Africa’s accelerated socio-economic transformation. The UN-NADAF reflects a mutuality of commitments and accountability. It is composed of two parts: what Africa commits itself to do, and what the international community commits itself to do. 5. A critical element of the support from the international community is the provision of adequate resource flows to Africa to achieve a set of quantitative targets agreed upon as follows: (a) To attain the stipulated 6 per cent growth rate in GNP, the UN Secretariat estimated that the international community would be required to provide a minimum of US$ 30 billion in net ODA, in 1992, after which the real net ODA would need to grow at an average rate of 4 per cent per annum; and (b) The international community also reaffirmed its commitment to attain the United Nations targets of devoting 0.7 per cent of GNP to ODA. 6. The UN-NADAF calls for a Mid-Term review of its implementation. As stated in the Agenda – Paragraph 46 – the OAU is expected to make an assessment and recommendations on the implementation of the New

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Agenda to be submitted to the General Assembly and the Economic and Social Council. This document constitutes the OAU’s submission as required. 7. Since UN-NADAF is only in its fourth year, it would be difficult to state in precise terms the degree to which the various set objectives have been met. Nonetheless, an analysis of the commitments entered into, against what was actually done to implement the Agenda over the period 1992–5, may provide insights into the level of involvement by African countries and the international community in the quest for economic recovery and sustainable development. Accordingly, the first section of this document deals with commitments entered into, and the initiatives taken, on the part of African countries to reform their political and economic situations. The second section focuses on an assessment of the implementation of the UNNADAF by the international community. The third section is devoted to conclusions and recommendations.

B. I 1.1

International agenda Africa’s responsibility and commitment Achievement of sustained and sustainable growth and development

8. In UN-NADAF, African countries committed themselves to the implementation of policies for the transformation of the structure of their economies in order to achieve growth and development on a sustained and sustainable basis. To this end, they committed themselves to persevere with necessary reforms and pursue improvement of domestic economic management, including effective mobilization and utilization of domestic resources. 9. Many African countries have endeavoured to live up to their commitment. During the last decade or so, African countries have carried out economic reforms, sometimes at great political risks and social hardships. Since the adoption of the UN-NADAF, African countries have intensified their efforts to institute market-friendly macroeconomic policies and reforms. They have continued to undertake major domestic reform measures aimed at achieving greater coherence and prudence in fiscal, monetary and trade policy. They have undertaken budgetary reforms and have introduced restrictions on credit and monetary expansion. They have also contained the growth of public expenditure and have applied austerity measures and civil service reforms aimed at the rationalization of the structure of the public sector. 10. The fiscal policy reform in African countries has been concerned with trying to solve the persistent problem of huge budget deficits, in order to contain inflation and inflationary expectations in the economy. African governments recognize that greater fiscal discipline is essential for controlling inflation, which has been a major factor in the stagnation of many

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African economies and falling standards of living. However, the curtailment of public expenditure has never been easy. The difficulty emanates from various political and social pressures on governments to provide some minimum levels of social welfare to the population and to maintain military spending in an increasingly turbulent and insecure socio-political environment. Some governments have introduced measures designed to improve the productivity of public expenditure and investment through prioritization, streamlining and rationalizing the government budget. 11. Positive rates of growth in government revenue have been experienced in some African countries, but the performance generally fell short of budgetary estimates and targets, owing to the continued poor GDP growth rates in many economies and the erosion of the taxable base for excise duties, indirect taxes and direct income taxes. Tax reform has been a key component of the economic stabilization and revenue generation programmes of many governments, involving rationalization of tariff structure, fiscal decentralization, the introduction of value added tax (VAT) and presumptive taxation in order to broaden the tax base. Some of the other revenue policy measures undertaken in African countries included the introduction of government debt instruments, including bonds and treasury bills, for sale to the public. 12. The economic reform programmes in Africa are based on incentives for savings, on measures to stimulate investment, and on the empowerment of the private sector. To promote savings, the financial sector reforms in many African countries have included the strengthening of the regulatory framework and prudent guidelines for banking and non-banking financial institutions intended to safeguard public confidence and streamline operational viability and effectiveness of the financial sector. To promote investment, African governments have made efforts to create enabling environment and conditions conducive to both domestic and foreign investment. To empower the private sector, almost all African governments have embarked on privatization programmes and have enacted laws to create an atmosphere favourable for the private sector expansion and operation. 13. Privatization of public enterprises continued apace in many countries, with many of them scaling down the number of inefficient enterprises. This has resulted in the increase of the share of private sector enterprises in the development process. However, privatization programmes fell far short of plans and expectations in many cases. African governments have preferred deregulation of trade and businesses as policy packages for boosting investment under the government privatization programme. 14. Many African governments have continued to undertake institutional reform in order to improve management standards and raise the level of productivity. Many of them have continued price decontrol; removal of import licensing; removal of exchange controls; liberalization of pricing and movement of certain commodities; and liberalization of the petroleum market.


15. The deregulation and liberalization of the mining sector that began in some African countries in the late 1980s have continued, with some governments introducing new land and mineral legislation as well as fiscal reforms aimed at enhancing the role of the private sector. However, despite the reform in the mining sector in many African countries, mineral production has remained export-oriented, with little or no forward linkages. 16. These economic reform measures were intended to deepen the process required to create conditions necessary to achieve the desired rapid and sustainable economic growth. They have been far-reaching and have produced positive results in terms of GDP growth. However, the situation is still very fragile and faces problems of sustainability. Although the objective of the new agenda was not realized, the African economy experienced in the last four years steadily increasing annual growth rates. The gross domestic product (GDP) of Africa, at constant 1990 prices, grew by 2.3 per cent in 1995, compared to 2.1 per cent for 1994 and 0.7 per cent in 1993. Consequently, this turnaround has influenced positively the per capita growth rates in the countries south of the Sahara as a whole in 1995, excepting only three countries which experienced negative growth rates. Furthermore, 19 countries in Africa have been enjoying real GDP growth in excess of their population growth rates through 1995. More than a third of these countries recorded growth rates of 6 per cent and above in the same year. This development is a vindication of the economic reforms and sound policies which African countries have been struggling to implement at considerable political and social costs in the last decade or so. It is a further confirmation of the recovery that has taken place in Africa in recent years and a sign that overall growth trends in Africa are beginning to gather momentum towards the recovery evident in the global economy. It is also a source of optimism on the prospects for economic growth and development in Africa during the coming decade. 17. Despite this improvement, African countries are not yet out of the rut. Africa’s share in world trade has deteriorated steadily from 5 per cent to 2.3 per cent during the period 1990–5. The debt burden continued to play a significant role in Africa’s development constraints. Debt grew by an average rate of 1.5 per cent between 1992–5. Regarding resource flows, net ODA declined from US$ 25 billion in 1992 to US$ 21.5 billion in 1995 contrary to what was anticipated in 1992. In addition, the food situation still represents a serious problem in the continent. The value added of agriculture dropped from 4.2 in 1994 to 1.5 in 1995. Structural transformation of African economies is yet to take root. Many of the factors responsible for the weak economic performance in Africa over the years are still at work, and so are the development problems and challenges facing the continent. But the prospects of the continent emerging from them are now better than ever before. The current indications are that the capacity of African societies and economies for real and sustained growth are being increasingly realized. In the Cairo Agenda for Action, African countries have

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reaffirmed their determination to keep up their efforts in implementing the reform programmes.

1.2 Promotion of regional and sub-regional economic cooperation and integration 18. African countries recognize that regional and sub-regional cooperation and integration will bring about effective transformation of their economies. They have reiterated their commitment and determination to pursue with vigor the policy of achieving effective regional and subregional economic cooperation and integration as their collective strategy for sustainable and self-reliant development. To this end, on 3 June 1991, in Abuja, Nigeria, they signed the Treaty establishing the African Economic Community (AEC). The Abuja Treaty entered into force in May 1994, following its ratification by two-thirds majority of the Organization of African Unity (OAU) Member States. The Treaty stipulates that the Community shall be established mainly through the coordination, harmonization and progressive integration of the activities of the Regional Economic Communities (RECs). The Treaty also stipulates that the Community shall be established gradually in six stages of variable duration over a transition period not exceeding thirty-four years. The activities to be undertaken during the first stage are to focus on strengthening of existing Regional Economic Communities, and establishing new ones in regions where they do not exist. In viewing these provisions in the Abuja Treaty, the OAU, in cooperation with the ECA and the African Development Bank, has given priority attention to building close working relations between the AEC and RECs. A draft protocol on this crucial subject has been finalized, so that it will provide a framework for all the parties concerned to coordinate their efforts in the implementation of the Treaty. 19. To galvanize the efforts of the various regional economic groupings as well as of different segments of society to ensure popular participation in the integration process, African governments convened the Seventeenth Extra-Ordinary Session of the OAU Council of Ministers in March 1995 in Cairo, Egypt, to relaunch and strengthen Africa’s economic and social development efforts. The Council adopted the Cairo Agenda for Action which was endorsed by the Assembly of OAU Heads of State and Government in June 1995. In the Cairo Agenda for Action, African governments have reaffirmed that the development of Africa is the responsibility of the African peoples themselves. Accordingly, they have underscored in particular what the African countries can do by themselves, especially by creating the enabling environment for peace and for the development of the economies of their countries; they have also indicated what Africa expected from the international community. The Agenda reaffirms the commitment of African countries to cooperate among themselves in the


implementation of the Abuja Treaty and to firm up the modalities for operationalizing the Treaty through strengthening of the RECs. 20. Within the institutional framework provided by the African Economic Community, the regional economic groupings have also recommitted themselves to taking practical steps to harmonize and coordinate their activities and policies at the regional level for the effective implementation of trade liberalization and cooperation programmes and projects. Some Regional Economic Communities have recently reorganized their priorities and functions to put them in line with the requirements of the African Economic Community. In 1994, the Preferential Trade Area of Eastern and Southern Africa (PTA) was transformed into the Common Market of Eastern and Southern Africa (COMESA); in the same year, the Southern African Development Coordination Conference (SADCC) transformed itself into the Southern African Development Community (SADC). The Economic Community of West African States (ECOWAS) has recently changed its constitution to be in line with the terms and provisions of the African Economic Community. The Economic Community of Central African States (ECCAS) is in the process of being rejuvenated and reactivated into a viable regional economic entity. With respect to the Arab Maghreb Union (UMA) there is an ongoing programme to review the practical conditions and procedures of coordination between the OAU/AEC General Secretariat and the Secretariat of UMA. 21. In the Cairo Agenda for Action, African countries have reiterated their commitment to provide the Regional Economic Communities with requisite political, financial and institutional support to carry out the tasks assigned to them by their respective treaties and by the Abuja Treaty. African countries have further committed themselves to continue to cooperate closely among themselves and to open their markets to African products as well as to develop and expand their production base. 22. The Cairo Agenda for Action recognizes that the process of integration of the continent also involves the participation of all African peoples, particularly the economic operators, both public and private, trade unions, NGOs, women and youth organizations. African countries have, therefore, recommitted themselves to taking practical steps to galvanize the efforts of all these various groups for the implementation of the Abuja Treaty. 23. Following the signing and ratification of the Abuja treaty, the General Secretariat of the OAU embarked on a number of activities regarding the implementation of the Treaty. At the beginning, most of those activities were concentrated in the preparation of the protocols to be annexed to the Treaty. To date, 19 protocols have been prepared, six of which have been discussed by the OAU Permanent Steering Committee (PSC). 24. To prepare modalities for and to work out a strategy and approach to the implementation of the Treaty, experts of the OAU/AEC Economic and Social Commission (ECOSOC) met in June 1996 in Addis Ababa. The

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Experts reviewed the Draft Rules of Procedure, the draft work programme for ECOSOC and the draft protocol on the relations between the OAU/AEC and the RECs prepared by the Joint OAU/ECA/ADB Secretariat together with the RECs. The recommendations on these drafts will be submitted to the Ministers for consideration and for further submission to the Assembly of Heads of State and Government for decision. 25. The implementation of the Abuja Treaty is a matter of priority to the OAU, ECA, ADB and the Regional Economic Communities. The Joint OAU/ECA/ADB Secretariat, established by the Assembly of Heads of State and Government of the OAU, has since 1991 held several meetings jointly with the RECs to exchange views on ways and means of facilitating the speedy implementation of the Treaty. The Chief Executives of the OAU, ECA, ADB, and those of the RECs have been holding consultative meetings as well. A major issue discussed by the Chief Executives has been how to jointly put together resources of their respective institutions to bear on the implementation of the Treaty. 26. During their seventh meeting in June 1996, the Chief Executives reiterated their commitment to do everything in their power to support the efforts of African countries towards economic integration as called for by the Abuja Treaty and the treaties of the Regional Economic Communities. They also indicated that, to be effective in carrying out their mandate regarding the implementation of the Treaty, they were restructuring their respective organizations accordingly. 27. African governments recognize that a major means of facilitating the integration process in the continent is the development of transport and communications. Accordingly, the Tenth Conference of African Ministers of Transport and Communications, held in Addis Ababa in March 1995, reaffirmed the continued relevance and critical importance of the Second United Nations Transport and Communications Decade in Africa (UNTACDA II), and urged Member States to make every effort to support the national coordination committees and to facilitate, encourage and strengthen the activities of the national initiatives in fund-raising and implementation, taking into account the environmental impact of transport and communications projects. The meeting decided to reactivate the Trans-African Highways Bureau and to implement the Yamoussoukro Declaration on a new African air transport policy, urging United Nations institutions as well as African financial institutions to lend their support to the achievement of the goals of UNTACDA II. 28. In addition to their commitment to the reactivation of cooperation in the fields of traditional means of communication, African countries realize the importance of electronic communication facilitated by the growing influence of the information technology revolution. But movement towards full connectivity remains a big challenge since it requires concerted political action for reshaping of the existing telecommunications regulatory frame and adequate financial resources for upgrading communication


infrastructure. Thirteen pioneer countries in Africa which are now fully linked to internet have been experiencing reforms of their communication systems as they transferred some of their prerogatives to the private sector. 29. In order to set up the much needed regional productive capacities, the African countries and the Regional Economic Communities agreed, in the Cairo Agenda for Action, to speed up integration through the implementation of common projects that will form an integrated development pattern leading to sustained economic growth, based on common interests and mutual benefits, as well as formulate lists of common projects that can attract international, governmental and private investments. There is an increasing need for rationalization and coordination of the existing cooperation organizations for more effective economic integration. Today there are more than 200 African cooperation organizations, 80 per cent of them are intergovernmental organizations, created and financed by Member States. 30. Funding the economic integration process represents a serious problem. All RECs face common problems of funding their programmes. So does the AEC itself. This is an important issue to be addressed in the midterm review of the implementation of the UN-NADAF. It should be noted that the African RECs have well elaborated programmes and projects, which, if implemented, will contribute to the establishment of a solid base for Africa’s economic integration. To this end the other Regional Organizations, the UN Development System, and all development partners of Africa should include in their Agenda actionable programmes and mobilize resources for Africa’s economic integration and the implementation of the AEC.

1.3 Intensification of the democratization process 31. The importance of peace in advancing Africa’s development cannot be overemphasized. Without peace, security, stability, and democracy, other development factors could have only a limited impact. The democratization process that is currently underway in many African countries is the key to achieving peace, security, and stability. Africa cannot be expected to advance further if wars and civil strife continue, and if many of its people are still unable to participate fully and freely in the democratic process. The recognition of this fact prompted the Assembly of Heads of State and Government of the OAU, in July 1990, to adopt a Declaration on the Political and Socio-Economic Situation in Africa and the Fundamental Changes Taking Place in the World. 32. In the past five years, there has been a marked momentum towards democratic reforms, governance and popular participation in the political process in African countries. More than 30 African countries have recently held presidential and/or legislative elections and more are in the process of doing so. This development is a source of hope for the continent, as it augurs well for the participation of the civil society in the political process. To keep up the momentum, African countries recommitted themselves, in

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the Cairo Agenda for Action, to further intensify their efforts to institutionalize multipartism in their societies as a way of ensuring popular participation and deepening of democracy. 33. For democracy to take root, other conditions must be met. A major pre-requisite to democracy is good governance, which refers to the degree of government accountability, openness, predictability, transparency, tolerance, and respect for the rule of law. The imperatives of good governance require that the leadership should not reserve privilege and power for itself, or for ethnic or religious elites. In the Cairo Agenda, African governments have committed themselves to ensuring the speedy promotion of good governance, characterized by accountability, probity, transparency, equal application of the rule of law, and a clear separation of powers, as an objective and a condition for rapid and sustainable development in African societies. 34. Democracy also requires a machinery that ensures its survival and facilitates its operations. Effective national agencies should therefore be put in place to ensure the equitable allocation of services and resources to all citizens, ensure fairness in economic transactions and civil procedures of all kinds. In the absence of such a machinery, democracy will founder on the shores of social distrust and ethnic conflict. The lack of either political or economic institutions in some African countries has resulted in the disintegration of social peace when there was a political opening up of Africa in the 1990s. In order to institute such a mechanism, African countries reaffirm their commitment, in the Cairo Agenda, to establish a policy of regionalization and decentralization to ensure the full participation of all the people, particularly the rural population at the grassroots level, in their own development, and to promote a sense of belonging. 35. In the Cairo Agenda for Action, Africa reaffirms its determination to press ahead with the democratization of development and the full implementation of the African Charter of People’s and Human Rights, the African Charter for Popular Participation in Development and Transformation, and the Declaration of the Heads of State and Government of the Organization of African Unity (OAU) at their 1990 Summit on the Political and Socio-Economic Situation in Africa and the Fundamental Changes Taking Place in the World. Africa is convinced that growth and development on a sustained and sustainable basis can come about only as a result of the full participation of the people in the development process, and to this end continues to be committed to pursuing the process of democratization. 36. While the majority of African countries have embarked on the path to democracy, in a few other countries, civil conflicts and political stalemates in governance have continued to aggravate the social and economic infrastructure, and disrupt and paralyse production, with important repercussions on the availability of even the most basic of social services. Recent wars in Africa have destroyed much of the socio-economic infrastructure. Countless African citizens have seen their lives and livelihoods disrupted


by marauding armies, dislocated markets, and collapsed public services. The famine and hunger that have accompanied these wars have been reflected in Africa’s increasing share of emergency and humanitarian food aid. The wars have also increased malnutrition and have inhibited domestic and foreign investment. More than six million people have been driven to seek refuge in neighbouring countries and another 18 million displaced people within the borders of their own countries. The build-up of military capabilities to meet perceived internal or external threats has diverted resources that could otherwise have gone towards essential social sectors. In some African countries, there have been wanton abuses of human rights. 37. The effects of instability in one country have always spilled over to the neighbouring states, resulting in huge population movements and displacement of persons; disrupting production and economic activities in general; and further paralysing already overburdened physical infrastructures, notwithstanding considerable humanitarian efforts at rehabilitation, repatriation and resettlement of refugees. 38. Africa is determined to take concrete steps to address the problem of conflicts in the continent. In 1993, the Assembly of Heads of State and Government of the OAU established within the OAU Secretariat the OAU Mechanism for Conflict Prevention, Management and Resolution. This is a bold and useful measure for the enhancement of peace, which should be supported. The international community is therefore invited to work closely with the OAU and lend support to this initiative by supplementing the African efforts in this undertaking. For more improvement in peace making operations, more resources should be mobilized for the OAU Peace Fund. Such mobilization of resources is first of all the duty of African governments and people but it should also involve the whole international community.

1.4

Investment promotion

39. The achievement of rapid growth requires a high rate of investment in economic and social infrastructure as well as in human capital, backed up by high rates of domestic savings in both the public and private sectors. With the fall in the inflow of external resources in real terms and with little prospect for any major improvement in access to external savings, African countries need to maximize the availability of domestic savings and to invest them productively. 40. Domestic savings and investment in Africa have been inadequate. Although the overall investment ratio in Africa has recently risen to 21 per cent of GDP in the past few years, in about half of the African countries south of the Sahara it was actually less than 16 per cent. This ratio is inadequate for the attainment of an aggregate GDP growth rate of the 6 per cent per annum stipulated in the UN-NADAF. Private savings in Africa have been historically low, not for lack of investible resources per se, but more so

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because of inadequacy in its mobilization and use for productive and growth-inducing investment. Greater efforts must be made by African governments to mobilize and manage public revenue through adopting appropriate policies, institutional arrangements and incentive structures. 41. In the Cairo Agenda for Action, Africa reiterates its commitment, to the creation of an enabling environment that attracts foreign and domestic direct investment, encourages savings, induces the return of flight capital and promotes the full participation by the private sector, including nongovernmental organizations, in the growth and development process. 42. In recent years, many African countries have established mechanisms to ease the bureaucratic procedures in granting licences and permits for the establishment of business enterprises, including the simplification of investment approval processes through ‘one-stop’ investment centres, establishment of investment promotion institutions and increased use of representative offices abroad to publicize local investment opportunities. 43. In an attempt to create a more conducive environment for foreign investments in small and medium-scale enterprises, many African governments have established export processing zones (EPZs), offering a special package of incentives including reductions in corporate tax, special tax exemptions and incentives, reduction in import duties and utility tariffs and tax holidays. 44. Many African countries have discontinued price support policies in favour of price and exchange rate liberalization aimed at ensuring remunerative producer prices and productivity incentives. They have undertaken measures for further liberalization of prices and removal of remaining restrictions on imports. Retail prices have been freed from control, leaving only a small number of items of domestic consumption under control. Some countries have undertaken liberalization of interest rates. Important policy initiatives continued to be implemented to reduce central planning. 45. Most African countries have instituted policies for the promotion of export-oriented and import-substituting industries and have made provisions for economic and financial incentives to attract foreign capital. In an effort to improve the investment climate and encourage the flow of foreign direct investment into their countries, many African countries have done away with certain restrictive laws and national regulatory frameworks, thus permitting easier repatriation of profit and providing tax concession and other incentives to attract such investments.

1.5

Human dimension

46. In the Cairo Agenda for Action, African countries emphasize that the development of human resources is fundamental to the sustainable and equitable development of Africa. The primacy of human resources development must therefore be maintained in the economic and social policies of


all African countries. They underscore the need for technical, scientific and technological education and reaffirm their commitment to giving priority in their development programmes to the basic needs of the people by meeting basic food requirements, providing primary health services, education and skills and generating productive and remunerative employment opportunities as a means of eradicating poverty. 47. Reduction and eradication of poverty is a major challenge facing Africa. Poverty has been increasing in some African countries at an alarming rate. Between 1985 and 1990, the number of people living in absolute poverty in Africa increased from 105 million to 216 million. The number of African people living below the poverty line has increased to nearly 50 per cent of the total population in recent years. The United Nations has projected that the number of poor African people will rise to 304 million by the year 2000. Therefore, the scourge of poverty is the one social malaise that Africa must tackle in order to succeed in its quest for sustainable development. While African countries are committed to improving the living standards of their people, including the reduction of poverty, it is imperative that African governments place increased emphasis on social services and adequately targeted interventions in favour of the poor, especially infrastructure-targeted rural development. 48. The labour force in Africa is growing at about 3 per cent per annum while productive employment lags behind at 2 per cent annually. According to the 1995 African Employment Report, unemployment in the early 1990s was estimated at 20 per cent for the urban areas. The number of urban unemployed has been growing at the rate of 10 per cent annually and was estimated to have reached a staggering 18.6 million in 1994. To arrest this trend, economies of the region will have to grow at a rate of about 5 to 6 per cent per annum in order to meet the employment needs of fresh entrants into the labour force. 49. The unemployment problem remains critical in Africa. It is particularly high among educated people including university graduates, and is alarmingly high in a number of African countries. The implications of large numbers of unemployed educated youth and university graduates are serious for Africa’s social and political stability. Youth unemployment rates are about three to four times higher than for older workers, rising to some 40–50 per cent in some countries. Among women, it is two to three times higher than among men, partly through gender bias, but also because about 60 per cent of African women over 15 are illiterate, compared to 40 per cent of men. 50. The creation of modern employment opportunities depends crucially on the relevant education and skills of the young people. However, for the last two decades, the educational facilities in African countries have drastically deteriorated leading to a fall in standards. To reverse this trend African countries recommit themselves to allocate the necessary resources

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in their development plans and programmes for education and skills training. In the Cairo Agenda for Action African countries committed themselves to create the conducive working environment and adopt employment policies that would attract back its engineers, doctors, economists and other professionals. 51. Africa is further committed to ensuring equality of opportunity for women at all levels. In pursuit of this goal, most African countries have paid special attention to the gender issue and have taken measures to enhance women’s contribution to social and economic development of their countries. They have committed themselves to ensuring the effective implementation of the regional and global platforms for action by strengthening the gender dimension in their programmes and by working toward achieving the gender balance in managerial positions. 52. In November 1994, African countries adopted the African Platform for Action in Dakar, Senegal. The fourth World Conference on Women, held in Beijing, China, from 4 to 15 September 1995, adopted the Beijing Declaration on Women and the Platform for Action. The Platform for Action endorses and encompasses the African Platform for Action. The Platform underscores the need to empower African women politically and economically, increase their education and training in science and technology, support their vital role in society and the family and protect their legal and human rights. 53. Women in Africa are increasingly becoming the hub of development in some countries and the main income earners for a majority of households. However, in many parts of the continent, cultural traits and taboos have continued to underpin the marginalization of women in the development process: low rate of participation of women in areas of education and labour force their relatively high unemployment rate in the formal sector, as compared to men as well as their lack of access to credit facilities for investment in self-employment generating activities. It is to be hoped that genuine efforts will be made by African Governments and peoples and their development partners to enhance the status of women and improve their participation in the development process within the framework of the Beijing Declaration and the Platform for Action.

1.6

Environment and development

54. Africa faces many unique environmental problems, as presented by various African countries during the United Nations Environmental Conference in Rio de Janeiro in 1992. The preparation of National Environmental Action Plans in many countries clearly documented extensive environmental damage in Africa. Migration to the coastal areas of West Africa by people seeking employment and the resulting increase in population densities has placed stress on the natural resource base. Further, in many countries, the combination of distorted economic policies, popu-


lation pressures, and low incomes are causing ever more fragile lands to be cultivated. As a result, environmental damage is increasing and agricultural productivity has declined. In several African countries, land and water degradation now seriously threatens the sustainability of growth. The rate of degradation of Africa’s environment and loss of genetic resources and bio-diversity threaten the very survival of the peoples of Africa. 55. These unique environmental problems have been compounded by rapid population growth and poverty. The nexus between poverty, population and the environment is already one of the most important social and economic issues in Africa’s future. The impact of continued high levels of poverty and high rates of population growth will be especially severe for the fragile and increasingly depleted natural resource base. Indeed, under conditions of increasing population and a larger number of the poor, efforts to protect or restore the environment will be increasingly costly. African countries must therefore take urgent measures to address the problem of poverty reduction and of reduction of environmental degradation. 56. Africa is fully committed to the promotion of sustainable development at all levels of socio-economic activity. Through the Bamako Convention, Africa took the decisive step of banning the import of toxic waste into Africa. Africa keenly participated in international negotiations on climate change, bio-diversity and the preparatory process of the United Nations Conference on Environment and Development, held in 1992. In all these negotiations, Africa was fully convinced that the problems of environment and development should be tackled in an integrated and balanced manner, fully taking into account the ‘polluter pays’ principle. In the Cairo Agenda for Action, African countries agreed to establish national coordinating machineries to ensure integration of environmental issues into national development programmes as defined in Agenda 21 and in the African Common Position on Environment and Development. Moreover, the Plan of Action to Combat Desertification remains a viable framework for cooperation in the field of desertification. The international community is called upon to contribute more effectively to the implementation of the Plan.

1.7

Population and development

57. In 1996, the population of Africa was estimated at 728 million. It is projected to grow at around 3 per cent per annum, and is forecast to decline only slightly (0.1 per cent) by the year 2000. At this rate, Africa’s population will be about 856 million at the end of the century and by 2025, could more than double to 1600 million. 58. The projected population increase will place a huge strain on the region’s natural resource base and the ability of the people to provide adequate food and the governments to provide a minimum of social services, such as education and health. The increase in the labour force resulting

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from increases in population and the high proportion of young people will also place a considerable strain on the labour market. 59. To address the adverse consequences of the rapid population growth rates, most African countries have been pursuing an active population policy. While there has been a remarkable success in reducing fertility in a large number of countries over the last decade, the population of Africa is still growing at a high rate of around 3 per cent per annum. African countries should therefore continue to place emphasis on family planning service delivery to achieve higher contraceptive use and on the promotion of programmes such as social marketing and community-based delivery to address demand for these services. To ensure better coverage of the population in the delivery of these services, greater reliance should be placed on private and other non-government entities. 60. Africa is committed to the deliberate and systematic integration of population factors into the development process in order, inter alia, to contain the tremendous strain and stress that a rapid rate of population growth puts on development. To that end, Africa will continue the efforts initiated under the Kilimanjaro Programme of Action for African Population and Self-Reliant Development in 1984, which currently constitutes Africa’s framework for devising and implementing national population policies, in all their interrelated aspects, including a reduction in maternal and child mortality and provisions for family planning and female education and the achievement of substantial and sustained increases in the quality of life and standard of living of the entire population. In Dakar (Senegal) in 1992, they adopted the Dakar/NGOR Declaration on Population, Family and Sustainable Development. The Dakar/NGOR Declaration was the African countries’ contribution to the International Conference on Population and Development (ICPD), in September (1994) in Cairo. The ICPD adopted the Dakar/NGOR Declaration as part of its action plan. 61. African countries established the African Population Commission (APC) in May 1994 under the Joint OAU/ECA/ADB Secretariat. The Commission initiates policy guidelines and resolutions on population and development for consideration by the OAU Council of Ministers and subsequently by the Assembly of Heads of State and Government. The APC will also monitor the implementation of resolutions and declarations adopted by the Member States on population and development policy matters. Furthermore, it plays co-ordination and collaboration functions among the Member States in the field of population. 62. The social sector remained under great pressure in 1995 not only because of rapid population growth relative to economic growth in many African countries, but also in part because of the severe cutbacks in expenditure in real terms particularly on education, health and medical care and social welfare. The quality of education has deteriorated in terms of declining primary school enrolment ratios, high and rising attrition and repetition rates at all levels, the flight of qualified teachers, a general


deterioration in physical infrastructure, equipment and supplies. The crisis in the health sector has also become more intense, with lack of hospital care and access to adequate sanitation and community health services contributing to exposure to numerous preventable diseases. The tendency of African states to support with increasing funds in public budgets education, health and the other basic social services, should be encouraged in all social and economic reforms. It became very clear that fiscal balances and low population rate of increase were not enough for the promotion of human resources development. 63. The United Nations Social Summit, held in Copenhagen, Denmark, in March 1995, agreed on a social contract to eradicate poverty and unemployment and build a new social solidarity across the world. The Social Summit was important for Africa which, in spite of having 33 out of the 48 LDCs in the world, attracted barely 6 per cent of the international investment needed to fight growing poverty. The Copenhagen Summit adopted the ‘20–20 principle’ according to which donor countries should reserve 20 per cent of their aid budgets for African social development, while the recipient countries correspondingly commit at least 20 per cent of their national budgets and match the external resources. It is expected that this will act as a catalyst to the promotion of employment, equality between men and women, universal access to education, adequate health care, and protection of workers’ rights.

1.8

Agriculture, rural development and food security

64. Africa is essentially an agricultural and pastoral continent. Yet, food and agricultural output in the continent has declined substantially since the 1960s. Despite the recent recovery in GDP growth rates in Africa, the growth of output in agriculture has remained lacklustre. Agricultural productivity has stagnated across the continent and the per capita growth rates of food production have fallen over the past 10 to 25 years. This stagnation has been caused by drought, civil strife, and other factors. 65. The production of food in African countries is uneven. While the food situation in some parts of Africa has remained a serious source of concern and anxiety, there have been good harvests in others. Nevertheless, the food production has remained generally poor in the continent. According to Food and Agricultural Organisation (FAO), Africa currently accounts for 42 of the 88 countries classified as low-income food-deficit countries. Most of Africa’s chronically food insecure people are also those in poverty; they lack access to food because of lack of income, assets or entitlement with which to produce, buy, or exchange sufficient food. These factors have resulted in food insecurity in a number of African countries south of the Sahara. 66. The most disturbing fact is that the current trends in malnutrition in Africa have remained stagnant or have deteriorated in much of Africa in

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the last decade, as a result of economic decline and poverty. The United Nations has estimated that the number of undernourished African people is expected to rise from its current level of about 180 million to some 300 million by the year 2010. 67. The production of cash crops in Africa increased due to an increase of about 12 per cent in world prices for tropical beverages. The increase in the world demand has had a favourable effect on the production of coffee, tea and cocoa. Production of such industrial crops as tobacco, cotton and sugar also increased. 68. The production of food has presented a mixed picture. The production of aggregate grain and wheat fell, as did that of the livestock. However, rice production increased, as did the production of roots and tubers, which constitute 20 per cent of the total food supply in the region. The production of fruits and vegetables also increased. Production of pulses, a key part of the diet in many areas of the continent, has not shown any significant rise since 1990. 69. The African continent as a whole continues to experience food deficit for which commercial food imports and food aid are needed but are not readily available on account of inefficient marketing and distribution systems at the domestic level, and owing to a limited capacity to pay for imports due to escalating world cereal prices and foreign exchange scarcity. Total food aid deliveries to Africa fell in 1994–5 for the second successive year and to the lowest level since 1989–90. Food assistance is still urgently needed to avert crises in several African countries. 70. To achieve food security and strengthen self-reliance in food, Africa reaffirms its commitment to the continued pursuit of policies and strategies in the development of the agricultural sector in order to enhance agricultural productivity, improve distribution mechanisms, and establish reliable market schemes, credit system and adequate storage facilities. This is clearly stated in the African Common Position on Food Security and the Cairo Agenda for Action as a duty of African governments, and all components of the society, particularity the private sector and professional associations. 71. To ensure food security practical steps should be undertaken. Priority should be given at the national level to the development of potential rural areas, appropriate diversification of agricultural output, rationalization of water resources, reduction of losses, adoption of new technologies and research results in addition to strengthening the government capabilities in planning, implementation and monitoring of policies and programmes for agricultural expansion and food production. 72. At the regional level, African countries should exchange appropriate technologies and approaches to food and agricultural productions, strengthen cooperation through joint programmes in areas such as transboundary plant, pests and animal diseases and early warning systems. In addition, cooperation should be expanded to joint management of shared resources, especially river basins, lakes and fishery resources.


1.9

South/South cooperation

73. In adopting the Cairo Agenda for Action, African countries underscored the importance of South/South cooperation as a necessary ingredient in pursuit of regional economic cooperation and integration in order to be competitive in world trade. They emphasized the need to take full advantage of the opportunities of South/South cooperation and forge partnership with the countries of the South. 74. Enhanced South/South cooperation between Africa and other developing regions, especially Asia, should be highly encouraged. A good number of the Asian countries, which have been able to make the best use of development assistance from the developed countries by creating their own development dynamic, could in turn give Africa the benefit of their experience and resources. In this context, African countries participated in the Tokyo International Conference on African Development (TICAD) in 1993 held in Tokyo, and in subsequent seminars and workshops organized under the TICAD in Djakarta in 1994, Harare in 1995 and in Yamoussoukro in 1996 to bring together Africans and Asians to share their development experiences. In these meetings, the focus has been on what Africa could learn from the Asian development experience. 75. In the Cairo Agenda for Action, African countries have expressed their determination to intensify South/South cooperation, which Africa is convinced is an indispensable element for the success of the new Agenda for international cooperation.

1.10

Role of non-governmental organizations

76. Along with political democratization, there has come an explosion of non-governmental organizations (NGOs), active in both urban and rural areas. These groups which include farmers’ unions, women’s associations, community groups and other local grass roots movements have deepened popular participation in development and given greater numbers of ordinary Africans a voice in shaping the policies that affect their lives. This trend is particularly significant at a time when many African countries are implementing painful economic adjustment programmes designed to enable their economies become more internationally competitive. 77. The political transformation underway since the late 1980s has liberated and given voice to African civil societies. Everywhere in Africa, civic organizations, the press, and associations of all kinds are more active than they have been since the independence struggles. African governments are being held to a stand of accountability and effectiveness by their own citizens. The African governments are thus challenged to be responsive, tolerant, and competent. 78. The focus of the international agenda on popular participation, human resource development and capacity-building calls for an increased role for non-governmental organizations (African and non-African) in

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various areas, including the promotion of indigenous small-scale businesses, especially in the rural sector, community development projects, training, etc. African non-governmental organizations should particularly be involved, without any administrative impediment, in the mobilization and efficient utilization of domestic resources.

II Responsibilities and commitment of the international community 79. In the UN-NADAF, the international community commits itself to assisting Africa in its efforts to achieve accelerated growth and humancentred development on a sustained and sustainable basis. Such support is to cover the areas discussed below.

II.1

Solution of Africa’s debt problem

80. Africa’s total external debt, growing at an average annual rate of 1.5 per cent during the period 1990–5, is the most constraining in terms of sustainability. Africa’s external debt which was about US$ 270 billion in 1990 was estimated to reach the level of US$ 322 billion in 1995. The servicing of this debt accounts for over 30 per cent of the continent’s exports. The share of multilateral debt in the long-term outstanding debt of African countries such of the Sahara has risen from 13 per cent in 1980 to 31 per cent in 1995. 81. Africa’s steadily rising debt, which has accelerated over the past years, does not reflect the development of liabilities ensuing from new investments and contributions from new financial assistance. This debt results from accrued arrears and consolidation at interest rates applicable on money markets because of the inability of most African countries to settle their debts. 82. A contributing cause of the increase in external indebtedness of commodity-exporting developing countries has been the fall in real commodity prices. As such prices become more and more depressed in real terms, debt overhang is projected to accelerate further despite international strategies for debt reduction. The debt reduction/rescheduling initiatives, including the Toronto Terms and Enhanced Toronto Terms and, more recently, the Naples Terms, collectively fall short of what is required to alleviate the debt burden of the heavily indebted countries, particularly in light of falling export earnings occasioned by declining commodity prices. New approaches embracing effective mechanisms for dealing with the immediate issue of depressed prices, excessive price instability and the revitalization of growth in the affected countries are required. 83. The proportion of total export earnings actually committed to meeting debt-servicing obligations remained at 20 per cent in Africa. The capacity of these countries to service their debt has not improved despite efforts at scaling down their debt burden and reduction in the volume of


arrears within the framework of existing debt reorganization and forgiveness mechanisms. The debt-service arrears of the African countries south of the Sahara which represented only 11 per cent in 1990, escalated to more than 27 per cent of their debt stock in 1995. In some of the highly indebted poor African countries south of the Sahara, scheduled debt service could absorb as much as 90 per cent of the government revenue. 84. The volume of debt servicing has stabilized. But then, with an average of US$ 28 billion over the past four years, it exceeds by far the yearly target of US$ 9 billion recommended under UN-NADAF. The variously successful strategies applied so far have laid emphasis on rescheduling and on limited debt cancellation. They have not made it possible to really release or make available to the economies the scarce development resources, which still partly come from Official Development Assistance (ODA). 85. Africa’s debt burden constitutes a critical bottleneck constraining the recovery and development of the continent. Therefore, a major priority is to tackle Africa’s external debt problem, which is a serious threat to the continent’s recovery and long-term development prospects. In spite of the implementation of several international initiatives, the situation has not significantly improved. Reducing the debt overhang to tolerable levels has therefore become imperative. 86. Since the adoption of the UN-NADAF, the international community, through various mechanisms initiated within the framework of the London Club and the Paris Club of donors, has continued to endeavour to address the debt problem. At the time the UN-NADAF was adopted, the London Summit in July 1991 of the Group of 7 major industrialized countries had already agreed that Africa deserved special attention; this was reiterated in the Lyon Summit of 1996. The summits called for additional debt relief measures in favour of the poorest and the most indebted countries, thus going well beyond the Toronto Terms. It also called on the Paris Club to continue its discussion on how these measures could best be implemented promptly. In addition, the Trinidad and Tobago initiative as well as the Naples agreements had been proposed. These, theoretically, have extended the scope of debt relief accorded to highly debt-distressed African countries. However, the application of these initiatives since the early 1990s has had limited effects not only because they failed to match the magnitude and intensity of the nature of the debt overhang, but also because the major components of the debt stock had changed. 87. While bilateral debt is constantly rising and has remained the major component of external debt, private debt has dropped slightly. Multilateral debt represents a growing proportion of the total stock of debt. Currently, it accounts for about 31 per cent of total debt stock of African countries south of Sahara. Nonetheless, these recent initiatives have gone a long way in addressing the problem of debt of the heavily-indebted African countries, even though they have been far from being adequate in solving the African debt overhang. Much more still remains to be done to address the debt issue adequately in order to find a lasting solution.

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88. Individually, the donor countries of the Paris Club have initiated unilateral plans to reduce the bilateral debt of some countries on the continent. The Scandinavian countries have been among the first countries to do so. They have been followed by the Federal Republic of Germany, the United Kingdom, Switzerland, Japan and the United States of America. After the Franco–African summit held in Libreville in October 1992, France established an ODA debt conversion fund of US$ 830 million for four middle-income countries of the franc zone, namely: Cameroon, the Congo, Côte d’lvoire and Gabon. The idea is to provide such relief to the countries as would cancel part of their official debt and channel the proceeds into the execution of development projects. In 1994, the United States of America proposed the cancellation of US$ 228 million corresponding to half of the debt of the 18 poorest African countries by extending to them the enhanced Toronto terms. 89. Successive increases in unpaid debt during the past decade have eroded the solvency of African countries and have made it difficult to attract new investments from sources other than multilateral institutions. Consequently, the share of debt servicing owed to multilateral institutions (IMF, World Bank, ADB) as part of total debt servicing obligations has increased. Multilateral debt servicing amounts have long outweighed the capacity of most African countries to repay and has been financed, to a large extent, by arrears which continue to increase. This is disturbing because no rescheduling agreements have been concluded on this category of debt. A debt service refinancing process has been operated by the World Bank within what has been termed the ‘Framework Action For Assisting Heavily Indebted Poor Countries’, by using IDA resources. Furthermore, the IDA relief fund established in 1989 has successfully carried out, over four years, numerous operations to forgive the debt of the poorest African countries. It succeeded in redeeming for the Niger and Mozambique early in 1992 and Uganda in 1993, at an average price of 14 cents for each face value dollar, about US$ 385 million of overall debt. Similar buyback transactions were prepared in 1994 and are currently being carried out for Ethiopia, Guinea, Mali, Mauritania, Tanzania and Zambia. The IMF’s Special Drawing rights (SDR) accrual approach also reflects the seriousness of the multilateral debt overhang. There are ongoing discussions and consultations between the Bank and the Fund of a new initiative to address multilateral debt. This is also true of discussions currently taking place at the African Development Bank (ADB) to introduce either a ‘fifth dimension’ or a mechanism for solving the serious problem of arrears. 90. All things considered, the results recorded over the past four years fail to match expectations regarding debt rescheduling with multilateral institutions. The political and economic instability prevailing in some African countries have led them to bend the rules of the World Bank prescriptions such as reduction of the public domain in all areas and giving market


forces free play. This has adversely affected the holding of negotiations with the Bretton Woods institutions, thereby impeding, in many cases, the conclusion of debt rescheduling agreements. 91. The commercial debt constitutes a relatively small part of Africa’s total debt stock. In recent years, the commercial banks have practically not been lending to indebted African countries. The application of the Brady Plan is encountering serious difficulties in Africa. Only Nigeria, which owes a heavy commercial debt, has been able to benefit from the Plan. 92. Africa’s policy-makers and the international community as a whole have expressed the urgency for more imaginative strategies to scale down the continent’s debt burden to manageable levels. At the same time, efforts should be stepped up and refined to keep the levels of debt payments within reasonable limits, as recommended in the New Agenda, i.e., a ceiling set at US$ 9 billion annually. 93. The magnitude and persistence of Africa’s external indebtedness continues to be a matter of serious concern to Africa. The resolution of Africa’s debt overhang is a prerequisite for the revitalization of both domestic and foreign investment and for the strengthening of growth momentum. Therefore, the current international initiative on ways of formulating practical approaches towards resolution of the problem is welcomed. Similarly, the efforts of the multilateral institutions on mitigating the burden of multilateral debt is welcomed. In this respect, the international multilateral development institutions should commit themselves to conclude their initiative effectively, so that the low-income debt-distressed countries are able to move forward in gaining access to external resources required for sustainable growth. African governments and their development partners should reaffirm their commitment to vigorously pursue the search for meaningful and lasting solutions to the debt problem. The international community should reaffirm its commitment to pay requisite and urgent attention to address Africa’s external debt crisis and the debt problems of African countries. The international community should also commit itself to continue to give serious consideration to the proposal for convening an international conference on Africa’s external indebtedness.

II.2

Resource flows

94. A critical element of the support from the international community is the provision of adequate resource flows to Africa. These resources are needed to achieve sustained real growth in GNP per capita and to achieve an average annual growth rate of real GNP of at least 6 per cent by African countries over the course of the 1990s. The UN Secretariat has estimated that a minimum of $US 30 billion in net ODA is required in 1992, after which the real net ODA would need to grow at an average rate of 4 per cent per annum. Resource flows considered here consist of two parts discussed below:

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(a)

Official Development Assistance (ODA)

95. Total ODA for all developing countries enjoyed from 1973 to 1992 a remarkable stability ranging from 0.32 per cent to 0.34 per cent of donor GNP. In 1993 and 1994, this percentage dropped below 0.3 per cent of donor GNP. This marks a further drift from the United Nations target set at 0.7 per cent of donor GNP. ODA flows which accounted for more than US$ 60 billion by the late 1980s, declined to almost US$ 55 billion by early 1994, and Africa’s share of that dropped from almost US$ 25 billion in 1990 to less than US$ 21 billion in 1993. Although representing the most important source of flows for the African low-income countries, prospects for future ODA increases are slim. 96. Bilateral ODA to which donors have given priority has dropped drastically in Africa. Its main component is tied assistance. Another part of bilateral ODA is granted subject to many conditionalities. The granting of resources by the United States Agency for International Development (USAID) is subject to the fulfillment of the following conditionalities: the establishment of a democratic society; environmental protection; creation of conditions propitious for sustainable economic development; and the implementation of a population control policy. France now largely directs its assistance to countries considered as development poles (middle income countries having a wide range of natural resources) while introducing some of the conditionalities stated above. 97. The distribution and quality of aid are also causes for growing concern. The distribution of ODA is markedly inequitable and unbalanced, as was fully indicated in the 1994 UNDP Report on Human Development. Ten nations in which 66 per cent of the world’s poorest people live receive only 32 per cent of total bilateral aid. Furthermore, only 7 per cent of bilateral aid (representing 70 per cent of total ODA) is earmarked for ‘human priorities’. These and other shortcomings in external aid, including questions about the effectiveness of technical assistance programmes, the use of aid as an export promotion instrument, the lack of adequate supervision and verification procedures, and so on, have been acknowledged by the Organization for Economic Cooperation and Development (OECD) Committee for Development Assistance and underlined at the World Summit for Social Development. It is hoped that the donor community will re-evaluate their assistance and take appropriate measures to make it more equitable and effective in favour of Africa. 98. In the light of the foregoing, the international community should introduce measures and devise programmes to encourage direct foreign investment in African countries, and support the policy changes undertaken by African countries to attract foreign investment. 99. Similarly, States that have reaffirmed their commitment to reach the agreed international target of devoting 0.7 per cent of gross national product to official development assistance and 0.15 per cent to least developed countries should implement as soon as possible the undertakings they have made


in that regard. African countries should also undertake to continue providing a better environment for the realization of the suggested estimate of the need to achieve an average of 4 per cent real growth in annual financial resource flows to Africa, as outlined in paragraph 29 of the New Agenda.

(b) Foreign direct investment 100. The World Bank has estimated that the foreign direct investment (FDI) flows to developing countries was $90.3 billion in 1995. These flows were directed mostly to Asia and Eastern Europe. The most important recipient was Asia whose share accounted for 61 per cent of the total flows to developing countries in 1995, compared to 45 per cent during the period 1990–92. In Africa in general, and in the countries south of the Sahara in particular, FDI declined by almost 27 per cent in 1995, from $2.9 billion in 1994 to $2.2 billion in 1995. Foreign flows on account of acquisitions by international firms were mostly motivated by promising investment prospects in countries producing petroleum and minerals where the privatization process has opened up increasing opportunities for investments in the two sectors. 101. While private capital flows have become a major source of financing for developing countries, African countries have not, however, been able to draw heavily on this source of finance, owing to low credit rating. An increasing number of African countries have embarked on the development of capital markets in order to encourage local and foreign private investment in securities. But only a few African capital markets with a potential for high rates of return have as yet attracted international investors, most of whom remain cautious. 102. African countries have not benefited fully from the surge in world investment flows for yet another reason. The numerous constraints on foreign investment and the high cost of doing business in Africa, particularly the inadequate infrastructure and poor services, have led the average prospective investors to be pessimistic about the continent. As a result, the investment rate in many African countries is inadequate even to replace existing capital stock, let alone support new investments. Increasing the investment rate requires more effective results at resource mobilization, both from domestic and external sources. In this regard, Africa should make increased efforts to develop the necessary enabling environment to attract international private capital flows to supplement investments needed for growth. This calls for a systematic support for the development of the private sector, which has served as a powerful engine of growth in many countries, within and outside Africa. 103. However, as the growing number of countries pursuing reform programmes show signs of sound recovery and profitability and as economic liberalization improves prospects for private investment, there is increasing expectation that foreign investors will be attracted to Africa in larger

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numbers. Studies on FDI in Africa conducted by the United Nations Conference on Trade and Development (UNCTAD) in 1995 show that the rate of return on overseas direct investment is higher in Africa than in any other region in the world, and that the continent’s investment potential remains largely untapped. Indeed, the impressive track record of return on FDI in Africa belies the ‘miserable’ image or pessimistic view that the average foreign investor generally has of Africa. 104. The recent developments attest to the fact that Africa is not the picture of conflict and disaster that is portrayed daily by the media. While it is true that some African countries are mired in conflicts and crises, the great majority of them are peaceful and have undertaken far-reaching political and economic reforms and have restructured their economies to become effective partners in the new international economic system. Africa therefore calls upon the international community to support these reforms and explore the unlimited potentialities of the continent for fruitful investments mutually beneficial to all involved. The international community should undertake to increase financial resource flows to Africa, as these are crucial in order to regenerate the growth and sustainable development of the African economies, to provide effective support to the political and economic reforms in which many African countries are now engaged and to help cushion adverse social consequences.

II.3

Commodities

105. Most African countries have continued to rely on a few primary commodities for much of their export earnings, exporting around 58 per cent of their products to the European Union (EU) market, with the EU absorbing about 47 per cent of their imports. For some countries the dependence on the EU is almost as high as 86 per cent. Africa has steadily lost its trade share in the EU market despite the fact that more than 70 per cent of Africa’s total trade is with the EU. 106. African producers have been ‘crowded-out’ by more efficient new producers of primary commodities in other regions. Countries in Asia and Latin America have now become major competitors in such products as coffee, tea, cocoa, timber and minerals. These countries were either importers or were very small players in the world market three decades ago but they have since achieved phenomenal success through strident diversification in production and trade. Inevitably, the static nature of the structure of exportable commodities has reduced Africa’s share in world exports from 10 per cent in 1950 to 2.2 per cent in the 1990s. 107. Diversification is a strategic short and long-term solution to the severe commodity problem in Africa, which has impeded its economic recovery and development. In order to support effectively efforts to diversify commodity exports and boost earnings, the international community, particularly the major trading partners, should commit themselves to grant


improved market access to Africa’s exports. The international community should commit itself to correct imperfections in commodity markets. The developed countries should intensify their support to the commodity diversification efforts of African countries, inter alia, by providing technical and financial assistance for the preparatory phase of their commodity diversification programmes. In addition, the Common Fund for Commodities should be strengthened to enable it to support Africa’s diversification efforts.

II.4

Support for the diversification of the African economies

108. Diversification of the African economies provides a major way out of commodity export dependence and its related problems and contributes to the achievement of more dynamic and resilient economies. While such diversification is primarily the responsibility of African countries, the international community should recognize that additional resources would be required to support Africa’s diversification programmes, including development of specific infrastructural and support services and the development of information networks and related services for diversification programmes and projects. 109. Although some African countries have made attempts to diversify their economies, these efforts have not succeeded because the African countries have been preoccupied with implementing economic reform programmes under the structural adjustment programmes. Yet, economic diversification is critical for achieving a lasting and sustainable development for the African economies. It is, therefore, imperative that African countries should continue their efforts to diversify their economies, with a view to modernizing African production, distribution, and marketing systems, enhancing productivity and stabilizing and increasing African export earnings in the face of the persistent instability of the prices of most primary commodities. 110. The international community should support the proposal that an African Diversification Fund be established to provide an essential focal point to galvanize the technical assistance that is required and to provide additional finance for the development and implementation of diversification programmes and projects. 111. In order to effectively support efforts to diversify Africa’s economies and to boost export earnings, the international community should commit itself to a substantial reduction in or removal of tariff and non-tariff barriers affecting African exports, particularly of processed, semi-processed and manufactured products, and to ensure continued preferential arrangements currently enjoyed by African exports.

II.5

Trade

112. Trade is the engine of growth: the more a country trades, the more it is likely to generate growth of its economy. For Africa, this observation

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seems correct: Africa has traded less and has therefore experienced low growth rates. The share of Africa in world trade has fallen steadily over the years from 5 per cent in 1980 to 2.2 per cent in 1995. The decline of Africa’s share in the trade of developing countries as a whole has been even more dramatic, from 14.9 per cent in 1980 to 10.9 per cent in 1990 and 6.4 per cent in 1995. 113. For the improvement of market-access to Africa’s exports, the international community committed itself in the New Agenda to ensure an early balanced and successful conclusion to Uruguay Round. It committed itself also to correct imperfections in commodity market. Contrary to this, while world trade was expected to grow by around US$ 200 billion as an impact of the Uruguay Agreement, the African continent was expected to lose about US$ 2.6 billion per year as confirmed by recent studies. Regarding market access, the outcome of negotiations has resulted in a number of obligations too difficult to be fulfilled by African countries. 114. The plight and performance of Africa’s trade have been due, to a large extent, to the price trends of a few commodities supported by many price stabilization systems. The conclusion of the Uruguay Round Agreements and the establishment of the WTO, provide for the review, or even the abolition of several of these systems. In this respect, intensified horizontal and vertical diversification must broaden the production and export base of African countries and guarantee their competitiveness in the new world trading environment. 115. Within the emerging international context, the development of intra-African trade through regional cooperation should be intensified. It offers an opportunity to coordinate economic and financial policies which make it possible to attain broader coherence and achieve a better bargaining position in multilateral financial and trade talks. 116. Intra-African trade continues to remain low, as many of the constraints and trade-related bottlenecks remain unaddressed. These include non-tariff barriers, stringent rules of origin and structural hindrances including poor physical infrastructure, undiversified production structures, lack of trade financing, poor trade information mechanisms. 117. As far as the external sector is concerned, the policies of export promotion and import curtailment are yet to bear fruit in many African countries. Africa’s exports have not increased significantly in the short run owing to their inelastic structures and the increased competition on the world market. Import curtailment has, on the other hand, been hamstrung by the high elasticity of imports relative to domestic economic output. Only 15 African countries managed to maintain or increase the ratio of exports to GDP during 1995 whereas the majority of the countries experienced expanded import bills relative to GDP. 118. Perhaps the most important demand management instrument that has been widely used in the external sector of virtually all African adjusting countries including, for the first time in 1994 the CFA zone coun-


tries, is the foreign exchange rate. The magnitude of devaluation of African currencies has been quite large, reaching more than 50 per cent against the United States dollar in many cases, with some countries devaluing their currencies several times over within a short span of time and in large doses. African countries have moved progressively towards market-determined exchange rates and interest rates. The liberalization of foreign exchange rates has resulted in significant creeping depreciation of currencies and the narrowing of the differential between ‘official exchange rates’ and ‘parallel rates’. As of mid-1995, 17 African countries had adopted an ‘independently floating’ exchange rate regime, seven were on a ‘managed float’ system, five on a ‘composite currency basket’, system and 29 countries were still on a” single currency reserve system” , with the largest of these in the CFA franc zone. A number of African countries acceded to article VII of the IMF Articles of Agreement, thereby committing themselves to the non-reimposition of restrictions on transactions on the current and, possibly, capital accounts. 119. The environment of trade liberalization and currency depreciation in many African countries has attracted an upsurge in imports of cheap manufactures and second-hand goods from the Far Eastern Asian countries, as a result of weak competitive strength of domestic goods and prohibitive local production costs.

II.6 Support for regional economic integration: environment, science and technology 120. In the UN-NADAF, the international community has committed itself to support African countries in their efforts to establish the African Economic Community, strengthen the functioning of existing sub-regional intergovernmental organizations, stop environmental degradation and enhance Africa’s scientific and technological capacities. 121. The international community is aware of the fact that Africa’s economic integration is the most effective way for policy coordination and the establishment on a continental scale of a framework for development. It is also aware that economic integration permits Africa to mobilize and utilize its material and human resources, optimally utilize its existing production capacities in order to achieve self-reliant development. Despite this important reality the support of the international community to Africa’s integration efforts was very limited. 122. Funding the integration process in Africa represents a serious problem to be faced. As stated clearly in the Cairo Agenda, the international community is not expected to fund Africa’s projects and programmes. Africa should rely mainly on its own resources. Meanwhile, an adequate support from the international community is necessary. 123. Africa’s low level of science and technology base is highly inadequate for the requirements of modern development processes in fields such

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as agriculture, industry, health, etc. There is, therefore, an urgent need to build up and strengthen Africa’s capacity in the field of science and technology, if Africa is to be efficient and competitive in its production and thus participate in the increased flows of advanced technologies and globalization of production processes. 124. African countries are committed to the intensification of their efforts in human resources development and capacity-building, especially in science, technology and management, and to taking measures to arrest and reverse the brain drain. In the Cairo Agenda for Action, the African governments have reiterated their commitment to human resources development and capacity-building as well as creating the conducive atmosphere necessary to reverse the brain drain. To achieve this goal, the support of the international community is required. The international community should, therefore, support African countries in their efforts to acquire and utilize scientific knowledge and production technologies. 125. The information revolution is changing the world’s economy. Member States are urged to take advantage of this revolution in accordance with Africa’s Information Society Initiative (AISI): An Action Framework to Build Africa’s Information and Communications Infrastructure. This Action Plan was adopted by the twenty-second meeting of the ECA Conference of Ministers (812 (XXXI)). It aims at utilizing information technology to accelerate development across the continent and focuses on priority strategies, programmes and projects, which can assist in the sustainable build-up of an information society in African countries in accordance with the regional integration goals of the AEC. In accordance with the AISI, Member States are urged to formulate, develop and implement national information and communication plans. Functioning and linked informatics systems will greatly foster the exchange of economic and commercial information, which is necessary for inter-state economic cooperation. To attain this objective, the international community should lend support to African countries to enable them to take full advantage of this new information technology.

II.7

Role of the United Nations System

126. The United Nations System should play a major role in the implementation of the international Agenda. The new Agenda stipulates that the United Nations system should also contribute to ensure an efficient followup and monitoring of the implementation of the international Agenda. In this respect, the United Nations has set up an Inter-Agency Task Force UNIATF. The OAU has been attending the meetings of the Task Force. The main task of the Task Force was to undertake a continuous assessment of Africa’s performance in the areas outlined in the agenda, with a view to having a great impact in maintaining the momentum within and outside Africa and, eventually, for renewed commitments to the agreed objectives and targets. The UN-IATF has convened six regular meetings of procedural


nature. The only achievement of this body was the elaboration of a systemwide plan of action waiting for implementation. The Task Force needs revitalization to carry out its mandate effectively. 127. The UN-NADAF stipulates further that the various United Nations Organizations and specialized agencies, in their respective areas and sectors, should devise specific programmes for Africa which are consistent with the elements of the Agenda, and devote adequate resources for their implementation. However, it is not clear that this has been done. Each agency has continued to undertake those activities which were planned before the Agenda and continued to do the same after the UN-NADAF. It is difficult to pinpoint specific programmes that were established by any of the UN specialized agencies specifically for the implementation of the New Agenda. 128. There is no other legislative organ in the UN System except the General Assembly which has taken specific actions on the UN-NADAF. The Specialized Agencies, Funds and programmes of the system have no policy directives from their governing bodies and Chief Executives to promote and support the Agenda, or mobilize resources for additional activities for Africa. 129. Within the framework of commitments of the United Nations system in Africa, the budgets of the main organizations involved in relief operations (UNHCR for refugees, WFP for food relief and UNICEF for children) on the whole recorded an increase in all United Nations disbursements in respect of development assistance while funds allocated to UNDP and other more development-oriented organizations were reduced. 130. Emergency relief, which is expected to continue rising is merely short-term assistance granted at the expense of development financing. What African countries need is long-term financing that enables the continent to achieve self-sustained economic growth and face up to the problems with which emergency relief has to grapple. 131. By the General Assembly Resolution 49/142, the Secretary-General was requested to ensure that the Inter-Agency Task Force for the Implementation of the United Nations New Agenda for the Development of Africa in the 1990s accords high priority to the consideration of the diversification of African economies and to the coordination of activities of the relevant organizations and programmes of the United Nations System in this field. The terms and provisions of this mandate have not been implemented. The Task Force is urged to take concrete and urgent steps for the implementation of this resolution. 132. Africa welcomes the effort of the Secretary-General of the United Nations for launching the United Nations System-wide Special Initiative on Africa. The Initiative is complementary to the UN New Agenda for African Development (UN-NADAF) and is drawn from the Cairo Agenda for Action. It provides a framework for focusing the contributions of various UN agencies and other donors on Africa’s key development issues. 133. The implementation of the Initiative requires a financial commitment amounting to $US 25 billion, spread over a ten-year period. These funds are expected to come from national budgets of African countries as well as funds

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provided by multilateral and bilateral donors. In addition to the substantive aspects, the United Nations system will lead in a number of fundamental reforms to improve the efficiency and impact of international development cooperation and ensure, through the Special Initiative, that the previous initiatives on Africa – United Nations New Agenda for the Development of Africa in the 1990s (UN-NADAF) and the United Nations Programme of Action for African Economic Recovery and Development (UN-PAAERD) – are reinforced and given added practical expression. The totality of the reforms would focus on regional fora to create frameworks for cooperation; national sectoral programmes to base assistance in key sectors and key inter-sectoral goals requiring an integrated approach to agreed national plans of actions under government leadership; and broadening participation in consultative groups and/or round-table meetings to include private profit and non-profit organizations to enhance the quality and support of these exercises. 134. The Initiative should not be viewed as an alternative to the UN New Agenda for African Development (UN-NADAF). Africa continues to be concerned that the expected resource flows to Africa to the tune stipulated has not been achieved. Therefore the international community is urged to reaffirm its commitment to the UN-NADAF by providing the required resources. Africa views this Initiative as a part of the effort in support of development of African countries including the effective implementation of both the Abuja Treaty and the Cairo Agenda for Action.

II.8

Role of non-African non-governmental organizations

135. The UN-NADAF stipulates that non-African non-governmental organizations (NGOs) should be given every encouragement to assist in the formulation and implementation of development assistance projects in the context of the international Agenda. In this context, the non-African NGOs have been active in Africa in all areas indicated in the Agenda. They have also assisted in promoting non-governmental organizations at the national, sub-regional and regional levels in Africa. 136. In the Cairo Agenda for Action, Africa welcomes and recognizes the important role which non-African non-governmental organizations can play in promoting the development of Africa. However, Africa cautions that the role of non-governmental organizations, despite their useful and tangible contributions, cannot be a substitute for the role which African governments are expected to play.

C.

Conclusion and recommendations

137. Africa made commitments under the United Nations New Agenda for the Development of Africa in the 1990s. Since then, most African countries have continued to carry out political and economic reforms. Although these reforms are beginning to bear fruit, Africa is not yet out of the rut; a lot still remains to be done before Africa can achieve a meaningful and lasting eco-


nomic transformation. The UN-NADAF provides a useful framework for further actions to ensure continued recovery of the African economy. The International Community in general, and particularly the UN System should reaffirm its commitment to the implementation of UN-NADAF. Although the recently launched UN System-Wide Special Initiative is welcome, it should not by any means be viewed as an alternative to UN-NADAF. 138. Although it has been difficult to obtain accurate data on some countries’ performance during the period 1994–5 and on trends over previous years, the various objectives of political and economic reforms for development under UN-NADAF have been but partially achieved, four years after the new programme was launched. 139. Great efforts have been carried out in African countries under the aegis of the Organization of African Unity to establish peace and security, sound economic management, assumption of responsibilities by African countries themselves, strengthening of self-management capacities and domestic resources mobilization, all conducive to a favourable environment for recovery and sustainable development. 140. African countries have taken serious decisions and practical steps towards economic cooperation and integration. The implementation of the Treaty establishing the African Economic Community provides African countries with the opportunity to approach the development of their economies in a coherent manner, by making better use of their comparative advantages in production and hence improve their external competitiveness. 141. Results achieved by African countries during the period 1992–6 were limited due to, among other factors, the external debt burden, decreasing resource flows, inadequate commodity prices and weak support of the international community. 142. African countries have achieved considerable improvement in democratization, governance, peace and security. More political and financial support is needed on the part of African countries and the international community to the OAU Mechanism For Conflict Prevention, Management and Resolution. In order to achieve more effective peace-making operations, adequate resources should be mobilized for the OAU Peace Fund. 143. African countries are committed to the development of their human resources. Their increasing tendency towards the rehabilitation of educational and health services should be encouraged. In all social and economic reforms human resources development should be a first priority, and should receive adequate support from the international community. 144. The increasing awareness of African countries about their fundamental objective of food security should be supported. The African Common Position On Food Security should receive the support it deserves from Africa’s development partners and the UN System. 145. The African Common Position on Africa’s External Debt provides adequate solutions for Africa’s debt burden. This Common Position should receive more serious consideration from the donor community. The inter-

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national community is urged to keep its commitment towards a sustainable solution for Africa’s debt problem. Such a solution as stated clearly in the Cairo Agenda should go beyond debt rescheduling. 146. The commitment of the international community to provide Africa with adequate resource flows to enable it reach the average annual growth rate of 6 per cent, have not materialized. In addition to the fact that the commitments pledged have not been honoured, resource flows to Africa deteriorated since 1992. For the rest of the decade the international community is urged to honour its commitment and increase resource flows to Africa. 147. Africa is expected to lose a considerable part of its market share due to the Uruguay Round Agreements. Contrary to what has been agreed in the UN-NADAF, the international community did not ensure the balanced conclusions of the Uruguay Round, and the corrections of imperfections in commodity markets. In the coming negotiations within the World Trade Organization, the international community is urged to help strengthen and improve Africa’s efforts to participate effectively in the new emerging trading system and enhance its institutional capacity to address the new requirements of the WTO including its negotiating capacity. 148. The specialized agencies, funds and programmes of the UN System should have policy directives from their governing bodies and chief executives to support the implementation of UN-NADAF and mobilize additional resources for specific programmes and projects in the light of the systemwide plan of action elaborated by the UN-IATF. 149. During the World Summit on Social Development held in 1995 in Copenhagen, the international community at large decided to give the same priority to Africa’s special case in so far as the objectives outlined in UN-NADAF were still being jointly pursued. However, it is the primary responsibility of African States to bear the bulk of their development burden by tapping their own resources as a matter of priority. 150. In various resolutions and declarations adopted by Africa following the UN-NADAF, Africa has renewed its determination and commitment to continue the political and economic momentum created by the reform processes already under way. It calls upon the international community to pursue vigorously its responsibilities and commitments under the New Agenda in order to provide full and tangible support to African efforts. Special efforts should be made by African countries and the international community to address a number of deep-rooted and debilitating factors [sic] inhibiting African development. These include good governance, increased tempo towards democratization of African societies and popular participation; the increased role of the private sector in economic activities; the rapid population growth; the low level of human capital development and capacity-building; inadequate social and economic infrastructure; undiversified economies; Africa’s external debt problem; integration of Africa’s economies and the problem of commodity diversification.

Appendix 13(i): Statement by H.E. Ambassador Vijay S. Makhan Assistant Secretary-General of the Organization of African Unity at the Meeting of the Ad Hoc Committee of the Whole of the General Assembly on the Mid-Term Review of the Implementation of the UN–NADAF, New York, 16–20 September 1996

I have come all the way from Ethiopia to New York for this important occasion, namely the review of the implementation of the United Nations New Agenda for the Development of Africa, because we in the OAU attach considerable significance to this exercise. There was indeed much enthusiasm and a high level of expectations slightly over four years ago when UNNADAF was adopted. Much has happened since then, both within and outside Africa, including major global developments over which our countries of Africa have had little or no control. We have also observed with considerable disquiet the changed attitudes towards development issues, as well as the negative and uncompromising postures on the part of the key players in the international arena. The weakening of the spirit of multilateralism, the stifling of the United Nations System of needed financial resources and the mounting pressure of conditionalities on our poor countries are signs of a fast-changing world that is becoming more and more insensitive to the situation of those of us in the poorer segment of world society. All these developments and negative trends have had an immense impact on the implementation of the UN-NADAF and indeed on the capacity of the UN System to provide effective leadership in mobilizing support for the Agenda. 205

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The OAU has circulated a very candid and objective assessment of the implementation of the Agenda, which I hope you have had the opportunity to go through. This is not the first time that the General Assembly is undertaking a review of the implementation of a UN programme. I would, this time around, urge strongly that we adopt a different approach to this exercise, with a greater focus on the future rather than indulge in an unnecessary apportioning of blame or lamentation over failures and disappointments. Our approach should be an objective and critical assessment of what has taken place, with emphasis on how things should be done differently in order to achieve a better result. We have to recognize that the UN-NADAF had no intrinsic defects that could have affected its implementation; the whole programme was a result of a careful, well-balanced negotiation, and the commitments undertaken by the respective parties are very clear. Another important fact that has to be borne in mind in the review exercise is that the UN-NADAF was not the only programme that African countries were implementing. Apart from programmes on economic policy reforms and structural adjustment that had the strong hand of the Bretton Woods Institutions, there were regional and sub-regional programmes on the promotion of economic integration and cooperation, some of them with the strong hand of bilateral and multilateral donors. Some of these programmes probably had a bearing on UN-NADAF, but there appeared to have been no clear structural, organisational or policy links among them, particularly from the standpoint of addressing Africa’s development issues in a coordinated manner. Africa, as is well known, has been grappling with the dual problems of political and economic transition, including, in particular, the resolution of conflicts and associated problems such as refugees. These problems have taxed the capacity of governmental institutions, particularly the bureaucracy which, in many cases, consists of poorly paid and overworked personnel. There was also, during the period under review, a serious financial constraint for the UN system as a whole, which impacted adversely on the implementation of UN-NADAF. Despite these problems, some efforts have been made by all the parties to implement the Agenda. There were various initiatives taken, such as by the Government of Japan to organize the Tokyo Conference on African Development in October 1993, and the launching of the Global Coalition for Africa. In March this year, the Secretary-General launched the SystemWide Special Initiative on Africa. African governments on their part, within the OAU, have continued to place the problems of their socio-economic development on top of the agenda. In May 1994 the Treaty of the African Economic Community, signed in Abuja, Nigeria in 1991, came into force, and in March last year in Cairo, our leaders adopted the Cairo Agenda for Action for Relaunching Africa’s Economic and Social Development.

Statement by H.E. Ambassador Vijay S. Makhan 207

These actions by African governments constitute a demonstration of their effort to change the socio-economic picture of the African continent. Individually, African countries were carrying out programmes of structural adjustment and policy reforms. The sum total of the impact of all these measures and actions has been assessed by various institutions. What has emerged is that there have been improvements in the economic performance in the continent in terms of the growth rate of the GDP, particularly in 1995. The trend is expected to continue in 1996 if the countries maintain the momentum of last year. On the other hand, and despite the improved GDP growth rate, the social situation of African countries, or what is accepted as the components of Human Development, has deteriorated considerably. This is not to say that the performance of African economies should be attributed solely to the impact of the UN-NADAF. The point of emphasis in this statement concerns the level of awareness of the NADAF at the level of individual African countries, and its influence on national programmes and policies. What needs to be done during the remaining life of the programme is to give effective publicity to the New Agenda, particularly at the level of each African country, with the full involvement of the UN agencies, under the leadership of the UNDP Resident Coordinator, so that national programmes take fully into account the elements and requirements of the UNNADAF. Meetings of the consultative groups and round tables should constantly review the impact of the UN-NADAF on national programmes. Secondly, the nature of initiatives in support of and assistance to African countries within the context of UN-NADAF is a major factor that should be critically reviewed in terms of the future actions required for the remaining years of the New Agenda. It is important that rather than attempt to come up with parallel programmes, or a different and competing agenda, the initiatives should devise detailed modalities and means for implementing UN-NADAF. The focus should be on effective implementation through pragmatic measures, rather than a stream of endless meetings and workshops that consume the valuable of time of everybody concerned. The mid-term review of the UN-NADAF provides another favourable opportunity for renewed partnership and commitment to Africa’s development. Africa will from now be subjected to an increasingly competitive world market as a result of the globalization of the factors of production. As we move towards the year 2000 and beyond, the UN-NADAF along with the new United Nations Special Initiative on Africa’s development could provide a good framework for partnership for development. However, with the changing circumstances within Africa and in the context of the development priorities of African governments, as well as the emerging situation in the international economy there would be need for underscoring a few areas for immediate action, namely:

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(a)

(b)

(c)

The promotion of Africa’s trade expansion. The international community should urgently adopt appropriate measures to ensure better prices for the commodity exports of African countries and remove the prevailing constraints to their exports. Genuine support should be accorded to the diversification of African exports as discussed in the context of the creation of a special facility in the African Development Fund of the African Development Bank. The expansion of Africa’s trade represents a major strategy for ensuring growth and development in Africa. It cannot be overemphasized that increases in foreign direct investment is urgently needed in Africa to facilitate the rejuvenation of the industrial and agricultural sectors. Increases in foreign direct investment would go a long way towards improving the level of employment and raising the level of production. Foreign direct investment is, moreover, desirable for the effective sustenance of the on-going structural adjustment programmes in many countries. The burden of external debt continues to constitute a major impediment to the development of many severely indebted African countries. The use of over 30 per cent of foreign exchange earnings on debt servicing represents a major drain on diminishing external resources. While we welcome the Naples Terms on debt relief, the Organization of African Unity would urge the international community, in the immediate future and in consultation with all parties, to evolve solutions which go beyond these terms to be able to impact consequently and positively on Africa’s growth efforts.

We also believe that there is a need for all the UN agencies which are associated with NADAF to re-examine their approaches and working modalities in relation to the implementation of the Agenda for Action. It will not be enough for the agencies to say that they are contributing to the implementation of UN-NADAF, without a review of their programmes and aligning them to the requirements of the Agenda. All UN programmes in Africa should be mutually reinforcing and complement each other for greater impact. The current evaluation should not, therefore, be an occasion for each agency to present a list of all the activities carried out for Africa. Rather, it should be an opportunity to examine in concrete terms how all these activities can dovetail and make maximum impact. In the spirit of shared responsibility, the African countries being the major beneficiaries from the UN-NADAF, and with an important role to play in its implementation, also need to re-examine their attitudes, approaches and strategies to programme implementation, The issue here is not a selective or piecemeal approach, but a comprehensive analysis of the various elements of NADAF with a view to reflecting or integrating them as appropriate, in national programmes for socio-economic development. Africa’s development partners, on the other hand, have a major respons-

Statement by H.E. Ambassador Vijay S. Makhan 209

ibility in reviewing their attitudes towards Africa and African issues, particularly with regard to Africa’s external debt, the crippling conditionalities, and the general direction and composition of their aid packages for Africa. These are some of the thoughts that I wanted to share with you, so that this important exercise focuses on a new orientation and approach to the implementation of the UN-NADAF for the remaining years of the programme.

Appendix 13(ii): Statement by Ambassador Vijay S. Makhan, Assistant Secretary-General OAU/African Economic Community at the 45th Session of the UNCTAD Trade and Development Board Sessional Committee II Agenda Item 6 (UNCTAD’s Contribution to the Implementation of the UN-New Agenda for Development in Africa) Geneva, 19 October 1998 (Extract)

Although the documentation for this agenda item is part two of this year’s Trade and Development Report as well as the relevant section of the overview, my remarks will also embrace this year’s Least Developed Countries Report and its overview, which I consider relevant to the issues we are discussing here today. I welcome both reports as a useful contribution towards consensus building on the way forward for the African countries and the LDCs, 33 of which can be found in Africa. There are five major issues that I wish to take up. First, as regards the review of economic performance in the African countries and the African LDCs, both reports underscore the fragility of the recovery of recent years and the destabilising effect of exogenous developments such as drought and floods, declining aid, and weakening commodity prices. It is clear that growth in these countries has not been sufficiently robust to stem the slow decline of their share of world production and trade. On top of this, the Asian crisis has introduced an element of uncertainty with projections of export contraction, lower earnings and hence lower growth for 1998 and possibly 1999. 210

Statement by Ambassador Vijay S. Makhan 211

Second, both reports make clear the view that the determined efforts of our countries at economic reform is paying off in improved macroeconomic fundamentals but the structural constraints, especially as regards the underdevelopment of human resources and of infrastructure as well as institutional limitations, remain severe. Consequently, the response of the private sector to the opportunities provided by the improved macroeconomic environment and a liberalised market has been rather weak, if not outright marginal and insignificant. The response, also, of foreign direct investment has been disappointing, to say the least. On this matter of a weak supply response, let me say that the OAU has consistently pointed out the stranglehold of structural constraints on our economies, and therefore the limitations of the Bretton Woods approach to structural adjustment, or what the LDC Report refers to as the approach of the ‘Washington consensus’. Indeed, we find it disappointing that hardly any attention has been paid in either Report to the position the OAU has taken in regard to the limitations of structural adjustment programmes, a position which I have no doubt is well known to UNCTAD. Third, both reports are convincing in making the case that a major reason why most African countries continue to lag behind, is the inadequacy of financial resources to support policy reform and structural change. In effect, the pressure from this resource squeeze is coming from two directions. From the internal front, many African countries face a situation of low savings and investment and declining levels of public investment as governments have pursued more prudent budgetary and fiscal policies as part of their economic reform programmes. Then, from the external front, not only has there been a sharp drop in aggregate flows of official development assistance and, as I have already noted, private flows have not been forthcoming, but the debt overhang remains a millstone that has been pulling us down. Decisive measures to bring about debt relief have for long been an important part of OAU advocacy in forums ranging from the UN to the IMF, World Bank and to the mid-term review of UN-NADAF. For example, a 1995 OAU document, the Cairo Agenda for Action states, and I quote: ‘Africa’s external debt stock and its rapid growth are a deterrent to increased non-debt generating resource flows’. I wish, therefore, to especially welcome the recognition on page 25 of the Overview of the 1998 TDR that, I quote: ‘There is now ample evidence that Africa’s external debt burden is having a severe adverse impact on investment and renewed growth’. We at the OAU have welcomed the HIPC Initiative but have nonetheless underlined its limitations, which are well known and I need not therefore rehearse them here. But we must move forward. The OAU/African Economic Community is therefore pleased with the call made for an Ad Hoc Group of Independent Experts to be appointed to examine this question of the sustainability of African debt afresh. This, indeed, echoes the recommendation that is contained on pages 25 to 26 of the overview of the 1998 TDR, which reads as follows:

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A comprehensive assessment of the sustainability of African debt is now needed; it should be carried out by an independent body that would not be unduly influenced by the interests of creditors. Such a body could be composed of eminent expert persons experienced in questions of finance and development who could be appointed by mutual agreement between creditors and debtors, with a commitment by creditors to implement fully and swiftly any recommendations that may be made. Such a course of action would be in complete harmony with recognised principles of debt workouts. I therefore wish to call upon this Sessional Committee to make this recommendation contained in the 1998 TDR a key part of its Agreed Conclusions and to send an appropriate Resolution on this matter to the Trade and Development Board for onward transmission to the UN General Assembly. My fourth point relates to the substantive analysis of African development in comparative perspective contained in the TDR. This analysis is important because it provides much evidence of the limitations of the ‘Washington consensus’ and the need for a broader synthesis of ideas and approaches. It is gratifying to note that the Bretton Woods institutions have shown signs of responding to these limitations. No doubt we will hear more about the paradigmatic revolution in development theory and practice that is underway in this afternoon’s Raul Prebisch Lecture. However, I want to emphasise four lessons that can be drawn from the substantive analysis in the TDR. First, is the recognition that policy must reflect the fact that with economic liberalisation, markets may not emerge on their own, and may be sub-optimal if they do. Second, is the further recognition that the liberalisation of product and factor markets requires proper sequencing with institutional reforms if appropriate incentives are to be generated and economic instability avoided. Third, is the acknowledgement that policy must recognise and address directly structural constraints and institutional limitations if incentives are to be translated into a vigorous supply response through new investment for the expansion and rationalisation of production. And the fourth lesson is that in addition to the traditional challenges of development, governments now must cope with unprecedented acceleration of technological change and the distributional consequences of globalisation as the new global economy does not benefit all countries equally. These lessons lead the TDR to suggest that the marginalisation of Africa, especially the least developed African countries, in world trade is not so much a consequence of their resistance to liberalisation but rather a reflection of their inability to expand productive capacity. This implies that African governments must pursue economic liberalisation selectively while


also building up the productive capacity to facilitate the fuller integration of these countries into the world economy. In this context, I am happy to note that the report echoes a view I have expressed in my book, Policy Consensus, Strategy Vacuum: A Pan-African Vision for the 21st Century, published last year by Macmillan in association with the OAU, that regional integration and increased intra-regional trade could provide a learning ground and a first step towards closer integration with the world economy. Indeed, both the LDC Report and the TDR provide data to show that intraregional trade is showing signs of increase in Africa. On this score, however, I am disappointed that both reports fail to take into account that Africa does have a strategy and a programme for regional integration to which all member states of the OAU are committed. This is the Abuja Treaty establishing the African Economic Community that came into force in 1994. In not recognizing this element, the TDR, in particular, fails to generate proposals on ways in which UNCTAD could support the efforts of African countries, the sub-regional economic communities and the OAU/AEC Secretariat in the implementation of the Treaty. It is not too late and we would welcome an effective partnership with UNCTAD in pursuing our regional integration initiatives. This brings me to my fifth and final point, which concerns the substantive analysis of the LDC Report. As I have already pointed out, 33 of the 48 LDCs are in Africa. So we have taken much interest in what UNCTAD has to say about strengthening the capacity of the LDCs to participate in the multilateral trading system. We largely agree with the difficulties in regard to implementation of the Uruguay Round Agreements and accession to the WTO identified in the report and with the various proposals for the greater involvement of the LDCs in the WTO and for support in the forthcoming negotiations. Indeed, this same ground was covered extensively during the first OAU/AEC meeting of African Ministers of Trade in Harare, Zimbabwe, in April this year, at which a number of important recommendations and conclusions of specific concern to Africa was elaborated. In this context, I cannot emphasise enough the need for adequate follow-up to the HighLevel Meeting process. Where the LDC Report falls short, however, is its silence on the issues relating to the negotiations for a post-Lomé IV Convention and especially on the question of the call for the new Convention to be compatible with WTO rules. We would have appreciated UNCTAD’s perspective on this matter, especially since all the African LDCs are parties to the Convention. In this intervention I have taken care to give a detailed reaction from the perspective of Africa’s premier continental organisation, the OAU/AEC, to the two reports which cover issues that so closely concern us. The analysis contained in the reports, however, must be followed by action. As I see it, the biggest challenge facing UNCTAD as we mark the half-way stage between UNCTAD IX and X is to forge the necessary partnerships with

214 Appendices

other multilateral organisations in order to influence the implementation of policy and programmes in our countries. Working closely with the Bretton Woods institutions in this regard will require UNCTAD to retain its independent analytical capacity, which has proved to be a most valuable resource. If, indeed, a fundamental paradigmatic shift in development policy and practice is now underway, and we are entering a ‘post-Washington consensus’ era, this should not be too difficult.

Appendix 13(iii): Observations by Ambassador Vijay S. Makhan, Assistant Secretary-General, OAU/AEC on the Findings of the World Investment Report 1998 on Africa at the Launching of the Report, Addis Ababa, 10 November 1998

First let me say that I have made it a point to be personally present at the launching of the World Investment Report (WIR) 1998 this morning because I believe, as does the OAU/African Economic Community, that foreign direct investment (FDI) in Africa is a subject that is of enormous importance and consequential impact for the development of this continent in this era of economic globalisation and liberalisation. As I see it, three distinct messages come out of the World Investment Report 1998 as far as Africa is concerned. The first message is on the factual situation of investment inflows into the continent. The second is a message to the outside world about what has been happening in Africa to improve the investment climate. And the third is a message to us, here in Africa, in particular, policy-makers, as to what still remains to be done to ensure that our continent receives its rightful share of global investment flows. Let me briefly look at each of these three messages. The first message contains a theme that is very familiar from previous editions of the WIR. That is, FDI inflows to this region have remained stagnant at around 3 per cent of global flows. Moreover, FDI in Africa is concentrated in just a handful of countries. The actual figure for 1997, US$ 4.7 billion, is at the same level as 1996. To put this amount in perspective, this figure for the whole of Africa is around what Ireland or Malaysia received in FDI inflows in 1997. And also for the record, it should be noted that global FDI inflows amounted to US$ 400 billion and flows to developing countries as a whole came to US$ 149 billion in 1997. Clearly, there is gross under-investment in Africa. Despite our efforts to put in place economic reform programmes, this single fact is responsible to 215

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a substantial degree for the enormous economic problems we face and the scale of poverty that can be found among our people. This brings me to the second message of the WIR, that is, its message to the outside world about Africa. This is a message that Africa is a good place for doing business and there should no longer be room for negative images and such stereotypes that the whole of Africa is a place of war and instability. There are eight major elements in this message. The first is that the African continent is a highly profitable investment location. Data for United States and Japanese affiliates of transnational companies (TNCs) operating in Africa show that they received rates of return that exceeded those in other developing regions. The same applies for the UK, France, Germany and the Netherlands, which are the principal home countries of TNCs investing in Africa. This has been recognised by Asian TNCs, particularly from the Republic of Korea, Malaysia, Taiwan Province of China and China which continue to increase their investments in Africa, albeit so far only in a handful of countries. But this very welcome development now seems threatened by the Asian financial crisis as the report suggests that only the Republic of Korea may sustain its 1997 level of investment in Africa in 1998. Second, notwithstanding exogenous developments during 1997, including the El Niño weather phenomenon and the weakening of commodity prices, the macro-economic fundamentals in most African countries remain sound, continuing the steady trend of improvement that has been observed throughout the 1990s. Third, African governments have made enormous efforts to improve their national policy frameworks for attracting and retaining FDI. According to the report, of the 53 African countries, 47 have adopted liberal legal instruments to promote and facilitate investment inflows. In addition to these efforts, African countries have signed bilateral investment treaties, which numbered 326 in 1997 mainly with countries outside the continent. Further still, 41 African countries have signed the Convention establishing the Multilateral Investment Guarantee Agency (MIGA). Fortytwo countries have signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Forty countries have signed the Paris Convention for the Protection of Industrial Property under the auspices of the World Intellectual Property Organisation (WIPO). And forty-one countries are members of the WTO (with several others at various stages of accession) and are therefore parties to the agreements relating to investment such as TRIPS and TRIMS. Fourth, efforts are being made throughout the continent to reduce bureaucratic red tape, to streamline procedures concerned with the administration of investment, and to eliminate corruption. Indeed, the Report suggests that the continent as a whole does not fare much worse than other developing regions on this matter. The effort to introduce and maintain high standards of professionalism in the administration of investment

Observations by Ambassador Vijay S. Makhan 217

continues. Twenty-five African investment promotion agencies are now members of the World Association of Investment Promotion Agencies. Fifth, despite all the constraints on many African countries, including an unsustainable debt burden, our governments have been taking steps to improve the competitiveness of their economies. The WIR cites an important survey by the Davos-based World Economic Forum that in a number of policy areas including trade liberalisation, governance, access to finance, road infrastructure and telecommunications, significant improvements have taken place in Africa as a whole. To quote the report, ‘openness to trade, improvements in institutions, and the availability and affordability of telecommunication infrastructure and computers were assessed … to have been the areas of greatest progress.’ Sixth, African governments have created opportunities for FDI by steadily expanding privatisation programmes. This is particularly the case in countries such as Angola, Cape Verde, Côte d’Ivoire, Egypt, Ghana, Kenya, Mozambique, Nigeria, Senegal, South Africa, Tunisia, Uganda, and Zambia. In Botswana, Burkina Faso, Eritrea, Madagascar, Namibia, and Zimbabwe, steps were taken during 1997 to facilitate foreign participation in privatisation in 1997. Figures cited by the report for 1996 show that in Africa south of the Sahara, US$ 299 million of total privatisation sales of US$ 623 million were raised through ‘sales to foreign investors’. Seventh, at a sub-regional level, African governments are factoring the advantages of regional cooperation and integration into their efforts to attract FDI. Let me say here that this theme is underdeveloped in the report, as many of the relevant developments within COMESA, UEMOA, East African Cooperation, and SADC for example, are not reported. However, the WIR does cite the case of the investment promotion agencies within SADC that are pursuing a strategy of cooperation in joint marketing missions, exchange of experiences on promotion practices, and business intelligence. The eighth message of the WIR to the outside world on investment in Africa is that although Africa’s trade preferences have generally been eroded by the Uruguay Round Agreements, most African countries still have residual preferential access for exports to the European Union through the Lomé Convention and through the GSP schemes of several other major markets. The United States has also proposed to improve market access for some African countries through the African Growth and Opportunity Act – which unfortunately remains stalled in the US Congress. However, let me take this opportunity to state here today that the OAU/AEC is determined to do everything it can to ensure that the preferences that are currently available for our exports are not further eroded as African countries – many of which are LDCs – need this marginal boost to market access as part of their effort to attract export-oriented FDI in an increasingly competitive global economy. As is well known, this is our position as we enter the post-Lomé IV Convention negotiations. We

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remain hopeful that our partners in development would appreciate this and act in that direction. In short, the message, of the report to the outside world is that Africa is a good location for investment. The profits to be made are significant. The conditions are right and serious efforts are being made to improve them even more. Let me now turn to the message of the WIR to Africa’s policy-makers. As I have previously noted, Africa is not receiving its rightful share of global investment inflows. In analysing this inequity, the WIR adopts an innovative methodology to identify the reasons for the relative success of the African countries that have been most effective in attracting FDI – a group of countries the report terms the ‘frontrunners’. Four major issues, worthy of the attention of our policy makers, stand out in the success of the frontrunners. The first is the policy framework. The frontrunners are those countries which maintained political stability, have generally achieved sound macroeconomic fundamentals and a relatively liberal investment, trade and financial regime. The WIR cites data showing that 32 per cent (i.e., 649) of the 2 040 privatisation transactions undertaken in Africa South of the Sahara before 1997 are accounted for by six of the seven frontrunners, namely Botswana, Equatorial Guinea, Ghana, Mozambique, Namibia and Uganda (Tunisia is the other frontrunner). I know that privatisation remains contentious in many African countries. But I believe that with appropriate safeguards including the use of joint ventures, the pitfalls can be avoided while maximising the benefits including transfer of technology, know-how, management and marketing skills, and, more generally , the revitalisation of public enterprises, which often perform below capacity. The second issue accounting for the success of the frontrunners is their approach to business facilitation. On this score, the report suggests that these countries have generally made the most progress in streamlining investment procedures, providing business support facilities and containing corruption. Third, the report finds that access to a larger regional market has been a factor in attracting FDI for some of the frontrunners, in particular, Namibia and Botswana, which are both in SADC and SACU. In view of our small country markets, regional cooperation and integration is increasingly becoming important as a critical determinant of competitiveness in Africa. Fourth, and finally, the report finds that the frontrunners are attracting not only resource-seeking investment (i.e., investment mostly in minerals and energy) but also market-seeking investment (i.e., investment in the production and distribution of consumer goods and services) and efficiency-seeking investment (i.e., investment in sectors that require specific types of comparative advantage such as low cost labour for textiles, for example, or the availability of appropriate skills in the labour force such as is required for some manufacturing and services activities). However, for market-seeking investment to grow substantially in Africa, African economies and per capita incomes also need to grow. This is all the

Observations by Ambassador Vijay S. Makhan 219

more reason why our development partners need to take decisive action to remove such constraints as the unsustainable debt burden we bear in support of our growth enhancing measures. As far as the requirements of efficiency-seeking investment are concerned, the WIR cites physical infrastructure, developed human resources, and technological capacity as among the key factors and introduces the concept of ‘created assets’ to describe these people-made advantages. Our policy-makers need to take heed of the view advanced by the Report that these created assets will increasingly determine levels of competitiveness in the future. These are the main messages on Africa of the World Investment Report 1998. It is a report which the international business community and African policy-makers should examine with great care and attention. International investors should look at African countries afresh especially in the light of the changes that have been taking place. African governments should deepen these reforms, taking into account the growing importance of created assets. I commend the UNCTAD Secretariat for the professionalism of the WIR although I would have liked to see more depth in the analysis of the impact of our regional integration efforts on FDI. Indeed, as a matter of procedure, UNCTAD should consider exchanging views at a pre-publication stage on relevant sections of its annual Reports with regional organisations such as ours as the view from Geneva may not necessarily always reflect the reality in Africa.

Appendix 13(iv): Statement by Ambassador Vijay S. Makhan, Assistant Secretary-General OAU/African Economic Community at the Opening of the Thirty-third Session of the UN Economic Commission for Africa/ Twenty-fourth Meeting of the Conference of Ministers/ Seventh Session of African Ministers of Finance, Addis Ababa, 6 May 1999

The theme of this meeting ‘The Challenges of Financing Development in Africa’ underscores the fact that finance is the lifeblood of economic development. To be sure, there are other important prerequisites and preconditions for development to be sustainable. These include investment in the human resource base; the build-up of physical infrastructure; and the maintenance of institutions of governance that are responsive and accountable with policy-making and implementation capacity. But no one can deny the important role of finance. An importance, moreover, that is highlighted by the current context in which African governments find themselves. This is a context of declining export receipts as a result of weak demand for Africa’s commodity exports, falling terms of trade, little capacity to generate internal savings, and – the mother of all our economic difficulties: the debt overhang. These factors have combined to make African countries, especially those south of the Sahara, increasingly dependent on foreign aid or official development assistance (ODA). Yet, it is also a context in which the region as a whole has experienced four years of positive growth rates following two decades of almost continuous dismal economic performance. Modest as this recovery is, the evidence does suggest that it is underpinned by increasingly sound 220


macroeconomic fundamentals in most countries. Yet again, at precisely the time when a new window of opportunity has been opened through the sacrifices of difficult political and economic reforms, levels of ODA to our countries have been cut back sharply. Indeed, by the mid-1990s, the policy environment in most African countries had generally become very favourable for foreign aid to be used to intensify policy reforms and direct efforts towards addressing the human, institutional, infrastructure and other structural constraints. ODA, however, has fallen for six consecutive years, from 0.33 per cent of the combined GNP of the OECD-Development Assistance Committee (DAC) donors in 1992 to 0.22 per cent in 1998, its lowest ever level. This, moreover, is now less than one third of the agreed UN target of 0.7 per cent of GNP. Foreign Direct Investment inflows to Africa have remained stagnant, hovering at around 3 to 4 per cent of global flows throughout the 1990s, concentrated in just a few countries and in the extractive sector, notwithstanding the overwhelming evidence suggesting a higher than average rate of return for investment in Africa. Equity flows to Africa have been relatively insignificant and other private flows including net bank lending have shown a declining trend for a number of years. Even as we welcome recent initiatives to address the problem of debt overhang in Africa, the meaningful reduction of the stock of debt must remain the objective if internally generated resources are to be directed towards our pressing development needs. Meanwhile, the implementation of economic reform programmes continues to improve national resource and factor allocation in our economies. But the financial flows required to support the improved conditions for strong growth have not been forthcoming. So far as our continent is concerned, this is a context that can aptly be described as economic recovery and a paradox of resource flows. A good policy environment now exists in much of Africa. However, as the useful documentation that has been provided by the ECA points out, more needs to be done to deepen financial sector reforms and capacity for financial intermediation through capital market development, the introduction of flexible savings instruments, appropriate interest rate policy management, innovations in the public sector to generate public savings, suitable measures to curb capital flight, and the fostering of greater transparency in financial markets through the widening of the participation of African countries in the General Data Dissemination System (GDDS) and the Special Data Dissemination System (SDDS). Clearly, these issues are among the next generation of reforms that will require the full attention of our governments in the coming years. But we must also not lose sight of the fact that these reforms are not ends in themselves. Nor should they be seen simply as the changes needed to bring African countries into the global mainstream. They are rather the means to achieve such objectives as reducing the unacceptably high levels of poverty

222 Appendices

among our people, and generating growth leading to sustainable development. We must also not lose sight of the fact that the capacity of our economies to increase savings significantly in the foreseeable future is inherently limited. To this extent, sustaining the gains that have already been made and the good policy environment that has largely been achieved requires external resource flows to address the long-standing structural weaknesses and supply-side constraints in our countries. Sustaining these gains further requires increasing levels of investment in sectors, products and services where value-added is greater, productivity growth is faster and demand elasticities in world markets are higher. Indeed, the analysis that has been presented by the ECA suggests that to achieve the internationally-agreed goal of reducing poverty by half by the year 2015, an annual growth rate of 7 per cent will be required in Africa as a whole. The ECA projections show that the quantum of external resources that is needed to achieve this target in Africa south of the Sahara amounts to 47 per cent of GDP during 1999 and 2000; 32 per cent of GDP during 2001 to 2005; and 10 per cent of GDP during 2006 to 2010. Well, I leave it to our collective imagination as to how this can be attained. On current levels of external financial inflows, it therefore follows that our countries are facing a massive financing gap. As we ponder over this predicament in which we find ourselves – economic recovery and the paradox of resource flows – we must also recognise that the distribution of benefits from the ongoing globalisation of the world economy is profoundly inequitable. This underscores the need for more meaningful cooperation between developed and developing countries in shaping a global economy in which the gains from liberalisation are more equitably shared. This is an issue, a far-reaching analysis of which would greatly enhance our deliberations at this meeting. On our part, we at the OAU/African Economic Community are advocating that this issue of enhanced coherence in global economic management and the need for the international community to take a systemic approach in addressing global economic imbalances is clearly the way forward. Forthcoming fora such as the third WTO Ministerial Conference, the proposed OAU/European Union Summit, the UN Conference on Financing for Development, the UN Millennium Summit, UNCTAD X, the South–South Summit, and the Third UN Conference on Least Developed Countries provide an opportunity for meaningful progress to be made in addressing the general issue of the management of global economic imbalances and the specific issue of external resource flows. In the current ACP/EU negotiations for a successor to the Lomé IV Convention and in our preparations for the new round of trade negotiations that is expected to be launched at the WTO Ministerial Conference in Seattle later this year, we are making every effort to ensure that this issue of the imbalances of globalisation are adequately addressed. To this end, with the collaboration of the ECA and the African


Development Bank, we have put in place a panel of experts to assist African negotiators in these very important negotiations. As much as the importance we attach to enhanced coherence in global economic management is justified, globalisation also calls for a higher level of competitiveness as a response. To this end, regional economic integration within the framework of the Treaty Establishing the African Economic Community (the Abuja Treaty) is the cornerstone of our strategy of fuller integration into the world economy and of achieving global competitiveness. The high incidence of small country markets and land-locked states as well as underdeveloped intra-regional transport and communications infrastructure are among the constraining elements that underscore the importance that our governments have attached to economic integration and the creation over the next three decades of a continental economic space. Our vision at the OAU/AEC on this subject is that the regionalisation of economic activity will enable our national economies to build up capacities in all critical areas, from the absorption and generation of new technology to production and marketing, as a springboard for more meaningful participation in the world economy. As our entrepreneurs – in partnership with foreign investors and corporations from the North as well as from the more advanced countries of the South – respond to the freer flow of factors, goods and services within the regions of our continent and build up their supply capacity in terms of productivity, scale and scope of production and marketing, they will become more and more able to exploit global opportunities in a gradual, step-by-step, process of integration into the world economy. Indeed, this month marks the fifth anniversary of the coming into force of the Abuja Treaty. I am grateful that the last five years have seen the gradual strengthening of the regional economic communities and the beginning of the process of policy coordination and integration in the continent. Clearly, we have a long way to go. The forthcoming Third Ordinary Session of the Economic and Social Commission of the African Economic Community that is now scheduled to take place here in Addis Ababa at ministerial level on 17–18 June will be an occasion to review this progress, assess the state of play and map out the way forward. I cannot conclude these remarks on the perspective of the OAU/African Economic Community on the theme of this meeting without making reference to the incidences of conflict that continue to rage in certain – albeit a few – areas of our continent. So many resources have been directed by humanity against humanity in wanton destruction and senseless killings – resources that could have been positively attributed to alleviate the plight and lot of the poorest of the poor. As we also look beyond Africa, and consider the resources that have been mobilised and are being expended in post-Cold War militarism, this end of the century has once again demonstrated and upheld the adage that

224 Appendices

history repeats itself – as one considers the capacity of the human race to self-destruct. If only such resources and the political will behind them could be mobilised to cut global poverty by half by 2015! This conference will be deliberating on the challenges of financing development, and there are important lessons to be drawn. Among these is the need to continue our reform efforts and, in particular, to embark upon a new generation of financial sector reforms aimed at deepening and achieving greater transparency in African financial markets. Regional economic integration is also the cornerstone of our strategy of transformation and of achieving competitiveness in the wider global context. It is therefore imperative that the implementation of our reform programmes should increasingly reflect the commitments that are being made at both the levels of the regional economic communities and of the AEC. However, we also find ourselves in a strange predicament of what I have described as economic recovery and the paradox of resource flows. The magnitude of financial resources required for Africa’s socio-economic transformation and sustained development are far beyond the capacity of our economies to generate. Urgent international support by way of official and private flows as well as an effective resolution of the debt crisis is needed if the current recovery is to be translated into vigorous growth and rising living standards. In this context, it is imperative for our governments to take the lead and initiative to press the case for greater coherence in global economic management and for addressing the imbalances of globalisation. Assembled here today are policy makers of our continent, on whom much will depend, and from whom much is expected as Africa, with its teeming millions, faces its destiny in the third millennium. I have no doubt whatsoever that we shall all rise to this challenge.

Notes and References

Introduction 1 See African Development Bank (1999) African Development Report, 1999 (Oxford, UK: African Development Bank/Oxford University Press), p. 1. 2 See UNCTAD (1998), Trade and Development Report, 1998 (Geneva: UNCTAD), p. xii. 3 See A. A. G. Ali (1998), ‘The Impact of Financial Crisis on Trade, Investment, and Development: Regional Perspectives’, (Addis, Ababa, ECA, mimeo, October 1998), p. 1; and UNCTAD (1999), Trade and Development Report, 1999 (Geneva: UNCTAD), pp. 30–40. 4 See African Development Bank (1998), African Development Report, 1998 (Oxford, UK: African Development Bank/Oxford University Press), p. 3 5 See OECD (1998), News Release, ‘Aid and Private Flows Fell in 1997’ (OECD web site, www.oecd.org/dac, 18 June 1998). 6 See UNCTAD (1998), World Investment Report, 1998 (Geneva: UN), p. 163 7 See World Bank (1998), Global Development Finance, 1998 (Washington DC: World Bank), Appendix 5. 8 OECD (1998), News Release, ‘Aid and Private Flows Fell in 1997’, loc. cit. 9 See, for example., UNCTAD, Trade and Development Report, 1998, p. xii. 10 See United Nations (1991), New Agenda for the Development of Africa in the 1990s (New York: UN), p. 12. 11 Vijay S. Makhan, Statement made at the launching of the UN System-Wide Special Initiative on Africa, Addis Ababa, 15 March 1996. 12 See World Bank (1998), Assessing Aid: What Works, What Doesn’t and Why (Washington DC: World Bank), p. x. 13 See Joseph E. Stiglitz (1998a), ‘Towards a New Paradigm for Development: Strategies, Policies and Processes’, Raul Prebisch Lecture, UNCTAD, Geneva, 19 October 1998; see also Joseph E. Stiglitz (1998b), ‘An Agenda for Development in the 21st Century’ in Boris Pleskovic and Joseph E. Stiglitz (eds), Annual World Bank Conference on Development Economics 1997 (Washington DC: World Bank), pp. 17–31. 14 See Stiglitz (1998a), ‘Towards a New Paradigm for Development’, loc. cit.; and World Bank, Assessing Aid, loc. cit.

1

A Survey of Africa’s Economic Performance in the Post-Independence Period

1 The survey draws significantly from UNCTAD (1998), Trade and Development Report 1998 (Geneva: UNCTAD, 1998), pp. 115–209. 2 The Sarahawi Arab Democratic Republic, a Member State of the OAU, is not a regional member state of the AfDB. 3 See African Development Report, 1998 (Oxford: Oxford University Press, 1998) p. 18. 225

226 Notes and References 4 See African Development Report, 1999 Oxford: Oxford University Press, 1999) p. 15. 5 African Development Report, 1998, p. 19. 6 Ibid.; and also African Development Report, 1999, p. 16. 7 See African Development Report, 1998, pp. 19–20. 8 Ibid. 9 See African Development Report 1999, p. 9. 10 Ibid., p. 22; see also UNCTAD (1999), Trade and Development Report, 1999 (Geneva: UNCTAD), p. 13. 11 African Development Report, 1998, p. 13. 12 Ibid. 13 Ibid., p. 8 14 UNCTAD, Trade and Development Report, 1999, pp. 29–30. 15 African Development Report, 1998, p. 11. 16 African Development Report, 1998, p. 9. 17 African Development Report, 1999, p. 23. 18 Ibid., pp. 9–11. 19 AfDB data is based on IMF methodology and terminology. Thus capital inflows are the items included in the capital and financial accounts of the balance of payments. The heading ‘balance on capital account’ includes mainly credit items such as the grant element of official development assistance (ODA), debt forgiveness and migrant transfers. The heading ‘balance on financial account’ includes mainly long- and short-term liability items such as foreign investment and external borrowings including borrowings from the IMF itself. Non-debt creating flows therefore consist mainly of the credit items plus long-term investment. 20 African Development Report, 1998, p. 13. 21 See United Nations (1998), World Investment Report 1998 (New York and Geneva: United Nations), pp. xxv, 9, 163–5; see also African Development Report, 1998, p. 16. 22 African Development Report, 1999, p. 12. 23 See OAU (1995), The Cairo Agenda for Action (Addis Ababa: OAU/AHG/Res. 236 (XXXI), p. 22. This document is reproduced as an the Appendix of this book. 24 See, for example The Jubilee Coalition (1998), ‘To Him that Hath: Debt and Financing Development’ in South Centre, South Letter No 30, p. 18. 25 See UNCTAD, Trade and Development Report, 1998, p. xii. See also, Vijay S. Makhan, ‘Statement at the 45th Session of the UNCTAD Trade and Development Board’ (Geneva: OAU/AEC, mimeo, 1998). 26 See, for example, Paul Collier and Jan W. Gunning (1997), ‘Explaining African Economic Performance’ (Oxford: Centre for the Study of African Economies, Working Paper Series /97/2); Thandika Mkandawire and Charles Soludo (1999), Our Continent, Our Future (Trenton, New Jersey, USA: Africa World Press,); and World Bank (2000), Can Africa Claim the 21st Century? (Washington DC: World Bank).

2

The Paradox of Financial Flows

1 The term ‘foreign’ aid is used to refer to official development assistance (ODA). These flows, mostly from bilateral donors and/or channelled

Notes and References 227

2

3 4 5 6 7 8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

through the multilateral institutions contain significant concessional elements. Official development finance (ODF) is the term used for all official flows including non-concessional flows plus ODA. The main donors are the OECD countries and within this group, the Development Assistance Committee (DAC) members. In 1998, the OECD-DAC members were Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, United States, and the Commission of the European Communities. See OAU (1995), Report of the Secretary-General to the Special Session of the Council of Ministers on Economic and Social Issues in African Development (Addis Ababa: OAU, mimeo), p. 9. The Economist, February 24, 2001, p. 17 See African Development Report, 1998, pp. 9–11. See Africa Policy Information Centre (1998), Africa’s Debt, (Washington DC: Africa Policy Information Centre Background Paper, December), p. 1 See UN Economic Commission for Africa (1999), The Challenges of Financing Development in Africa (Addis Ababa: UNECA, E/ECA/CM.24/2,), p. 3. See World Bank (1998), Assessing Aid: What Works, What Doesn’t and Why (Washington DC: World Bank), p. x. Fluctuations in the overall downward trend are due to currency movements and other special effects such as, for example, large non-concessional rescue packages associated with the 1997–8 East and South-east Asia financial crisis and contagion in Brazil. See World Bank (1998), Global Development Finance Report 1998, (Washington DC: World Bank), pp. 49–50; and World Bank (1999), Global Development Finance Report 1999 (Washington DC: World Bank), p. 2. See OECD, News Release (1998), ‘Aid and Private Flows Fell in 1997’; and World Bank (1998), Global Development Finance Report, 1999, p. 70. See UNCTAD (1998), Least Developed Countries, 1998 Report (Geneva: UNCTAD), p. 28. See World Bank (1999), Global Development Finance Report, 1999, p. 70. See UNCTAD (1999), Least Developed Countries, 1999 Report (New York and Geneva: UNCTAD), p. 23. See UNCTAD, Least Developed Countries, 1998 Report, p. 28. See OECD, News Release, ‘Aid and Private Flows Fell in 1997’, 18 June 1998. See World Bank, Global Development Finance Report, 1999, p. 70. See World Bank, Global Development Finance Report, 1998, pp. 50–1; and The Financial Times (UK) ‘Aid to Poor Nations Fall to 18 Year Low’ (8 April, 1999). Ibid. See also UNCTAD, Least Developed Countries, 1999 Report, pp. 24–5. See OECD News Release, loc. cit; see also OECD, Development Assistance Commitee Report, 1995 (Paris, OECD), p. 100. See OECD, News Release, loc. cit. See World Bank, Global Development Finance Report, 1998, p. 50. See UNCTAD (1999), Foreign Direct Investment in Africa: Performance and Potential (New York and Geneva, UNCTAD), pp. 2–3. See UNCTAD (1999), World Investment Report, 1999 (New York and Geneva: UNCTAD), p. 46. Ibid., pp. 47–8.

228 Notes and References 24 See Vijay S. Makhan, ‘Observations on the Findings of the World Investment Report 1998 on Africa at the Launching of the Report’ (Addis Ababa: OAU/AEC, mimeo). It should be noted that when FDI inflows are standardized to take into account the size of the economy, by measuring them in terms of inflows per capita or per $1,000 of GDP, several African countries fare considerably better than the average for developing countries as a group. By another relative measure, inward FDI flows as a percentage of gross fixed capital formation, Africa’s performance was comparable to that of developing countries as a group: for 1991–7, the figure was 5.6 per cent for Africa as compared to 7.5 per cent for all developing countries. However, the figure for Africa reflects not only the size of African economies but also the context of inadequate domestic savings and investment. See UNCTAD, Foreign Direct Investment in Africa, loc. cit., p. 20. 25 See Amar Bhattacharya, Peter J. Montiel and Sunil Sharma, ‘Can SubSaharan Africa Attract Private Capital Flows’, Finance and Development, June 1997, p. 5. 26 See UNCTAD, World Investment Report, 1998, loc. cit., p. 174. 27 Ibid., p. 165–6. 28 Ibid., pp. 185–8. 29 Ibid., p. 166. 30 See World Bank, Global Development Finance Report, 1999, loc. cit., p. 146. 31 See World Bank, Global Development Finance Report, 1998, Appendix 5. 32 Ibid. 33 See African Development Report, 1998, loc. cit., p. 17. 34 See World Bank, Global Development Finance Report, 1998, Appendix 5. 35 See Vijay S. Makhan (1999), Statement at the Opening of the 33rd Session of the UN Economic Commission for Africa/24th Meeting of the Commission/7th Session of African Ministers of Finance (Addis Ababa: OAU/AEC, 6 May 1999). 36 See UN Economic Commission for Africa, The Challenges of Financing Development in Africa (Addis Ababa: May 1999). p. 22. 37 See Africa Policy Information Centre, Africa’s Debt ??, p. 1 38 See the Financial Times, ‘Debt: Too Much to Bear’, 12 June 1999. 39 Ibid. 40 See E. K. A. Anyidoho (1997), The African Debt Crisis: Towards Sustainable Debt Relief (Addis Ababa: OAU/AEC, Consultant Report No. 2, January), p. 5. 41 See UNCTAD (1998), Trade and Development Report, 1998 (Geneva: UNCTAD), p. 127. 42 Ibid. 43 See UN Economic Commission for Africa, The Challenges of Financing Development in Africa, loc. cit., p. 22. 44 See the Financial Times, ‘Debt: Too Much to Bear’, 12 June 1999 45 See UNCTAD, Trade and Development Report, 1998, loc. cit., p. 129. 46 See UNCTAD, Least Developed Countries, 1999 Report, loc. cit., pp. 30–1. 47 See UNCTAD, Trade and Development Report, 1998, p. 129–30; and Financial Times, ‘UN Seeks New Debt Initiative’. It was reported that UNCTAD advocated a substantial reduction of the share of government revenues going into debt servicing. 48 Ibid. 49 See S. I. Ajayi (1997), Capital Flight and External Debt in Sub-Saharan Africa (Washington DC: IMF Working Paper WP/97/68), pp. 11–12

Notes and References 229 50 See UN Economic Commission for Africa, The Challenges of Financing Development in Africa, loc. cit., p. 18 51 See Ajayi, Capital Flight and External Debt in Sub-Saharan Africa, pp. 23–6 and statistical annex; see also UN Economic Commission for Africa, The Challenges of Financing Development in Africa, pp. 17–18. 52 See Ajayi, Capital Flight and External Debt in Sub-Saharan Africa, p. 24. 53 See UN Economic Commission for Africa, The Challenges of Financing Development in Africa, p. 18. 54 See UNCTAD, Trade and Development Report 1998, p. 216. 55 Ibid. 56 UN Economic Commission for Africa, The Challenges of Financing Development in Africa, p. 19. 57 See OAU (1995), Relaunching Africa’s Economic and Social Development: The Cairo Agenda for Action (Addis Ababa: OAU/AHG/RES.236 (xxxi), p. 15. 58 UN Economic Commission for Africa, The Challenges of Financing Development in Africa, pp. 20–21. 59 Ibid. See also OAU/AEC (1998), Financial Market Integration and Development in Africa, (Addis Ababa: OAU/AEC). 60 Kwesi Botchway (2000), Financing for Development: Current Trends and Issues for the Future, Paper prepared for UNCTAD X High-level Round Table on Trade and Development: Directions for the Twenty-first Century. Bangkok, 12 February 2000, p. 2. 61 See The Guardian (UK), ‘Developing World’s Crisis Deepens’ (8 April 1999). 62 See UN Economic Commission for Africa, Economic Report on Africa, 1999 (Addis Ababa: UNECA, E/ECA/CM.24/3), p. xii.

3

New Priorities for Foreign Aid

1 See United Nations (2000), United Nations Millennium Declaration (New York: UN General Assembly, 8 September 2000). 2 See UNDP (1997) Human Development Report, 1997 (New York: UNDP/Oxford University Press), p. 3. 3 Ibid. 4 See UNDP (1998), Human Development Report, 1998 (New York: UNDP/Oxford University Press), p. 17. 5 See OECD (1996), Shaping the 21st Century: The Contribution of Development Co-operation (Paris: OECD). 6 See OECD, News Release, loc. cit. 7 See UK Government (1997), Eliminating World Poverty: A Challenge for the 21st Century, White Paper on International Development (London: HM Stationery Office), p. 1. 8 See Government of Canada (1995), Canada in the World, Government Statement (Ottawa: Government Services Canada). p. 42. 9 See OECD, News Release, loc. cit. 10 See UN (1997), The World Conferences: Developing Priorities for the 21st Century (UN Briefing Paper Series), p. v. 11 See OECD, News Release, loc. cit. 12 See UN, The World Conferences, loc. cit., p. 20. 13 See Communiqué of the Non-Aligned Movement Summit, Durban, South Africa, September 1998.

230 Notes and References 14 See UN, The World Conferences, loc. cit., p. 48. 15 See UNDP (1997), Human Development Report, 1997, p. 112. The breakdown of this amount is as follows: the cost of achieving basic education for all is $6 billion; basic health and nutrition, $13 billion; reproductive health and family planning, $12 billion; and low-cost water supply and sanitation, $9 billion. See also UNDP (1998) Human Development Report, 1998 (New York: Oxford University Press), p. 37. 16 See UN, The World Conferences, pp. 30–35. 17 See UNDP, Human Development Report, 1997, p. 108; and Africa Recovery 11 (4), March 1998, p. 11. 18 UNDP (1998), Human Development Report, 1998 (New York: UNDP/Oxford University Press), p. 3. 19 UNICEF Information Newsline, ‘UNICEF says world has not done enough for children’ (UNICEF web site, www.unicef.org/newsline/99). 20 See UN, The World Conferences, loc. cit., p. 56. 21 See, for example., UNDP, Human Development Report, 1998, p. 31–3. 22 See UNICEF Information Newsline, ‘UNICEF says world has not done enough for children’, loc. cit. 23 See UN, The World Conferences, pp. 43–4. 24 See UNDP, Human Development Report, 1998, pp. 34–5; see also ‘The Economics of AIDS Policy’ in World Bank Policy and Research Bulletin, 9 (1) , January–March 1998, pp. 1–5. 25 See UNDP, Human Development Report, 1997, p. 111. 26 See Vijay S. Makhan (1996), ‘Statement at the World Food Summit’ (Addis Ababa: OAU/AEC, mimeo, 14 November 1996). 27 See UN, The World Conferences, p. 76. 28 Ibid., p. 66–70.

4

New Perspectives an Aid Delivery and Development Management

1 See OECD (1995), Development Assistance Committee Report, 1995 (Paris: OECD, 1995), p. 43. 2 See UNCTAD (1998), Trade and Development Report, 1998 (Geneva, UNCTAD), p. 53. 3 See OECD (1994), Development Assistance Committee Report, 1994 (Paris: OECD), p. 3; and Joseph E. Stiglitz (1998), ‘Towards a New Paradigm for Development: Strategies, Policies, and Processes’, Raul Prebisch Lecture, UNCTAD, Geneva, 19 October 1998. 4 See Rubens Ricupero (2000), ‘From the Washington Consensus to the Spirit of Bangkok – Is there a Bangkok Consensus or a Bangkok Convergence’ (Bangkok: 10th Session of UNCTAD, 19 February 2000). 5 See UNCTAD (1999), Least Developed Countries 1999, Report (Geneva: UNCTAD), p. iv. 6 See Nicolas Van de Walle and Timothy A. Johnson (1996), Improving Aid to Africa (Washington DC: Johns Hopkins University Press). 7 See OAU (1990), Declaration of the Assembly of Heads of State and Government of the Organisation of African Unity on the Political and Socio-Economic Situation in Africa and the Fundamental Changes Taking Place in the World (Addis Ababa: OAU), p. 2. This document is reproduced in full in Appendix 5 of this book.

Notes and References 231 8 See OAU (1995), Relaunching Africa’s Economic and Social Development: the Cairo Agenda for Action (Addis Ababa: OAU). This document is also reproduced in full in the Appendix. 9 Ibid. 10 See Partnership for Capacity Building in Africa: Strategy and Program of Action (A Report of African Governors of the World Bank to Mr James D. Wolfensohn, President of the World Bank Group, September 28, 1996), p. vi.

Index Note: f = figure; n = note; t = table.

abbreviations, x–xii Abidjan Stock Exchange, 46 Abuja Treaty (establishing the African Economic Community, 3 June 1991), 100, 104–11, 131, 176–7, 202, 203, 206, 213, 223; articles, chapters, protocols: Articles 1–5, 104–8; Articles 88–95, 109–11; Chapter XIX, 109–10; Chapter XX, 110; Chapter XXI, 110–11; Protocol on Environment, 128; Protocols, 131, 176, 177–8; Protocols on Chapters XIX, XX and XXI (Article 95), 111 general: agreements concluded by Member States (Article 93), 110–11; came into force (May 1994), 206; cooperation agreements (Article 92), 110; entered into force (May 1994), 176; establishment (Article 2), 104; general undertakings (Article 5), 106; implementation, 178; international negotiations (Article 94), 111; international organizations (Chapter XXI), 110–11; modalities for the establishment of the Community (Article 6), 106–8; objectives (Article 4), 105–6; principles (Article 3), 104; ratification, 131, 176; relations between AEC and African continental organizations (Article 89), 109; relations between AEC and African non-governmental organizations (Article 90), 109; relations between AEC and

regional economic communities (Article 88), 109; relations between AEC, third states and international organizations (Chapter XX), 110; relations between AEC, third states, regional and sub-regional organizations relations between AEC and socio-economic organizations and associations (Article 91), 110 accountability, 63, 119, 123, 172, 180, 189, 220 acknowledgements, xviii ACMS, see African Centre for Monetary Studies ACP (African Caribbean Pacific Group of States), 99, 222 Ad Hoc Group of Independent Experts (proposed), 211 ADB, see African Development Bank Addis Ababa, 117, 121, 136, 140, 160, 163, 165 Declaration of 11 July 1990, 117–20, 123 External Debt Crisis (December 1987), 136–9, 140–59 launch of World Investment Report 1998 on Africa (10 November 1998), 215–19 meeting of OAU/AEC Economic and Social Commission (June 1996), 177–8 Seventh Session of African Ministers of Finance (6 May 1999), 220–4 Tenth Conference of African Ministers of Transport and Communications (1995), 178

232

Index 233 Third Ordinary Session of the AEC Economic and Social Commission (1999), 223 Thirty-Third Session of UNECA (6 May 1999), 220–4 ADF, see African Development Fund adjustment programmes, 19, 52f advertising agencies, 106 AEC, see African Economic Community AfDB, see African Development Bank AFREXIM BANK, 128 Africa capital flight, 54–6 child mortality, 70, 72 conflict and instability not general, 102 continental organizations, 109 debt to export earnings ratio, 160 development partners, 131–4, 218 development problématique, 50 economic development era, 120 economic integration, 120 economic performance, 1–6, 118 economic performance postindependence (1965–98), 8–34, 225–6 FDI inflows, 45–6, 130, 195, 215 financial resource needs, 90 foreign misconceptions about, 216 ‘frontrunners’, 218 ‘fundamental constraints’, xvi ‘good place to do business’, 216, 218 greater ‘insensitivity’ towards, 205 greater integration into world economy, 62 ‘gross under-investment’, 45, 228(n24) ‘high cost of doing business’, 195 HIV/AIDS, 70, 71 human development, 74 inadequate negotiating capacity, 146 introduction, 1–7, 225 investment/GDP ratio, 91 island countries, 106, 131, 157 land-locked countries, 10, 74, 106, 157, 223

LDCs, 45 low-income countries, 40 ‘main economic question’, 4, 62, 74, 80, 92 marginalization, 212 negative images, 130, 196, 216 net outward transfer of resources, 147 ‘no simple panacea’ for development problems, 6, 95, 102 oil-importing countries, 27 people in extreme poverty (1987–93), 63 political liberation and nation-building era, 120 poverty-reduction targets, 60 rates of return on investment ‘exceed those in other developing regions’, 45 real GDP (1990–8), 23t regional institutions, 168 regional integration, 92, 93, 95, 99, 100–2 savings/GDP ratio, 36, 94 single currency (planned), 108 single market (planned), 108 single parliament (planned), 108 socio-economic situation, 118, 122, 171 stagnation of investment, 91 ‘star performers’, 10, 14, 17 structure of book, 6–7 threatened marginalization, 117 trade/GDP ratio, 98 ‘weakest link in global economy’, xvi wealth held overseas by private citizens, 94 see also sub-Saharan Africa Africa: economic performance post-independence (1965–98), 8–34, 225–6 1965–73, 10–13 1973–80, 13–17 1980–94, 17–19 African economy during mid/late 1990s, 19–23 average real growth rates of GDP, exports and investment

234 Index Africa (1965–98) cont. (sub-Saharan Africa, 1965–94), 9f balance of payments summary and current account financing, 1990–98, 30t commodity dependence, 26–8 composition of net resource flows to sub-Saharan Africa, 1970–96, 20f external debt outstanding and debt service payments, 1990–98, 31t frequency distribution of countries according to real GDP growth rates, 1990–98, 23t frequency distribution of countries according to real per capita GDP growth rates, 1990–98, 23t growth in industry and agriculture (sub-Saharan Africa, 1965–94), 12f increasingly sound macroeconomic fundamentals, 23–6 low or declining external financial flows and unsustainable debt, 29–32 low levels of domestic investment and savings, 28–9 macroeconomic indicators, 1990–98, 22t public and private investment in Sub-Saharan Africa, 1970–94, 21f recovery of 1994–7 in perspective, 8, 32 summary, 32–4 terms of trade of sub-Saharan Africa, 1954–96, 15f African Business Round Table, 134 African Central Bank (planned), 108 African Centre for Monetary Studies (ACMS), 109, 139, 148, 150 African Chambers of Commerce, 134 African Charters Culture (1976), 125 Human and Peoples’ Rights, 104, 180 Popular Participation in Development and Transformation, 180

Rights and Welfare of the Child, 125 African Common Position on Africa’s External Debt Crisis (Addis Ababa, December 1987), 118, 138–9, 140–59, 160–1, 203–4 ‘accusatory tone’, 161 conclusion, 158–9 measures to be implemented by African countries, 147–50 measures to be implemented by the developed countries and international financial institutions, 150–8 Part I: evolution, magnitude and structure of Africa’s external debt, 143–4 Part II: major causes of Africa’s external debt crisis, 144–6 Part III: impact of external debt on African economies, 146–7 Part IV: measures to alleviate Africa’s external debt crisis, 147–58 preamble, 140–2 African Common Positions Environment and Development, 128, 185 Food Security, 188, 203 Human and Social Development, 125 African debt crisis: strategies towards sustainable relief (Addis Ababa, 31 January 1997), 160–2 African Debtors Club, 150 African Development Bank (ADB/AfDB/AFDB), 1, 2, 22, 25, 26, 28, 102, 109, 116, 120, 131, 135, 139, 148, 149, 164, 176, 178, 192, 208, 222–3; ‘data based on IMF methodology’, 226(n19) President, 127, 135, 150 Study on the African Energy Programme, 127 African Development Fund (ADF), 40, 133, 155, 158, 208 African Development Fund Credits, 151 African Diversification Fund (proposed), 197

Index 235 African Economic Community (AEC), 3, 7, 119, 130, 176–7, 179, 199, 200, 203, 206, 213, 224 Abuja Treaty (3 June 1991), 104–11 Assembly, 106, 108, 110 common market, 105, 107–8 Council, 106, 108, 110 customs union, 107 documents, 7, 104–11 establishment in six stages lasting thirty-four years, 106–8, 176 free trade area, 107 harmonization, 106 international negotiations, 111 ratification, 106 sanctions, 106 Secretary-General, 110 suspension of any recalcitrant member, 106 tariffs maintained against nonmembers, 105 Third Ordinary Session of the Economic and Social Commission (1999), 223 third states, 110–11 Treaty Establishing, 93, 104–11 see also OAU/AEC African Employment Report (1995), 183 African Energy Commission, 127 African Financial Community (CFA), 11 African governments, 24, 33, 47, 48, 49, 59, 98, 99, 122, 123, 125, 126, 128, 130, 132, 134, 141, 143, 146, 149, 175, 176, 178, 180, 182, 184, 188, 189, 202, 206, 219, 221, 223, 224 improved policy frameworks, 216 improvements to economic competitiveness, 217 integration of aid into planning and budgeting structures, 83 weak technical capacity, 82 weaknesses in development management capacity, 81 African Maritime Transport Charter, 127–8 African Ministers of Finance: Seventh Session (Addis Ababa, 6 May 1999), 220–4

African Ministers of Transport and Communications Tenth Conference (March 1995), 178 African Monetary Fund (prospective), 149 African Platform for Action (Dakar, November 1994), 184 African Population Commission (APC, 1994), 186 African Regional Nutrition Strategy (1993–2003), 124 African Specific Fund (proposed), 170 African Union (AU), xv, 93 Assembly, 113 Constitutive Act, 93, 112–13 objectives, 112 principles, 113 successor to OAU, xv, xvi Africa’s Information Society Initiative (AISI): An Action Framework to Build Africa’s Information and Communications Infrastructure, 200 Africa’s Priority Programme for Economic Recovery (APPER), 1986–90 (Addis Ababa, 1985), 118, 119, 136, 137, 140–1, 142, 144, 145, 147, 148, 158 Agenda 21 (1992), 65, 66, 128, 185 Agreement on the Common Fund for Commodities, 157 agricultural processing, 156 agricultural products, 73 agriculture, xv, 13, 17, 33, 86, 92, 95, 99–100, 102, 105, 106, 107, 124, 125, 147, 156, 187–8, 200, 208 1965–73, 14 declining productivity, 185 exports, 99 large-scale projects, 49 sub-Saharan Africa (1965–94), 12f value-added (1994–5), 175 agro-food processing, 130 air transportation, 101–2, 178 airlines, 127 Algeria, 27, 29, 30, 45 Angola, 27, 29, 45, 163, 217 apartheid, 117–18, 137, 145

236 Index APPER, see Africa’s Priority Programme for Economic Recovery ARABSAT, 127 Asia, 189 capital flight (compared with Africa), 36 competition with Africa, 196 FDI flows (1995) into, 195 FDI flows to Africa from, 45 investment/GDP ratio, 28, 91 people in extreme poverty (1987–93), 63 proportion of GDP supplied by ODF (1990s), 35 savings/GDP ratio, 36, 94 wealth held overseas by private citizens, 94 Asian crisis, see East Asian financial crisis Asian ‘tiger’ economies, 41 assassination, 113 AU, see African Union auditing, 129 Australia: OECD-DAC member (1998), 227(n1) Austria: OECD-DAC member (1998), 227(n1) balance of payments, 22t, 25, 26, 28, 29, 30t, 57, 95, 141, 146, 151, 226(n19) Bamako Convention, 185 bank lending, 2, 14, 16, 221 bank loans (commercial), 37, 43, 46, 47, 145 to developing countries (1990–98), 44t see also loans banking, 24, 56, 59, 160, 174 banks, 30t, 128 African multilateral development, 164 commercial, 43, 44t, 46, 47, 144, 145, 152, 154, 158, 193 freezing of African funds, 138, 145 private commercial, 138, 159 regional development, 38, 116 BCEAO, 164

Beijing: Fourth UN/World Conference on Women (September 1995), 64, 68, 69–71, 184 Beijing Declaration on Women (1995), 184 Beijing Platform for Action (1995), 184 Belgium: OECD-DAC member (1998), 227(n1) Bien Aimé, Rico, xviii bilateral agencies, 82 assistance, 39t, 138 creditors, 52f funding, 66 loans: conversion into grants, 138 system, 38 bio-diversity, 66, 128, 185 Bolivia: completed the HIPC process (1998–9), 53 bonds, 37, 43, 44t, 46, 174 borrowing, 16, 18, 24, 29, 30t, 48, 49, 226(n19) Botswana, 10, 14, 17, 27, 29, 46, 71, 218 Botswana Stock Exchange, 47 Bouteflika, President Abdelaziz, 165 Brady Initiative/Plan, 133, 193 brain drain, 56, 84, 85, 97, 122, 126, 200 ‘retaining human capital’, 129 Brazil, 45, 227(n8) breast-feeding, 72 Bretton Woods institutions, 33, 37–8, 91, 92, 163, 193, 211, 214 IMF/World Bank Annual Meetings 1999, 167–8 meetings, 169 ‘strong hand’, 206 see also IMF; World Bank Brown, Gordon, 48 budget deficits, 23, 24, 28, 57, 129, 146, 173 budgetary allocations, 98 constraints, 211 policy, 3 reform, 173–4 situation, 153

Index 237 budgeting, 82, 83, 86, 129 budgets, 80, 95 bureaucracy, see civil service Burkina Faso, 4, 53, 217 Burundi, 10, 28, 163 business facilitation, 218

Cairo Seventeenth Extra-Ordinary Session, OAU Council of Ministers (1995), 122, 176 UN Conference on Population and Development (ICPD 1994), 64, 69, 70–1, 125, 186 Cairo Agenda for Action (OAU 1995), 31, 83, 85, 92, 175–6, 176–7, 179, 180, 182, 185, 188, 189, 199–200, 201, 202, 204, 206, 211, 226(n23), 231(n8) Africa’s external debt, 133–4 capacity-building and human resources development, 124–6 democracy, governance, peace, security, stability, sustainable development, 123–4 effective mobilization and efficient utilization of resources, 129–30 employment, 184 environment, 128 follow-up mechanism, 134–5 food security, 124 industrialization, 126 mineral resources and energy, 126–7 preamble, 121–3 regional economic cooperation and integration, 130–1 structural transformation of African economies, 126–8 text, 121–35 trade, 128 trade and development, 132–3 transport and communications, 127–8 understanding, appreciation and support of Africa’s development efforts, 131–2

what we can do for ourselves, 123–31 what we require from our development partners, 131–4 Cairo International Seminar (1989), 160 Cameroon, 16, 27, 192 Canada, 38, 40, 65, 134, 227(n1) capacity-building, 92, 102, 116, 124–6 civil service, 85–6 economic management, 86 institutional, 95, 96–7 trade, 100 Cape Verde, 217 capital, 94, 96; free movement, 105 capital flight, 35, 36, 37, 51, 54–6, 59, 90, 93, 94, 145, 182, 221 loss of potential domestic tax receipts, 54–5 ‘not necessarily associated with debt problem’, 55 see also FDI capital flows, 30t, 61, 102 capital flows initiative, 114–16 capital formation, 147 capital gains, 145 capital markets, 46, 57, 58, 129, 149, 195, 221 Caribbean, 3, 93 cash crops, 188 Central African Republic, 28, 56 central banks, 24, 56, 129 central planning, 182 CFA, see African Financial Community CFA franc zone, 198–9 Chad, 10 Challenges of Financing Development in Africa (theme, 1999), 220 chambers of commerce, 106, 134 child mortality, 70, 71–2, 172, 186 child soldiers, 72 children, 64, 67, 68, 70, 71–2, 125, 201 China, 45, 67, 79, 216 civic rights, 125 civil conflict, 180 civil service, 85–6, 97, 173, 206;

238 Index civil society, 63, 66, 68, 75, 77, 78, 80, 84, 86, 87, 92, 96, 101, 163, 164, 179, 189 campaign for debt relief, 48 civil strife, 10, 81, 122, 124, 187, 223 climate change, 66, 185 Club of Rome, 63 coastal areas, 184 cocoa, 11, 18, 26, 27, 188, 196 coffee, 11, 18, 26, 188, 196 Cold War, 38, 41, 49, 79 aftermath, 62, 63, 64, 74–6, 78–9, 91, 96, 117, 223 ‘peace dividend’ fails to materialise, 41 collective self-reliance, 104, 118, 119, 122 Cologne, 4, 32, 53, 168 colonialism, 11, 103, 137 COMESA, see Common Market of Eastern and Southern Africa Commission of the European Communities, 227(n1) commitment, 172, 207 commodities, 13, 14, 18, 23, 27, 31, 59–60, 92, 124, 128, 138, 145, 157, 166, 174, 196–7 commodity dependence, 26–8, 32, 34, 58, 89, 90 ‘bane of African economies’, 26 commodity market: imperfections, 198, 204 commodity prices, xv–xvi, 1–2, 4, 48, 81, 88–9, 120, 137, 145, 155–6, 169, 190, 197, 198, 203, 208, 210, 216 importance for economic buoyancy, 36 Common African Agricultural Programme (CAAP), 124 Common Fund for Commodities, 197 Common Market of Eastern and Southern Africa (COMESA), 100, 101, 217, 177 communications, 105 communism, 38 community development projects, 190 community groups, 189

Community Solidarity, Development and Compensation Fund, 105 Comoro Islands, 29 comparative advantage, 11, 203, 218 competition, 99, 121, 127, 198 competitiveness, 60, 75, 89, 125, 126, 157, 189, 198, 200, 203, 217, 219, 223, 224 concessional debt, 49 finance, 39t financing, 152 flows, 144 lending, 41 loans, 58, 145 resources, 133 concessionality, 156 conditionalities, 78, 118, 132, 145, 152, 155, 156, 194, 205, 209 conflict, 79, 89, 102, 128 conflict resolution, 104, 113, 119, 206 Congo Brazzaville, 27, 192 Congo, Democratic Republic of (previously Zaire), 16, 27, 28, 29, 163 conservation, 130 constraints, 3, 6, 8, 11, 31, 35, 36, 59, 62, 91, 208, 211, 217, 223 development finance, 94 financial, 37 ‘fundamental’, xvi ‘human, institutional, infrastructure’, 221 structural, 74, 80, 212, 221 supply-side, 8, 33–4, 37, 62, 74, 92, 100, 169, 222 consumer groups, 101 consumption, 5, 89, 98; luxury consumption, 99 Contact Group, 168, 170 contraception, 186 contract enforcement, 79, 130 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 216 cooperation, 103, 104, 110, 150, 206 coordination, 105, 108, 109, 112, 223 aid contributions, 85

Index 239 macroeconomic and sectoral policy, 101 coordination mechanisms, 78 Copenhagen: UN Conference on Social Development (1995), 60, 64, 66–7, 68, 69, 125, 187, 194, 204 poverty-reduction target, 94 copper, 18 corruption, 49, 55, 56, 59, 216, 218 Côte d’Ivoire, 4, 10, 13, 14, 16, 27, 30, 45, 46, 47, 56, 192, 217 cotton, 18, 188 ‘created assets’, 219 credit, 24, 129, 173, 184 credit guarantee schemes, 116 credit insurance, 149 creditor community, 145 countries, 140, 158, 161, 164, 167, 169 governments, 114 creditors, 133, 162, 163, 165, 167, 170, 212 bilateral and multilateral, 49–50 commercial, 52f official, 30t perceptions, 55 creditworthiness, 47, 147, 166, 195 crimes against humanity, 133 cultural agreements, 110 development, 112 structure, 147 culture, 105 currency, 16, 25, 51, 146, 154, 199 devaluation, 85 movements, 227(n8) customs union, 107 DAC (Development Assistance Committee), see Organization for Economic Cooperation and Development Dakar, 125, 184 Dakar Consensus, 125 Dakar/Ngor Declaration on Population, Family and Sustainable Development (1992), 125, 186

debt, 37, 90 African panel of experts, 170 bilateral, 166, 168, 191, 192 commercial, 49, 161, 168, 170, 193 external, 13, 30, 31t, 47–54, 55, 118, 132, 133–4 fiscal burden, 53 ineffective ‘initiatives’ to resolve problem, 50 internal, 129 measurements of ability to pay, 51 multilateral, 50, 133, 134, 161, 166, 168, 170, 190, 191, 192 non-concessional, 144 official, 49, 51, 168, 192 private, 166 unsustainable, 29–32, 34 debt burden, 4, 23, 35, 36, 43, 47–8, 55, 56, 59, 93, 94, 98, 118, 120, 133–4, 140–59, 175, 203, 208, 211, 217, 220, 221 advocacy, 167–8 commercial loans, 152 composition, 166 conclusion, 158 evolution, magnitude and structure, 143–4 impact, 146–7, 166–7 improving African primary commodity export earnings, 155–7 major causes, 144–6 measures to alleviate, 147–58 measures to be implemented by African countries, 147–50 measures to be implemented by developed countries and international financial institutions, 150–8 measures to support efforts of leastdeveloped countries, 157–8 multilateral loans, 151–2 nature, 165–6 need for coordinated international action, 48 official bilateral and officiallyguaranteed loans, 151 origins (1970s), 48–50

240 Index debt burden cont. percentage of GDP and exports, 30–1 recommendations, 166–8 rescheduling, 152–3 resources for development, 154–5 sustainability, 51 unsustainable, 32, 218 debt cancellation, 137–8, 150, 158, 165, 168, 169, 170, 191, 192 ‘moral hazard’, 160, 167 ‘must not be at expense of ODA’, 167 sought, 164 debt crisis, 136–9, 140–59, 224 ‘not just a liquidity problem’, 50 OAU documents, 93, 114–224 solution, 190–3 strategies towards sustainable relief (1997), 160–2 Third Extra-Ordinary Assembly of the OAU (December 1987), 136–9 debt initiative, 114–15 debt forgiveness, 226(n19) debt relief, 4, 31, 32, 47, 48, 51, 53–4, 89, 94, 95, 98, 114–15, 134, 138, 152, 153, 163, 208, 211 bilateral, 164 ring-fencing of savings, 168 debt sustainability analysis (DSA), 163 debt swaps, 161 debt-rescheduling, 41, 50, 133, 138, 142, 144, 145, 150, 152–3, 191, 192, 193, 204 debt-servicing, 3, 30–1, 36, 48, 49, 55, 94, 98, 114, 134, 136, 137, 138, 140, 143, 144, 145, 147, 151, 152, 157, 158, 166, 167, 190–1, 208 ratio to export earnings, 18–19, 22t, 51, 141–2 ratio to GDP, 53 ratio to government revenues, 51, 228(n47) debtors’ cartel, 161 decentralization, 123, 180 decolonization, 117 defence, 113; need to reduce expenditure on, 119 demand elasticities, 4, 37, 141, 222

demand management instruments, 198–9 democracy, 123–4, 194 democratic principles, 112, 113 democratization, 87, 119, 179–81, 203, 204 Denmark, 38, 227(n1) deregulation mining sector, 175 trade and business, 174 desertification, 124, 185 destabilization, 145 detainees, 68 devaluation, 199 developed (industrial) countries, 14, 17, 18, 54, 59, 63, 75, 84, 121, 137, 138, 142, 143, 145, 159, 189, 197, 222 debt-relief measures to be implemented, 150–8 ‘have not lived up to commitments’, 141 need for change in banking regulations, 56 developing countries, 3, 13, 14, 16, 17, 48–9, 63, 64, 65, 75, 78, 137, 140, 149, 152, 155, 159, 216, 222 Africa’s declining share in trade (1980–95) of, 198 ‘capital flight’, 54 child mortality, 70 Cold War era, 38, 41, 49, 79 commercial bank loans, 47 debt, 50, 160 extreme poverty, 67 FDI, 29, 43–6, 130, 195, 215, 228(n24) human development, 74 illiteracy, 42 life expectancy, 42 middle-income, 42 ‘net long-term resource flows’ (1990–98), 44t savings/GDP ratio, 28, 36, 57, 94 development, 35, 37, 41, 42, 55, 74, 86, 94, 105, 122, 129, 132–3, 137, 138, 140, 142, 146, 150, 151, 153, 165, 180, 191, 201, 212 aid effectiveness, 80–1

Index 241 changed attitudes, 205 ‘devastating’ impact of debt crisis, 166 economic, 5, 17, 113 economic, political, social, 87 and environment, 184–5 ‘fundamental human right’, 68 market-oriented approach, 79 population and, 185–7 programmes, 125, 185 resources for, 154–5 self-sustaining, 118, 122 socio-economic, 6, 60, 62, 119, 172, 206, 208 strategy, 100 see also sustainable development development assistance, 189, 201, 202 development finance, xv, 48, 90–1, 102, 149, 220–4 ‘non-conventional source’, 54 see also economic recovery and paradox of financial flows development management capacity-building in civil service, 85–6 capacity-building for economic management, 86 improving, 83–5 new perspectives, 77–87, 90–1, 230–1 disabled people, 68 disease, 64, 187 diarrhoeal, 72 eradication programmes, 112 guinea worm disease, 72 tropical, 97 distribution, 188, 197 diversification, 6, 28, 60, 61, 75, 95, 98–100, 149, 156, 172, 188, 196–7, 201, 204, 208 absent, 13 exports, 16 international support for African, 197 Diversification Fund for African Commodities, 132, 133 doctors, 184 donors, 5, 52f, 80, 86, 134, 187, 203–4

bilateral, 202, 206, 226(n1) fatigue, 160 multilateral, 202, 206 ‘outdated concept’, 78 perceptions, 76 poor coordination, 81, 82 drought, 1, 88, 124, 128, 146, 187, 210 East Africa, 11, 71, 217 East Asia, 10, 63, 67, 75, 77, 79, 97, 199 East Asian financial crisis (1997–8), 2, 22, 25, 26, 31, 43, 79, 88, 210, 216, 227(n8) Eastern Europe, 117, 157, 160, 195 ECA, see United Nations Economic Commission for Africa ECCAS, see Economic Community of Central African States (ECCAS) economic agreements, 110 economic blocs, 117 Economic Commission for Africa (ECA), see United Nations Economic Commission for Africa (UNECA) Economic Community of Central African States (ECCAS), 100, 177 Economic Community of West African States (ECOWAS), 100, 177 Economic Governance Initiative, 114, 115 economic growth, xv-xvi, 2, 3, 4, 5, 6, 11, 22, 51, 53, 56–7, 58, 75, 80, 81, 84, 86, 88, 89, 114, 119, 124, 129, 133, 138, 147, 148, 151, 158–9, 165, 168, 169, 180, 187, 196, 208, 210, 211, 220, 221 1965–73, 10 accelerated, 190 conditions for, 97, 175 debt-led strategy, 48–9 ‘devastating’ impact of debt crisis, 166 developed world (slowdown, post oil shock of 1973), 13 East Asia, 10, 63, 75, 77, 79, 97, 101

242 Index economic growth cont. essential for sustainable human development gains, 68 factors inhibiting, 96 foreign aid needed for, 36 improved African performance, 207 integration of factors necessary for, 87 population, xv prospects, 8 rate required to meet 2015 povertyreduction targets, 222 rates, 10, 17, 147 sustainable, 90, 96, 98, 102, 131, 173–6, 179, 193, 194, 201, 222 targets, 172, 181, 193, 204 trade the engine of, 197–8 weak, 32 world economy, 150, 155 economic integration, 74, 109, 119 economic management: capacitybuilding, 86 economic performance, 2, 33–4, 210 1980–94, 17 ‘more rapid export growth essential’, 27–8 variations across the continent, 10, 13–14, 17, 22–3, 23t economic recovery, 7, 36, 133, 138, 146, 148, 150, 151, 158–9, 173, 191, 195, 220–1, 203 mid-1990s, 92 translation into growth, 224 weak (in Africa), 67 ‘weak, precarious, hedged by supply constraints’, 92 economic recovery and paradox of financial flows, 35–60, 61, 89, 90, 102, 221, 222, 224, 226–9 conclusion, 6, 88–102 development finance gap, 90–1 documents, 7, 103–224 economic performance postindependence (1965–98), 8–34, 225–6 foreign aid: new priorities, 61–76, 90, 229–30 foreign aid delivery and development management:

new perspectives, 77–87, 90–1, 230–1 human development, 97–8 introduction, 1–7, 225 macroeconomic stability, 95 ‘no simple panaceas’, 95–102 peace, political stability, responsive governance and institutionbuilding, 96–7 private-sector development, economic diversification, trade and export expansion, 98–100 regional cooperation and integration, 100–2 stagnation in investment and financial flows, 91–4 summary, 102 economic reform, 35, 42, 47, 48, 49, 89, 158, 160, 168, 169, 174, 195, 196, 197, 206, 211, 215 implementation, 221 political and social costs, 137, 141, 173, 175 Economic and Social Commission (ECOSOC); established under Abuja Treaty, 135 economic and social development, 62, 136 economic stability, 51 economies of scale, 92, 100, 101, 223 economists, 184 ECOWAS, see Economic Community of West African States education, 42, 64, 67, 73, 87, 97, 105, 118, 124–5, 171, 172, 183–4, 185, 186, 230(n15) deterioration in physical infrastructure, 187 flight of qualified teachers, 186 primary, 68–9, 72, 186 secondary, 69 technical, scientific, technological, 124, 183 education spending, 48, 53 efficiency, 89, 121, 125, 141, 148, 196, 200, 218, 219 Egypt, 27, 30, 45, 46, 217 elections: free and fair, 123 electricity grids, 131

Index 243 electronic communication, 178–9 elites, 180 embargoes, 133 emergency relief, 201 employers, 110 employers’ organizations, 134 employment, 67, 125, 126, 183, 184, 187, 208 energy, 45, 86, 102, 105, 107, 126–7, 130, 218 engineering/engineers, 126, 184 Enhanced HIPC Framework, 53–4 entrepreneurial activities, 102 class, 98, 99 dynamism, 74 entrepreneurs, 13, 223 environment, 63, 64, 65–6, 75, 106, 119, 124, 128, 146, 178, 194, 199–200 and development, 184–5 national action plans, 184 equal opportunities, 125 Equatorial Guinea, 27, 163, 218 equity capital, 145 equity flows, 2, 37, 43, 46, 221 to developing countries (1990–8), 44t equity investment, 129 Eritrea, 217 Ethiopia, 4, 31, 192, 205 ethnic conflict, 180 ethnic differences, 89 euro zone, 40 Europe, 6, 79 European Development Fund (EDF), 133 European Union (EU), 26, 99, 222 African trade with, 196 FDI, 43, 45 monetary union (Maastricht) criteria, 40 political and monetary union, 117 preferential access for African exports, 217 single market, 121 trade/GDP ratio, 98 exchange rates, 16, 31, 95, 129, 146, 154, 182, 199

appreciation, 56 depreciation, 24–5 fluctuations, 145 ‘misaligned’, 23–4, 55 official, 199 ‘parallel’, 199 stability, 25 volatility, 154 excise duties, 174 expectations, 5, 89 expertise/know-how, 98 export base, 149, 198 export earnings, 2, 4, 8, 9f, 10, 14, 18, 19, 27, 28, 30, 33, 35, 51, 53, 88, 89, 93, 137, 138, 141, 145, 150, 153, 155–7, 166, 190, 196, 197, 208, 210, 220 1965–73, 11 ‘bane’ of commodity dependence, 26 world market access, 156 export marketing boards, 11 export promotion, 106, 198 export-oriented activities, 74, 98, 182 export-processing zones (EPZs), 182 exports, 2, 3, 13, 16, 18, 25, 27, 30t, 75, 90, 101, 105, 118, 124, 127, 128, 141, 149, 166, 197, 217 external debt as proportion of, 50 goods and non-factor services, 9f growth/expansion, 22t, 95, 96, 98–100 markets, 92 processed, semi-processed, manufactured, 197 under-invoicing, 145 external debt, see debt, debt burden external financial flows, 4, 5, 6, 8, 9f, 10, 17, 29–32, 33, 34, 37–47, 90, 93, 122, 157, 181, 193, 222, 226(n19) concessional, 154 crucial, 8 declining, 91–4 ‘non-debt creating’, 29, 30t, 226(n19) official, 37–41, 89 paradox, 89 private, 89 ‘stagnant or declining’, 32

244 Index external shocks, 1, 2, 26, 146 see also East Asian financial crisis; oil extractive sector, 29, 45

factors of production, 41 Fajana, Professor Femi O., xviii family, 184 family planning, 70–1, 186, 230(n15) famine, 124, 181 FAO, see United Nations Food and Agriculture Organization farmers’ unions, 189 FDI, see foreign direct investment fertility (reproductive), 69, 186 finance, 105, 217 ‘lifeblood of economic development’, 220 financial account, 30t deepening, 57–8 institutions, 129, 174 instruments, 116 markets, 47, 57, 58, 116, 221, 224 policy, 108 sector, 55, 129, 174, 221, 224 services, 101, 102 system, 55, 58 financial flows, paradox of, 35–60, 61, 89, 221, 226–9 capital flight, 54–6 commercial bank loans, 47 diminishing just when they could have been most effective, xv, 4, 35, 221 explaining the decline in ODA, 41–3 external financial flows, 37–47 external debt, 47–54 foreign direct investment (FDI), 43–6 net long-term resource flows to developing countries (1990–98), 44t net official long-term flows to developing countries (1990–98), 39t official flows, 37–41

private debt flows, 46–7 private flows, 43 savings, 56–9 summary, 59–60 summary of the HIPC initiative, 52f see also external financial flows; resource flows Financial Market Integration Task Force, 116 Finland, 227(n1) fiscal balance, 22t, 24 deficits, 16–17, 55, 75–6 conditions, 25 management: ‘more prudent’ (1990s), 24 policy, 3, 28, 49, 108, 173, 211 reform, 57, 58–9 fisheries, 66, 124, 188 flooding, 1, 88, 210 food, 125, 128, 175, 183, 185 aid, 188, 201 prices, 25, 26 production, 25, 118, 119, 146, 156 security, 64, 72–3, 124, 187–8, 203 foreign aid, 4–5, 35, 37, 41, 57, 76, 80–1, 92, 93–4 commercial motives, 81–2 dependency, 54 fatigue, 42, 76 flows, xv ‘fungibility effect’, 5 packages, 209 terminology, 226–7(n1) see also Overseas Development Assistance foreign aid: new priorities, 61–76, 229–30 assessment, 74–6 environmental sustainability, 65–6 human development, 68–74 human rights, 67–8 international consensus on priorities for foreign aid, 63–5 poverty eradication, 66–7 foreign aid delivery and development management: new perspectives, 77–87, 230–1 aid effectiveness, 80–1

Index 245 assessment, 86–7 capacity-building in the civil service, 85–6 capacity-building for economic management, 86 improving development management, 83–5 inability to cover recurrent costs, 82 lack of local ownership, 81–2 poor coordination in aid, 82 proliferation of stand alone projects, 83 foreign direct investment (FDI), xv, 2–3, 11, 29, 36, 37, 43, 43–6, 54, 56, 58, 74, 93, 130, 132, 154, 166, 167, 182, 194, 195–6, 208, 228(n24) African share of world total inflows low and stagnant, 215, 221 concentrated in a handful of African countries, 215 ‘disappointing’, 211 rate of return (Africa), 196, 216, 221 ‘resource-seeking’, 45–6 World Investment Report [WIR] 1998 on Africa, 215–19 see also capital flight foreign exchange, 11, 19, 25, 141, 146, 148, 149, 150, 208 foreign investment, 226(n19) foreign portfolio investment, 58 forests, 66 franc zone, 192 France, 29, 38, 40, 45, 133, 182, 194, 216, 227(n1); free movement: persons, goods, services, capital, 105, 108 free trade, 105, 107 freedom: of press, speech, association, conscience, 123 fruits and vegetables, 188 Gabon, 14, 16, 27, 29, 45, 192 gas: FDI, 29 GDI, see United Nations Development Programme Gender Development Index GDP, see gross domestic product gender, 64, 69, 113, 125, 183, 184, 187

General Data Dissemination System (GDDS), 221 Generalized System of Preferences, 128 Geneva, 210, 219 genocide, 113 Germany, 29, 40, 45, 192, 216, 227(n1) Ghana, 27, 29, 46, 47, 56, 163, 217, 218 girls, 97, 125 global economic imbalances, 222, 224 economy, 6, 8, 37, 112, 121, 126 partnership (principle), 171, 172 village, 5 Global Coalition for Africa, 206 Global Environmental Facility (GEF), 66 globalization, 41–2, 62, 74, 75, 76, 77, 79, 80–1, 87, 89–90, 91, 93, 102, 125, 126, 207, 212, 215, 222–3, 224 ‘profoundly inequitable’, 222 gold, 26, 53 goods and services, 41, 46, 58, 82, 105, 133, 218, 223 governance, 6, 123–4, 179, 203, 204, 217, 220 good, 64, 84, 94, 102, 112, 113, 167, 169, 180 improved, 114 political and economic, 116 reform, 37, 88 responsive, 95, 96–7, 189 government, 78 ‘minimal interference’, 5, 41 responsibility for reduction of malnutrition, 72 unconstitutional change, 113 government revenues, 51, 228(n47) grace periods, 152, 153, 155, 158 see also debt-rescheduling grains, 73 grants, 37, 39t, 158 Great Lakes Region (Africa), 29 gross domestic product (GDP), 11, 16, 17, 22t, 60 Africa (1991–8), 1

246 Index GDP cont. external debt as proportion of, 50 growth (1995–8), 22 importance of oil, 27 investment ratio, 28 per capita growth, 13–14, 23t proportion supplied by ODF (1990s), 35 rate of growth required to reduce poverty, 94 real growth (1990–8), 23t savings ratio, 28–9 sub-Saharan Africa (1965–94), 9f gross national product (GNP), 11, 38, 40, 172 Group of Seven/Group of Eight (G7/G8), 40, 163, 164 1991 Summit (London), 191 1996 Summit (Lyon), 191 1995 Summit (Halifax, Canada), 134 1998 Summit (Birmingham), 65 1999 Summit (Cologne), 4, 32, 53 2000 Summit (Okinawa), 168 letters to be addressed to, 168–9 listed, 169 OAU Mission (prospective) of Foreign/Finance Ministers, 169 Group of Seventy-Seven, 137, 140 GSP schemes, 217 Guinea: debt relief, 192 Guinea-Bissau, 4 Guyana: completed the HIPC process (1998–9), 53 Habitat II (1996), 73 Halifax (Canada), 134 Harare, 189, 213 harmonization, 105, 106, 107, 108, 109, 112, 116, 150 maritime, 128 payment systems and investment policies, 100 hazardous substance accumulation, 66 HDI, see United Nations Development Programme Human Development Index health, 64, 125, 171, 172, 185, 200 health care, 67, 97, 112, 125, 183, 186–7, 230(n15)

health services, 42, 70 health spending, 48, 53 Heavily-Indebted Poor Countries, see HIPC High Commissioner for Human Rights (proposed), 68 HIPC (Heavily-Indebted Poor Countries), 3–4, 31–2, 114, 115, 168 mostly in Africa, 36, 94 HIPC Initiative (1996), 50–4, 163–4 ‘advocated by Bretton Woods Institutions’, 161 ‘enhanced’ (1999), 53–4 shortcomings, 51, 53, 169, 211 summary, 52f HIPC Initiative: Enhanced, 167–8 HIV/AIDS, 70, 71, 97 homelessness, 73 hospital beds, 42 hospital care, 187 housing, 67, 73–4, 118; ‘shelter’, 172 human capital, 181 human development, xv, 6, 35, 68–74, 79, 86, 90, 92, 95, 97–8, 119, 190, 207 advancement of women, 69–70 elimination of gender disparity in education, 69 family planning, 70–1 gender equality, 69 halving of number of undernourished people by 2015, 72–3 improving well-being of children, 71–2 infant and child mortality, 70–1 maternal mortality, 70–1 right to housing, 73–4 targets, 62, 90, 97 universal primary education by 2015, 68–9 Human Development Report 1998 (UNDP), 69 human settlements: UN conference (Istanbul, 1996), 64, 73 humanitarian assistance, 134 humanitarian emergencies, 72, 73 human life: sanctity of, 113 human reproduction, 70–1 reproductive health, 230(n15)

Index 247 human resources, 3, 4, 33, 37, 74, 105, 109, 122, 124–6, 131, 147, 148, 182–4, 189, 199–200, 211, 219, 220 underdevelopment, 91 human rights, 64, 67–8, 75, 104, 112, 113, 119, 123, 181, 184 Vienna conference (1993), 64 human welfare: ‘limited gains’, 74 human well-being, xvi, 1, 5, 71–2, 81 hydraulic power generating stations, 131

ICPD (International Conference on Population Development, Cairo, 1994), 125 IDA, see International Development Association IDGs, see International Development Goals IGAD, see Inter-Governmental Authority on Development IMF (International Monetary Fund), 30t, 32, 39t, 49–50, 51, 52f, 72, 100, 115, 134, 143, 145, 153, 154, 155, 163, 167–8, 211, 226(n19) net recipient of resources from Africa, 144, 151 poverty-alleviation adopted as major policy objective, 90 poverty-reduction and growth facility, 99 September 1999 meeting, 53 see also World Bank IMF: Articles of Agreement, 199 IMF: Compensatory Financing Facility (CFF), 156 IMF: Managing-Director, 151–2 IMF: Special Drawing Rights (SDRs), 155, 192 IMF: Structural Adjustment Facility, 152 immunisation, 72 import costs, 48 curtailment, 198 duties, 182

growth, 22t licensing, 174 prices, 14 substitution, 11, 98, 182 imports, 4, 11, 16, 19, 26, 30t, 33, 89, 98, 105, 118, 128, 141, 144–5, 153, 166, 182, 188, 196 food, 124, 146 manufactured goods, 120 over-invoicing, 145 incentives, 59, 84, 99, 146, 149, 182, 212 income, 55, 89; per capita, 17, 157 incomes, 126 indebtedness, 16–17 independence, 103, 112 indigenous people, 68 individual rights, 85 industrialization, 11, 126 industrialized countries, 14 industry, 13, 17, 33, 86, 92, 95, 102, 105, 107, 119, 130, 200, 208 nascent, 11, 13 sub-Saharan Africa (1965–94), 12f inequality, 96 infant mortality, 5, 69, 70 inflation, 16–17, 22t, 23, 24, 25, 55, 57, 85, 95, 148, 173–4 informal sector, 98, 101, 129 information, 106, 131, 150 information networks, 197 information science and production technology, 121 information technology, 5, 41, 78–9, 89, 178, 200 infrastructure, 3, 4, 6, 11, 28, 35, 37, 74, 86, 95, 101–2, 116, 118, 125, 130, 131, 166, 168, 180, 183, 187, 195, 197, 198, 211, 217, 219, 220, 223 ‘inadequate social and economic’, 204 rural, 67 initiatives, 133, 161, 162 injustice, 48 inputs, 99, 105 instability, 89, 102, 192–3, 216 institution-building, 33, 95, 96–7, 100, 102

248 Index institutions, 86 capacity, 83–4 improvement to, 217 multi-national, 106 reform, 174 integration, 112, 116, 119, 130–1, 176–9, 204, 206 more fully into global economy, 80 progressive, 109 Inter-Governmental Authority on Development (IGAD), 100 interest rates, 24, 49, 129, 138, 141–2, 144, 145, 146, 150, 151, 152, 153, 154, 182, 190, 199, 221 international, 17, 18 positive real, 57 international capital market flows: to developing countries (1990–98), 44t international community, xvi, 5, 114, 126, 131–2, 136, 137, 138, 139, 143, 148, 154, 158, 171–3, 181, 185, 203, 204, 208 African expectations, 176 commitments ‘not honoured’, 204 commodities, 196–7 environment, science and technology, 199–200 FDI, 195–6 ODA, 194–5 resource flows, 193–6 responsibilities and commitment, 190–202 role of non-African NGOs, 202 role of UN system, 200–2 solution to Africa’s debt problem, 190–3 support for diversification of African economies, 197 support for regional integration, 199–200 trade, 197–9 ‘weak support’ of Africa, 203 international cooperation, 103, 112 International Development Association (IDA), 40–1, 114, 133 IDA–7, 154 IDA–8, 154 IDA relief fund (1989–), 192 IDA resources, 154–5, 192

International Development Goals (IDGs), 114 international economic environment, 138, 141, 150 international financial institutions, 48–9, 97, 118, 137, 138, 140, 142 ‘have not lived up to commitments’, 141 measures to be implemented, 150–8 International Fund for Agricultural Development (IFAD), 155 International Maritime Transport and Ports, 128 International Monetary Fund, see IMF international monetary system, 137 ‘should be more equitable’, 150 international organizations, 110–1 international system, 131–2 democratization, 132 ‘inequitable’, 120 internet (information superhighway), 127, 179 intervention: right to request, 113 interventionist policies, 41 investment, 4, 6, 8, 9f, 10–11, 16, 19, 22t, 23, 28, 31, 34, 36, 48, 56–7, 60, 74, 75, 88, 89, 95, 98, 99, 101, 102, 116, 131, 134, 144, 148, 153, 157, 174, 179, 181, 184, 187, 192, 211, 212, 222, 228(n24) domestic, 54 joint African projects, 149 joint programmes, 105 lack of profitable opportunities, 55 ‘lacklustre performance’, 28 low levels, 32 ‘one-stop’ centres, 182 open regimes, 79 private, 5, 13, 21f, 28, 96, 127, 129 promotion, 181–2 public, 3, 13, 21f, 28 special programmes, 158 stagnation, 32–3, 91–4 investment guarantee scheme, 149 investment incentives, 55 investment performance, 61, 91 investment policies, 100 investment productivity, 57 investment promotion agencies, 217

Index 249 iodine deficiency, 72 Ireland, 40, 45, 215, 227(n1) iron ore, 27 Istanbul: UN conference on human/urban settlements (1996), 64, 73 Italy, 40, 227(n1) ITC (International Trade Centre), 100 Jakarta, 134, 189 Japan, 38, 40, 43, 45, 79, 192, 206, 227(n1) joint ventures, 218 Jomtien, Thailand (UNESCO conference, 1990), 64, 68–9 judicial system, 130 justice, 123 Kampala (cancelled seminar, 1990), 161 Kenya, 10, 11, 13, 14, 16, 46, 56, 163, 217 Kilimanjaro Programme (1984), 186 Klerk, F.W. de, 117 labour, 101, 124, 183, 184, 185–6, 218 labour productivity, 148 Lagos Plan of Action (OAU 1980), 118–19, 123, 127, 149 land, 13, 67, 72 land transportation, 101–2 Latin America, 3, 28, 35, 47, 50, 56, 64, 91, 93, 97, 160, 196 law, 79 international, 132 ‘sound legal structure’ required, 96 law and order, 84 LDC Report (1998), 210, 211, 213 least-developed countries (LDCs), 35, 38, 40, 45, 76, 90, 100, 118, 138, 140, 150, 210, 217 African, 80, 91, 166–7, 187, 213 marginalization, 212 measures to support efforts of, 157–8 savings/GDP ratio (1997), 57 special treatment, 106 legal system, 104

legislation, 106, 116; maritime, 128 legitimacy, bases of, 63 Lesotho, 29 liberalization, 46, 77, 79, 87, 95, 125, 132, 174–5, 199, 211, 215, 218, 222 economic, 195, 212–13 financial, 95 harmonized approach, 101 preferential, 101 price and exchange rate, 182 selective, 99 trade, 95, 105, 128, 164, 217 Liberia, 28, 29, 163 Libreville: Franco-African Summit (October 1992), 192 Libya: oil-exporting country, 27 licences and permits, 182 life expectancy, 42, 71, 172 lifestyles, 5, 89 Limits to Growth (Club of Rome, 1974), 63 literacy/illiteracy, 5, 42, 64, 68, 69, 72, 183 livestock, 124, 188 living standards, 13, 63, 103, 105, 112, 147, 174, 183, 186, 224 loans, 37, 39t commercial, 152 multilateral, 151–2 new, 138, 144 official bilateral, 151 officially-guaranteed, 151 rescheduling, 152–3 should be converted into grants, 151 see also banks lobbying, 162 local authorities, 73 local ownership (of development process), 5, 83–4, 85, 86, 91, 102, 119, 122, 132, 137, 176 lacking, 81, 81–2 Lomé Convention, 128, 130, 217–18, 213, 222 London Club, 144, 153, 191 London Terms, 50 loopholes, 99 low income, 185

250 Index low-income countries, 28, 31, 42, 99, 134, 138, 150, 152, 154, 187, 193, 194 Luke, David, xviii Lusaka: OAU Summit (7.2001), xv, xvii, 93 Luxembourg: OECD-DAC member (1998), 227(n1) Lyon Terms, 50 Macmillan (publisher), 213 macroeconomic adjustment, 48 environment, 92 fundamentals, 1, 8, 10, 23–6, 34, 36, 46, 61, 88, 91, 94, 211, 216, 218, 220–1 imbalance, 8, 13 indicators (Africa, 1990–8), 22t management, 86, 141, 162 performance, 47 policy, 23, 41, 48, 81, 101, 173 reform, 2 situation, 33 stabilization, 91 stability, 5, 6, 46, 55–6, 57, 79, 95, 101, 105, 129 Madagascar, 29, 217 Makhan, Uma, xviii Makhan, His Excellency Ambassador Vijay S. Assistant Secretary-General, OAU, xvi, 205 Assistant Secretary-General, OAU/AEC, 209, 215, 220 author of Policy Consensus, Strategy Vacuum (1997), 213 cited, 45, 47, 73, 230(n26), 228(n 24, n35) Observations on Findings of WIR 1998, 215–19 recommendations to UNCTAD Secretariat, 219 Statement re UNCTAD’s Contribution to the Implementation of UN-NADAF (1998), 210–14 Statement on Mid-Term Review of UN-NADAF (1996), 205–9

Statement at Thirty-third Session of UNECA (1999), 220–4 malaria, 97 Malawi, 4, 27, 46, 163 Malaysia, 45, 215, 216 Mali, 4, 31, 53, 192 malnutrition, 72, 181, 187–8 management, 126 gender balance (target), 184 skills, 218 standards, 174 manufacturing, 11, 14, 18, 98, 106, 218 market access, 164, 167, 169, 197, 198, 208, 217 forces, 5, 41, 82, 121, 173, 192–3, 211 mechanisms, 79 pressures, 18 share, 31, 92, 204 marketing, 92, 106, 188, 197, 217, 218, 223 markets, 73–4, 100, 115 African, 177 dislocated, 181 domestic, 27, 46 emerging, 46–7 regional, 28, 127 role, 84 small country, 223 world, 4, 28, 37, 60, 166, 222 Marshall Plan, 6 maternal mortality, 70, 72, 172, 186 Mauritania, 4, 27, 192 Mauritius, 17, 27, 29, 46, 97 Mbeki, President Thabo, 165 media, 80, 102, 131, 196 press, 189 metals, 26, 29, 106 Mexico: debt crisis, 160 middle-income countries, 194 migrant remittances, 56, 226(n19) migrant workers, 68 migration, 184 military expenditure, 76, 174 minerals, 11, 16, 26, 45, 106, 126–7, 130, 175, 195, 196, 218 mining, 11, 175

Index 251 modalities, 207, 208 modernization, 97, 102, 197 monetary authorities, 24 conditions, 25 policy, 49, 57, 108, 129, 173 monetization, 57, 129 money, 105, 106, 190 money supply, 22t, 23, 24 Morocco, 29, 30, 45, 46, 97 mortality rates, 64 Mozambique, 4, 29, 31, 53, 192, 217, 218 multilateral debt relief, 51 development banks, 163 funding, 39t, 66 institutions, 35, 37–8, 50–1, 52f, 82, 158, 159, 192 Multilateral Investment Guarantee Agency (MIGA), 216 multilateralism: ‘weakening spirit’, 205 Namibia, 27, 29, 47, 117, 217, 218 Naples Terms, 50, 52f, 134, 190, 191, 208 natural disasters, 72, 122, 134, 146, 158, 196 natural resources, 10, 11, 105, 122, 131, 184–5, 194 net factor income, 30t net services, 30t Netherlands, 38, 40, 45, 216, 227(n1) New African Initiative, xv, xvi-xvii, 93, 114–16 actions, 115, 116 capital flows initiative, 114–16 debt initiative, 114–15 mobilising resources, 114–16 ODA reform initiative, 115 private capital flows initiative, 115–16 New York, 205 New Zealand: OECD-DAC member (1998), 227(n1) NGOs, see non-governmental organisations Niger, 28, 192

Nigeria, 10, 13, 14, 16, 27, 29, 30, 45, 46, 163, 193, 217 Niña, La, 1 Niño, El, 1, 216 Non-Aligned Movement (NAM), 66, 120, 134, 137 non-concessional finance, 39t loans, 145 rescue packages, 227(n8) non-governmental organizations (NGOs), 53, 63, 66, 68, 69, 71, 74, 77, 82, 109, 132, 134, 169, 177, 182, 186, 189–90 accountability, 75 non-African, 202 non-interference in internal affairs, 113 non-profit organizations, 202 non-tariff barriers, 105, 107, 132, 155, 197 North Africa, 17, 36, 49 North-South, 120, 159 Norway, 38, 227(n1) numeracy, 68 nutrition, 70, 72, 124, 172, 230(n15)

OA, see official assistance OAU (Organization of African Unity), xvi, 3, 7, 31, 83, 96, 102, 120, 131, 135, 140, 148, 160, 176, 181, 200, 203, 205, 206, 208, 211, 213 Addis Ababa Declaration (11 July 1990), 117–20, 123 ‘Africa’s premier intergovernmental organization’, 93 documents, xvi, 7, 92–3, 103–224 international conference on debt crisis suggested (1985–), 138, 139, 158, 159, 160, 164, 170, 193 (‘not welcomed’, 161) public statements, 93 summit (1996), 161 see also Makhan, Vijay S. OAU Assembly of Heads of State and Government, 84–5, 117–20, 121, 181, 186

252 Index OAU Assessment of the Implementation of the United Nations New Agenda for the Development of Africa (UNNADAF), 93, 171–204 Africa’s responsibility and commitment, 173–90 conclusion and recommendations, 202–4 international agenda, 173–202 introduction, 171–3 responsibilities and commitment of the international community, 190–202 OAU Chairman, 136, 139 OAU Charter (25 May 1963), 103, 120 OAU Contact Group on the African Debt Crisis, 161, 162, 163–4 OAU Council of Ministers, 135, 186 Seventeenth Extra-Ordinary Session (1995), 176 Twenty-Fourth Meeting (Addis Ababa, 1999), 220–4 OAU Declarations Africa’s External Debt Crisis (1987), 136–9 Employment Crisis in Africa (1991), 125 Health as the Basis for Development (1987), 125 Political and Socio-Economic Situation in Africa and the Fundamental Changes Taking Place in the World (1990), 85, 96, 117–20, 179, 180, 230(n7) OAU Extra-Ordinary Assemblies Second (Lagos, 1980), 118–19 Third (Addis Ababa, 1987), 118, 136–9, 160–1 OAU Mechanism for Conflict Prevention, Management and Resolution (1993–), 96, 123–4, 181, 203 OAU Mission on the African External Debt (11.1996–1.1997), 162 OAU Ordinary Assemblies Twenty-First (Addis Ababa, 1985), 118, 140 Twenty-Third, 141

Twenty-Sixth (Addis Ababa, 1990), 117 Thirty-First (Addis Ababa, 1995), 121–35 OAU Peace Fund, 124, 181, 203 OAU Permanent Steering Committee (PSC), 139, 148, 150, 177 OAU Secretariat, 139, 162 OAU Secretary-General, 120, 121, 127, 131, 135, 150, 161 OAU/AEC, 73, 97–8, 211, 215, 217, 222, 223 Extraordinary Summit (Sirte, 1999), 165 first meeting of Ministers of Trade (Harare, 1998), 213 OAU/AEC Contact Group of Africa’s External Debt, 165 OAU/AEC Debt Management and Coordination Unit (DMCU): proposed, 162 OAU/AEC Economic and Social Commission (ECOSOC): Addis Ababa meeting (June 1996), 177–8 OAU/AEC Secretary-General, 165 General Secretariat, 177 Secretariat, 213 OAU/ECA/ADB Joint Secretariat, 130, 135, 150, 169, 178, 186 OAU/EU: proposed summit, 222 ODA, see official development assistance OECD, see Organization for Economic Cooperation and Development official assistance (OA), 41 official development assistance (ODA), 2–3, 5–6, 19, 35, 37, 40, 42, 60, 62, 80–1, 93–4, 114, 132, 137, 141, 157, 164, 166, 167, 172, 175, 191, 193, 194–5, 211, 220–1, 226(n19), 226–7(n1) bilateral, 194 Canada, 65 cancellation of debts, 157 ‘could make a major difference’, 67 distribution, 194 downward trend, 35–6, 38, 48, 61, 75, 210

Index 253 explaining the decline in, 41–3 ‘export-promotion instrument’ (for donor), 194 ‘fails to compensate for decline in terms of trade’ (1980s), 19 ‘falling sharply’, 221 flows to Africa, 42–3 from non-G7 countries, 40 new priorities, 61–76, 229–30 paradox, 35, 61, 65 percentage of donor GNP, 194 reform initiative, 115 stagnation, 154 target (0.7% of GNP), 154 targets not met, 3 tied assistance, 194 ‘20–20 principle’, 187 UK White Paper (1997), 64–5 official development finance (ODF), 35, 37, 38, 42, 43, 47, 60 definition, 227(n1) ‘downward trend’ (1990s), 38, 39t, 227(n8) official financial flows, 91, 37–41, 44t oil/petroleum, 11, 16, 26, 27, 29, 174, 195 oil shock (1973), 10, 13, 14 oil-exporting countries, 14, 16, 17–18, 27 optimism, 8 Organization of African Unity, see OAU Organization for Economic Cooperation and Development (OECD), 35, 157 agricultural subsidies, 99–100 Development Assistance Committee (DAC) countries, 37, 38, 40, 41, 42, 64, 115, 154, 167, 169, 194, 221, 227(n1) Development Assistance Committee Report 1995, 78 markets need to be opened to African exports, 99–100 twenty-first Century Strategy, 65 see also official development assistance ozone depletion, 66 Pacific Region: extreme poverty (1987–93), 63

pan-Africanism, 120, 131 paradox, see financial flows; ODA Paris Club, 52f, 114, 134, 144, 153, 161, 163, 164, 191, 192 Paris Convention for the Protection of Industrial Property, 216 parliaments, 80, 134 partnership, 207, 213–14 better concept than ‘donor/recipient’, 78 peace, 6, 62, 95, 96–7, 104, 105, 112, 113, 123–4, 172, 176, 179, 181, 196 debt burden ‘potentially greatest threat’ (G. Brown) to, 48 and security, 115–16, 203 and stability, 119–20 peasant commodity production, 34 peasantry, 13 pessimism, 8, 102 pests, 188 pharmaceuticals, 101 Plans of Action to Combat Desertification, 185 for Promotion of Cultural Industries (1992), 125 planning, 82, 83, 86 Policy Consensus, Strategy Vacuum: A Pan-African Vision for the 21st Century (Makhan, 1997), 213 policy environment, 74, 89, 90, 102, 221, 222 ‘good’ (in Africa), 4–5, 36 policy failures, 8, 10, 32–3, 55, 81 policy reform, 2, 28, 35–6, 37, 59, 61, 147, 166 policy shifts, abrupt: ‘should be avoided’, 95 polio, 72 political instability, xv, 5, 32, 81, 166 organizations, 134 pluralism, 85 processes, 119 reform, 42, 46, 85, 89, 196, 206 stability, 2, 55–6, 62, 88, 94, 95, 96–7, 218 systems, 81 will, 5, 89, 95, 122, 135, 150, 167, 224

254 Index Political Governance Initiative, 114 ‘polluter-pays’ principle, 185 pollution, 124 popular participation, 85, 112, 113, 119, 189, 204 population, xv, 5, 13, 70–1, 73, 119, 146 1965–73, 14 and development, 185–7 growth rate, 185, 186 projected 1600m (2025), 185 UN Conference (Cairo, 1994), 64, 69, 70–1 population control, 194 population growth, 17, 22, 88, 89 population pressure, 61, 118, 124, 128, 184–5, 204 port arrangements (for land-locked countries), 10 Portugal: OECD-DAC member (1998), 227(n1) poverty, xv, 1, 4, 48, 53, 63, 64, 80, 92, 96, 102, 124, 128, 147, 166, 171, 185, 187, 188, 194, 205, 216 absolute, 183 Africa, 42, 45 alleviation, 17, 35, 90 capacity to assault, eroded, 89 extreme, 63, 65, 67, 167, 169 global, 5, 42, 75 international targets, xvi ‘limited gains’, 74 link with environmental degradation, 65–6 low income countries, 42 poverty eradication, 66–7, 125, 167, 168, 183 poverty reduction, 53, 68, 94, 114, 116, 164, 221–2 need for global political will, 224 schemes, 98 targets, xvi, 57, 60, 62, 64, 65, 90, 97, 167, 169, 222 Poverty Reduction Strategy Paper (PRSP) Learning Group, 115 PPP (public-private sector partnerships), 101, 116 Preferential Trade Area of Eastern and Southern Africa (PTA), 177

prices, 59, 129, 174, 182 ‘getting prices right’, 5, 41 private capital flows, xv, 2–3, 6, 36, 37, 42, 43, 60, 62, 80, 91, 93–4, 114, 162, 211, 221 composition, 37 to developing countries (1990–98), 44t ‘not enough to bridge the gap’ (created by declining ODA), 43, 47 private capital flows initiative, 115–16 private capital markets, 166 private debt flows, 44t, 46–7 private sector, 6, 13, 24, 51, 77, 78, 80, 84, 86, 87, 92, 95, 96, 97, 98–100, 123, 143, 148, 157, 167, 174, 179, 181, 182, 188, 195, 204, 211 privatization, 24, 45, 46, 174, 195, 217, 218 probity, 119, 123, 180 production, 1, 62, 75, 125, 180, 181, 197, 200, 203, 207, 208, 210, 212, 223 production base, 177 production structures: rigidities, 145 productive capacity, 61, 91, 100, 118, 213, 199 productivity, 62, 95, 99, 121, 174, 197, 223 growth, 4, 37, 92, 222 professional associations, 110, 134, 188 professionals, 184 profits, 145, 182, 202 Programme for the Second Industrial Development Decade for Africa, 126 Programme of the United Nations Transport and Communications Decade in Africa (UNTACDA II), 127 property rights, 55, 115, 130 protectionism, 11, 138, 141, 145, 155 public corporations, 143 public enterprise reform, 24 public expenditure, 24, 16, 27, 51, 76, 129, 173–4

Index 255 enhancing efficiency, 58 ratio to GDP, 141 severe cutbacks, 186 public funds: ‘illicit diversion’, 56 public health, 69, 118 public industrial enterprises, 49 public opinion, 40, 80, 120 public sector, 48, 49, 51, 53, 84, 87, 92, 96, 97, 141, 148, 157, 173, 181, 192, 221 public services, 84, 181 public–private sector partnerships (PPP), 101, 116 pulses, 188 quality of life, 118, 120, 186 quality management, 99 quotas, 90 racism, 117–18 RASCOM, 127 ratios broad money/GDP, 57–8 capital flight/debt, 55 debt/export earnings, 143, 160, 166 debt/GDP, 143, 165–6 debt-servicing/export earnings, 18–19, 51, 94, 141–2, 143–4, 150, 157, 166, 190–1, 208 debt-servicing/government revenue, 51, 54, 190–1, 228(n47) exports/GDP, 27, 53–4, 198 imports/GDP, 198 investment/GDP, 28, 91, 181 ODA/GDP, 172, 222 ODA/GNP, 38, 40 public expenditure/GDP, 141 savings/GDP, 28–9, 36, 57, 94 trade/GDP, 98 raw materials, 26, 145 recipient: outdated concept, 78 recovery, 6, 8, 25, 137 1994–7, 32 Africa (1995–8), 19, 22–3, 88, 90 current, 74, 95 ‘most important ingredient for peace’, 62 nullified by debt burden, 48 weak, precarious, 61

RECs, see regional economic communities recurrent costs: inability to cover, 81, 82 reforestation, 124 reform programmes, 89, 146 reforms financial and capital markets, 57, 58 fiscal, 57, 58–9 refugees, 68, 119–20, 123, 172, 181, 201, 206 regional cooperation and integration, 6, 11, 28, 37, 62, 92, 100–2, 105, 109, 119, 129, 130–1, 176–9, 198, 199–200, 212, 213, 217, 218, 223, 224 ‘fundamentally a development strategy’, 100 global tendency, 117 markets, 127 regional economic communities (RECs), 100–2, 105, 107, 108, 109, 112, 128, 130, 131, 134, 176, 177, 178, 179 see also COMESA, ECCAS, ECOWAS, IGAD, SADC, UMA regional financial institutions, 138 regional organizations, 110–1 regional programmes, 206 regionalization, 123, 180 regulation, 79, 115–16, 129, 174, 178, 182 regulations: maritime, 128 rehabilitation, 144, 146, 181 Relaunching Africa’s Social and Economic Development (1995), see Cairo Agenda religious groups: campaign for debt relief, 48 rent-seeking activities, 95 research, 112; scientific, 107 residence, 105 residence rights, 108 resource allocation, 23, 42, 61, 79, 89 resource flows, 18–19, 20f, 35, 36, 42–3, 93, 132, 138, 193–6, 202, 204 concessional, 137

256 Index decreasing, 203 non-debt-generating, 31 official, 224 private, 224 public and private, 89 see also financial flows resource gap, 6, 37, 56, 60, 93, 94, 95, 114, 115, 145, 222 resources additionality, 167 concessional, 114, 147, 158 genetic, 128 misallocation, 24 mobilization, 114–16, 129–30, 148, 149 net outflow from Africa, 154 restructuring, 50, 75, 89, 92, 126 retrenchment, 85 rice, 188 Rio de Janeiro: UN Conference on Environment and Development (1992), 65–6 risk, 46, 55, 58, 115–16, 173 roads, 125, 127, 178, 217 Rome: UN conference on food security (1996), 64, 72–3 roots and tubers, 188 rule of law, 85, 113, 119, 123, 180 rural areas, 98, 127, 129, 147, 189 rural development, 49, 183, 187–8 Rwanda, 28

SACU (Southern African Customs Union), 218 SADC, see Southern African Development Community Sahara, 127 sanctions, 106, 118, 163 sanitation, 70, 72, 73, 97, 172, 187, 230(n15) São Tomé and Príncipe, 163 savings, 3, 4, 23, 28–9, 33, 34, 48, 56–9, 89, 93, 94, 95, 98, 129, 146, 174, 181–2, 211, 220, 222, 228(n24) ‘depressed levels’, 32, 80, 86 domestic, 37, 54, 59, 60, 90, 114, 157

percentage of GDP, 57 private, 58 public, 221 stimulation, 79 ‘weak capacity to generate internal’, 35 Scandinavia, 192 science and technology, 105, 112, 117, 119, 125, 148, 184, 199–200 sea transportation, 101–2 sectoral integration, 107 sectoral management, 86 securities, 129, 195 security, 112, 113, 123–4 self-reliance, 113, 119 semi-processed goods, 106, 156 Senegal, 217 separation of powers, 123, 180 service sector, 95 services, 41, 92, 195, 218 shared responsibility, 171, 172, 208 Sierra Leone, 29, 56 Singapore: FDI inflow (1998), 45 Sinking Funds, 153 Sirte (Libya): OAU/AEC Extraordinary Summit (1999), 165 Sirte Declaration (1999): Brief on Implementation (13 January 2000), 165–70 advocacy, 167–8 background, 165 composition of Africa’s external debt, 166 impact, 166–7 nature of Africa’s external debt problem, 165–6 recommendations, 168–70 skills, 86, 87, 92, 97, 102, 125, 183 small-scale business/SMEs, 99, 101, 190 social conflict, 2, 166 deprivation, xv, 35, 42, 53, 63 development, 5, 64, 66–7, 68, 69, 112 hardship, 173 inequalities, 89 justice, 122, 113, 119 marketing, 186

Index 257 sector, 168, 186 services, 118, 166, 171, 180, 183, 185, 187 stratification, 96 structure, 147 welfare, 174, 186 socialist economies, 41 socio-economic organizations, 110 problems, 33 transformation, 119, 224 soils, 66 solidarity, 76, 103, 104, 112, 120, 136, 141, 149, 171, 187, 222, 224 Somalia, 28, 29, 163 South Africa, 29, 30, 45, 46, 47, 117–18, 137, 145 South Asia, 10, 16 South Korea, 10, 45, 216 South-East Asia, 77, 79, 227(n8) South–South Cooperation, 120, 130, 169, 189 South–South Summit, 222 Southern Africa, 71, 137, 145 Southern African Development Community (SADC), 100, 177, 217, 218 Southern African Development Coordination Conference (SADCC), 177 sovereignty, 103, 112, 113, 119 Soviet Union/Soviet bloc, 38, 41, 79, 134, 160 Spain: OECD-DAC member (1998), 227(n1) Special Data Dissemination System (SDDS), 221 Special Funds, 151 Specialized Technical Committees, 135 STABEX, 157 stability, 53, 112, 123–4 stabilization, 3, 19, 25, 174 stagnation, 10, 17, 19, 63–4, 91–4, 147, 173–4 stand-alone projects: proliferation, 81, 83 Stand-By Agreements, 156 state development corporations, 11

state intervention, 13, 79 State of the World’s Children 2000 (UNICEF), 69 stock markets, 46 strategic stockpiles, 156–7 structural change, 4, 11, 84, 89, 92 constraints, 2 economic transformation, 175 reform, 23, 95, 133 rigidities, 141 transformation, 122, 126–8 weaknesses, 5, 13, 17, 33, 36–7, 222 structural adjustment, 137, 147, 158, 206, 207, 208, 211 structural adjustment programmes (SAPs), 33, 49, 75, 82, 85, 91, 93, 118, 121, 141, 146, 160, 167, 189 ‘one-size-fits-all’, 5 sub-regional organizations, 110–1 sub-regional programmes, 206 sub-Saharan Africa, 1, 2–3, 9f, 144, 157, 187, 220, 222 borrowing, 16, 18 capital flight, 55 child mortality, 70 debt burden, 49 debt-servicing, 191 dependence on foreign aid, 35, 61, 93 economic growth (1993–5), 175 export of goods and non-factor services, 9f FDI flows (1995) to, 195 GDP, 9f, 181 gross domestic investment, 9f indebtedness, 16–17 industry and agriculture (1965–94), 12f multilateral debt, 191 primary education, 69 privatization, 217, 218 ratio of investment to GDP, 181 terms of trade, 15f, 58 subsidies, 145, 156, 158 subsistence, 98 Substantial New Programme of Action for the Least-Developed Countries, 158

258 Index subversion, 113 Sudan, 29, 163 suffrage, 108 sugar, 18, 188 sustainable development, 35, 37, 63, 64, 77, 79, 80, 87, 91, 112, 119, 123–4, 125, 127, 133, 134, 166, 167, 168, 173–6, 183, 185, 190, 196, 197, 203, 222, 224 international targets, 65 prerequisites, 220 see also development Swaziland, 27 Sweden, 38, 40, 227(n1) Switzerland, 192, 227(n1) taboos, 184 Taiwan Province of China, 45, 216 Tanzania, 11, 29, 192 tariffs, 90, 99, 107, 155, 197 ‘customs duties’, 105, 107 tax administration, 59 base, 59, 174 evasion, 51 incentives, 182 reform, 24, 174 structure, 59 taxation, 51, 54–5, 58–9, 107, 114, 129 corporate, 182 income, 174 indirect, 174 TDR, see Trade and Development Report tea, 11, 18, 26, 27, 188, 196 teachers, 134 technical agreements, 110 assistance, 86, 158, 194, 197 cooperation grants, 39t expertise, 86 technological change, 41 technological innovations: oil industry, 26 technology, 13, 125–6, 128, 133, 156, 188, 219, 223 mineral-processing, 127 technology transfer, 92, 218

telecommunications, 46, 102, 127, 178, 217 tenure, 73 terms of trade, 2, 4, 11, 14, 15f, 16, 17–18, 19, 22t, 26, 27, 28, 31, 33, 49, 58, 59–60, 133, 141, 145, 155, 166, 220 sub-Saharan Africa (1954–96), 15f territorial integrity, 103, 112 terrorism, 113 Tesfaye, Saba, xviii textiles, 11, 218 timber, 196 tobacco, 18, 27, 188 Tokyo International Conference on African Development (TICAD, 1993), 189, 206 Toronto Initiative, 133 Toronto Terms, 50, 190, 191 Enhanced, 190, 192 tourism, 128 trade, 6, 32, 75, 101, 105, 106, 107, 128, 132–3 barriers, 51 deregulation, 174 expansion, 95, 96, 98–100 gap, 25 international system, 137, 150 intra-African, 198 intra-regional, 213 liberalization, 5, 41, 73, 177 management, 57 open regimes, 79 policy, 55, 173 preferences, 11 preferential arrangements, 100 promotion of African, 208 responsibilities of international community, 197–9 taxes, 51 see also world trade Trade and Development Report 1998 (TDR), 210, 211–12, 213 trade unions, 177 trading blocs, 121 training, 87, 124, 125, 127, 148 Trans-African Highways Authorities, 127

Index 259 Trans-African Highways Bureau decision to reactivate (1995), 178 Trans-Saharan Highway, 127 transaction costs, 5 transition economies (ex-communist), 63–4 transnational corporations, 45, 145, 216 African, 108, 149 transparency, 57, 66, 132, 168, 180, 221, 224 transport, 10 transport and communications, 105, 107, 127–8, 130, 131, 178, 223 transportation, 11, 73 Treaty Establishing the African Economic Community, 93 TRIMS (Trade-Related Investment Measures), 216 Trinidad and Tobago Initiative, 191 TRIPS (Trade-Related Intellectual Property Rights), 216 Tunis: International Conference on the implications of the Uruguay Round Agreements on Africa (17 October 1994), 132–3 Tunisia, 27, 29, 45, 46, 97, 218 UEMOA, 100, 217 Uganda, 4, 11, 27, 29, 53, 56, 71, 161, 192, 218 UMA (Arab Maghreb Union), 100, 177 UN-NADAF, see United Nations New Agenda for Development of Africa UNCTAD, see United Nations Conference on Trade and Development UNECA, see United Nations Economic Commission for Africa unemployment, 147, 166, 171, 183, 187 United Kingdom (UK), 29, 38, 40, 45, 64–5, 134, 192, 216, 227(n1) United Nations (UN), 7, 110, 132, 157, 188, 211 African poverty, 183

conferences (1990–6), 35, 42, 62, 63, 64, 74–5, 77, 79, 86–7, 90, 97 high-level event on development finance (2002), 102 targets, 36, 38, 65, 194 United Nations Agenda for Development, 133 United Nations Charter, 67, 103, 112, 132 United Nations Children’s Fund (UNICEF), 69, 70, 72, 201 United Nations Conference on Trade and Development (UNCTAD), 1, 2, 10, 19, 33, 45, 49, 51, 100, 126, 148, 196, 213–14, 228(n47) Forty-Fifth Session of the Trade and Development Board Sessional Committee II Agenda Item 6, Geneva, 19 October 1998, 210–14 half-way stage between UNCTAD IX and X, 213–14 resolutions, 137, 143, 150 Secretariat, 219 Secretary-General, 157 Trade and Development Board Resolution 165 (S-IX) of 1 March 1978, 157 UNCTAD VI, 158 UNCTAD VII: Final Act, 155–6, 157, 159 UNCTAD X, 222 ‘view from Geneva may not reflect reality in Africa’, 219 United Nations Conferences Children (New York, 1990), 64, 70, 71–2 Development Financing, xvi, 222 Environment and Development (Rio, 1992), 64, 65–6, 184, 185 Least-Developed Countries, 38, 222 United Nations Convention on the Rights of the Child, 72 United Nations Development Programme (UNDP), 67, 69, 71, 98, 100, 201, 230(n15) Gender Development Index (GDI), 70

260 Index UNDP cont. Human Development Index (HDI), 70, 166 Report on Human Development (1994), 194 Resident Coordinator, 207 United Nations Economic Commission for Africa (UNECA), 1, 2, 48, 57, 60, 94, 110, 115, 120, 132, 148, 176, 178, 220–4 Conference of ministers, 200 Executive Secretary, 127, 135, 150 Secretariat, 139 United Nations Educational, Scientific and Cultural Organization (UNESCO) conference on education and literacy (Jomtien, Thailand, 1990), 64, 68–9 United Nations Food and Agriculture Organization (FAO), 73, 187 United Nations General Assembly, 122, 169, 173, 201, 206, 212 Forty-Sixth Session adopts UNNADAF, 171 resolutions, 137, 143, 150, 201 special sessions, 66, 136, 148 United Nations High Commission for Refugees (UNHCR), 201 United Nations Industrial Development Organization (UNIDO), 126 United Nations Inter-Agency Task Force (UN-IATF) 200–1, 204 United Nations Millennium Summit (2000), 62, 222 United Nations New Agenda for Development of Africa (UN-NADAF 1991), 42, 75, 132, 167 ‘credibility derailed’, 3 mid-term review (1996), 172, 205–9 OAU Assessment, 171–204 statements by Vijay S. Makhan, 205–9, 210–14 UNCTAD’s Contribution, 210–14 United Nations Programme of Action for African Economic Recovery and Development (UNPAAERD, 1986–90), 42, 136, 140, 147, 150, 171, 202

United Nations Secretary-General, 65, 201, 206 Agenda for Development, 132 United Nations System, 37–8, 203, 204 role, 200–2 ‘stifled of needed financial resources’, 205 United Nations System-Wide Special Initiative on Africa (1996), 42, 201–2, 203, 206, 207 United Nations Transport and Communications Decade for Africa (UNTACDA) UNTACDA II, 178 United States of America (USA), 26, 133, 227(n1) African Growth and Opportunity Act, 102, 217 bilateral debt relief for Africa, 192 dollar, 145, 199 FDI, 29, 43, 45 ODA/GNP ratio, 38, 40 unity, 103, 112, 120, 136, 141 Universal Declaration of Human Rights, 67, 103, 112 university graduates: unemployment, 183 urban areas, 64, 73–4, 98, 147, 183, 189 Uruguay Round Agreements, 60, 121, 126, 128, 132–3, 198, 204, 213, 217 USAID (United States Agency for International Development), 194 value-added sectors, 4, 37, 92, 99, 127, 222 value-added tax (VAT), 174 Venice Summit, 157 Venice Terms, 50 vicious circles, 4, 33, 96 Vienna: UN conference on human rights (1993), 64, 67–8 wages and salaries, 85 war, 72, 96, 134, 179, 180–1, 196, 216 war crimes, 113 ‘Washington consensus’, 5, 6, 41, 211, 212 rethinking of, 41, 90, 214 waste, 73, 185

Index 261 water, 66, 70, 72, 73, 97, 124, 125, 188, 230(n15) weather, xv-xvi, 2, 34, 73, 88 West Africa, 184 WFP (World Food Programme), 201 wheat, 188 women, 67, 68, 72, 97, 110, 119, 122, 125, 172, 177 advancement, 69–70 Beijing conference (1995), 64, 69–71 discrimination against, 69–70 empowerment, 69, 70, 71 equality of opportunity (goal), 184 integration in development, 172 Platform for Action, 69 unemployment, 183 women’s groups, 134, 189 workers, 110 workers’ organizations, 134 workers’ rights, 187 World Association of Investment Promotion Agencies, 217 World Bank, 1, 5, 32, 36, 37, 42, 49–50, 52f, 94, 100, 115, 143, 151, 154–5, 163, 167–8, 195, 211 capital ‘should be doubled’, 155 comprehensive development framework, 90, 99 Framework Action for Assisting HIPCs, 192 September 1999 meeting, 53 Special Facility for sub-Saharan Africa, 155 see also IMF

World Economic Forum, 217 World Intellectual Property Organisation (WIPO), 216 World Investment Report [WIR] 1998, 45 launched at Addis Ababa (10 November 1998), 215–19 message to Africa’s policy-makers, 218–19 message re FDI inflows into Africa, 215–16 message to outside world about Africa, 216–18 world trade, 1, 26, 92, 128, 189 marginalization of Africa, 175, 196, 198, 210, 212 World Trade Organization (WTO), 73, 90, 99, 100, 121, 132, 198, 204, 213, 216, 222 World War II: aftermath, 80, 84

Yamoussoukro: TICAD seminar (1996), 189 Yamoussoukro Declaration on a New African Air Transport Policy (1988), 127, 178 Yaoundé Declaration, 126 youth, 5, 89, 110, 119, 134, 177, 183, 186

Zambia, 4, 29, 47, 192 Zimbabwe, 10, 11, 14, 45, 46, 47, 71, 217

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