United Nations


General Assembly

Distr. GENERAL  

15 September 1998


Fifty-third session
Agenda item 24
Implementation of the United Nations 
  New Agenda for the Development of 
  Africa in the 1990s

         Mobilization of additional resources for African development: 
                a study on overall resource flows to Africa

                  Progress report of the Secretary-General


                                                Paragraphs       Page

  I.  Introduction . . . . . . . . . . . . . . . . 1-6             2

 II.  Savings and investment . . . . . . . . . . . 7-12            3

III.  Trends in resource flows . . . . . . . . . .13-33            5

      A.  Official flows . . . . . . . . . . . . .18-26            7

      B.  Private flows. . . . . . . . . . . . . .27-33           10

 IV.  Ways and means of advancing resource flows 
      to Africa. . . . . . . . . . . . . . . . . .34-41           11

      A.  National efforts at resource 
          mobilization . . . . . . . . . . . . . .  35            11

      B.  Debt reduction . . . . . . . . . . . . .  36            12

      C.  Meeting aid targets and improving aid 
          coordination . . . . . . . . . . . . . .37-38           12

      D.  Private flows. . . . . . . . . . . . . .39-41           13

  V.  Conclusion . . . . . . . . . . . . . . . . .42-46           13

                            I.  Introduction

1.    Africa's need for additional resource mobilization remains today as
important and as urgent as it was when the General Assembly approved, in
December 1991, the United Nations New Agenda for the Development of Africa in
the 1990s. Indeed, for several reasons, the need and the urgency are greater
now than before, as Africa enters the new millennium. The growth rate
in GDP has not yet reached the target of 6 per cent under the new agenda, far
lower than the rate of 8-9 per cent, which some development experts claim
would be needed to significantly reduce poverty in Africa. 

2.    After a period of negative growth in per capita GNP in the 1980s and
early 1990s, Africa as a region and several individual African countries have
recorded consistently positive, albeit small, growth in real per capita
incomes for the past four years. However, this recovery is fragile
and cannot be sustained at current levels of investment. Thus, even to
maintain the current rate of economic growth, investment rates in Africa need
to be increased above the present rate of 19-20 per cent of GDP. 

3.   While the need for investment is growing, domestic savings rate in Africa
has stagnated at around 16-17 per cent of GDP, reflecting mainly the low
propensity to save because of the low level of incomes, which cannot meet even
the basic needs of the vast number of people. A portion of these savings has
to be diverted into meeting Africažs external debt obligations and is thus not
available for domestic investment. At the same time, aggregate net resource
flows to Africa over the past five years have not increased to fill the
growing gap between investment needs and domestic savings. 

4.   The situation with respect to Africažs share in total net resource flows,
especially official development assistance (ODA), is discouraging. For
example, Africa's share in the total net aggregate resource flows to
developing countries declined from 15.4 per cent in 1992 to 7.4 per
cent in 1996. Similarly, the share of sub-Saharan Africa in net aggregate
resource flows also declined, from 11.7 per cent in 1992 to a low of 6.1 per
cent in 1996, and only marginally increased to 6.8 per cent in 1997. 

5.    Additional resources required for Africažs development cannot be met
from domestic sources alone and need to be supplemented by external inflows.
In view of their debt-servicing difficulties, African countries must rely on
non-debt-creating flows, especially ODA and (private) foreign direct
investment (FDI). However, private capital flows are likely to remain small in
the immediate years ahead, and many African countries must continue to depend
on ODA as the major external source of finance. This would imply that not only
should the industrialized countries increase their ODA to Africa but that they
should also take all possible measures to make such assistance predictable and

6.    The present report is a follow-up to the Secretary-General's report,
entitled "Mobilization of additional resources for African economic recovery
and development: a study on overall resource flows to Africa" (A/48/336, 7
October 1993). Against the backdrop of recent economic and financial
developments in Africa, the report analyses the trends in resource flows, as
well as the prospects. Section II briefly reviews the growth experience of
African countries and discusses trends in savings and investment since 1992,
factors affecting the savings rate, the widening gap between investment needs
and domestic savings and the increasing need for higher inflows of external
resources to fill the gaps. Section III analyses trends in resource flows and
their composition. Section IV advances some recommendations concerning ways
and means to enhance resource flows, including domestic savings, for African
development, while section V sums up major conclusions arising from the study.

                         II.  Savings and investment

7.   Gross domestic investment in Africa has remained very low compared to the
level required to achieve accelerated growth as well as in comparison with the
high-performing countries in South-East Asia. Over the past five years, the
volume of investment in the Africa region remained virtually static at 19-20
per cent of GDP, which is far below the average level of 30-33 per cent
of GDP in parts of South-East Asia. A major reason for the low and declining
volume of investment in Africa is the low mobilization of resources from both
domestic and external sources.

8.   For over a decade, until 1994, Africa experienced sluggish growth in GDP
which resulted in a continuous decline in per capita incomes. In the five-year
period 1990-1994, for example, the average annual growth rate of GDP was about
1.6 per cent for the Africa region (excluding the Libyan Arab Jamahiriya). 1/
That trend, however, was reversed in 1995, and the upturn has been maintained
in the subsequent years. In the three-year period 1995-1997, the average
annual rate of growth of GDP increased to 3.9 per cent. Thus, for the first
time in over a decade, Africa has registered consistent year-by-year increases
in per capita incomes since 1995.

9.   Gross domestic savings, defined as GDP minus consumption, have been
consistently declining in Africa. The average savings ratio in Africa was 25.9
per cent during 1976-1983, 17.7 per cent during 1984-1991, and 15.6 per cent
during 1992-1997. However, behind these worrisome averages, there are some
reasons for optimism. The savings ratio for Africa reached its lowest
level (13.9 per cent of GDP) in 1993; since then it has been increasing and
reached 16.8 per cent in 1997. Although encouraging, the savings ratio in 1997
is hardly close to that in 1992.

10.  Not all the domestic savings are available for domestic investment, since
Africa is a net transferor of resources abroad in the form of net factor
incomes less public grants from abroad. It is estimated that the net transfer
of resources from Africa averaged 3.8 per cent of GDP in 1990-1997, as
compared to 3.3 per cent in 1975-1984 and 4.6 per cent in 1985-1990. 2/ As a
proportion of domestic savings, such transfers amounted to over a quarter in
1990-1997. As a result, net domestic resources available for investment, as
represented by domestic savings less net transfers abroad (or gross national
savings), were reduced by that much, thereby adversely affecting the level of
domestic investment and increasing the gap between investment and savings.
It is estimated 3/ that the latter gap averaged 9 per cent of GDP during the
first half of the 1990s for Africa. The widening gap between national savings
and domestic investment affirms the widely held view that inflows of external
resources are most critical to achieving accelerated investment and growth.

11.  Trends in investment rates are similar to those in domestic savings (see
fig. I). The investment rate of 18.6 per cent in 1997 for Africa remained well
below the level necessary to sustain satisfactory growth. A number of factors
influence saving levels in developing countries, including Africa. They
include, among others, macroeconomic stability, inflation rates, fiscal
policy, exchange rates, trade policy, and structural and institutional
factors, especially the degree of financial intermediation as the principal
factors. 4/  The recent increase in domestic savings would lend support to
these findings, since economic indicators relating to these variables have
shown some improvement.

                   Figure I.  Savings and investment

                          [ not available ]

12.   The above factors also influence the level of investment. In addition,
however, the level of external debt, the debt service burden, and the
availability of foreign assistance assume particular importance in Africa.
High external debt ratios are also indicators of "debt overhang"
which includes expectations of higher future taxes leading the private sector
to transfer funds abroad rather than invest them at home. Also, while the
influence of foreign financial assistance on the level of domestic investment
is obvious, uncertainty regarding the predictability and perceived permanence
of such flows could affect private investment sentiment.

                    III.  Trends in resource flows 

13.  Resource flows are analysed in this section under two main concepts:
aggregate net resource flows and net resource transfers. 6/

14.  Aggregate net resource flows to Africa have fluctuated relatively widely
and show no underlying trend. For example, the net flow declined from $22.2
billion in 1992 to $17.6 billion in 1993, increasing thereafter to $25.9
billion and $28.2 billion in 1994 and 1995, respectively, but declining once
again to $20.8 billion in 1996.

15.  The fluctuations in resource flows to Africa are in marked contrast to
the steady year-by-year growth of resource flows to developing countries as a
group, from $143.9 billion in 1992 to $300.3 billion in 1997 (see table 1),
representing an increase of 109 per cent, or about 18 per cent annually,
during this period. Africa's share in total resource flows to developing
countries not only halved, from 15.4 per cent in 1992 to 7.4 percent in 1996,
but also fluctuated from year to year (see also fig. II). The main reason for
these different trends lies in the relative contribution of official
development finance (OF) 7/ and private flows in total flows and the divergent
trends in these two types of flows.

                                 Table 1

       Aggregate net resource flows to Africa and developing countries
                        (Billions of current US $)

                             1992    1993    1994    1995    1996    1997
Developing countries         143.9   208.1   206.2   243.1   281.6   300.3
Africa a/                     22.2   17.8     25.9    28.1    22.2     ..
Sub-Saharan Africa            16.8   14.6     20.7    24.1    17.2    20.8
Percentage share, Africa      15.4    8.6     12.6    11.6     7.9     ..
Percentage share, 
  sub-Saharan Africa          11.7    7.0     10.0    10.0     6.1     6.8

Sources: World Bank, Global Development Finance, 1998 (Washington, D.C.),
country tables. World Bank, Debt Tables, 1994-1995 (Washington, D.C., 1996).

a/  Calculated as sub-Saharan Africa plus Algeria, Egypt, Morocco and Tunisia.

        Figure II. Aggregate net resource flows to developing countries,
                   Africa and sub-Saharan Africa

                              [ not available ]

       Figure III. Aggregate net long-term resource flows to Africa, 1996

                              [ not available ]

16.  Aggregate net transfers to Africa have fluctuated widely, ranging from a
low of $4.6 billion in 1993 to a high of $14.5 billion in 1995. In 1996, these
flows almost halved, to $7.6 billion (see table 2). These trends are evidence
of the fluctuations in aggregate net resource flows, as interest and profit
remittances from Africa, after declining from $15.7 billion in 1992 to $13.0
billion in 1993, remained thereafter at an average of around $13.5 billion
annually (table 2).

17.  The major types of long-term financial flows to Africa can be broadly
categorized as: official development finance (OF), foreign direct investment
(FDI), and private loans. Trends in each type of flow are discussed below.

                          A.  Official flows

18.  Official development finance (OF) includes official (multilateral and
bilateral) debt and official grants. OF remains the major source of resource
flow into Africa, particularly since Africa's access to international capital
markets is limited. Total OF to Africa, after increasing to a high of $18.4
billion in 1994, declined to $16.3 billion in 1995 and $15.4 billion in 1996
(table 2). The share of OF in aggregate net resource flows declined from a
high of about 98 per cent in 1993 to 74 per cent in 1996 (table 2). 8/

                 1.  Official Development Assistance 

19.  The main element of OF continues to be the official development
assistance (ODA) which is provided largely by member countries of the
Development Assistance Committee (DAC) of the Organisation for Economic
Cooperation and Development (OECD) (74 per cent in 1996 compared to 82 per
cent in 1992). The overall effort, as measured by the ratio of ODA to GNP
of DAC member countries to developing countries, has fallen for five
consecutive years, from 0.33 per cent in 1992 to 0.22 per cent in 1997, its
lowest level ever. African countries also experienced a decline in net ODA
from both the DAC and non-DAC countries (table 3). In 1996, total ODA at $20.7
billion was 17 per cent lower than that of $25 billion in 1992. ODA from
DAC countries declined by almost 26 per cent, from $20.7 billion in 1992 to
$15.4 billion in 1996. As a result, ODA share in Africa's GDP declined from
5.8 per cent in 1993 to 5.3 per cent in 1995 and less than 5 per cent in 1996.
The decline in ODA was experienced in almost all African countries.

20.  Despite the decline in ODA flows, Africa's share in total ODA remained
the highest among recipient regions. Among the providers of ODA to Africa, the
largest donors have traditionally been France, Germany, the Netherlands, and
the United States of America. The amount of assistance provided by the United
States has been declining, and in 1996 it was only 41 per cent of that in 1993
(at 1995 prices and exchange rates). In terms of the percentage of their
respective GDP/GNP allocated to ODA, however, the largest donors are Denmark,
Norway, the Netherlands, and Sweden, all of whom have exceeded the United
Nations target of 0.7 per cent of GDP for ODA. On the recipient side, major
receivers of ODA in Africa have been Egypt, Ethiopia, Ghana, Mozambique, the
United Republic of Tanzania, and Uganda.

   Figure IV. Net ODA flows from DAC countries to Africa, 1995 and 1996

                               [ not available ]

21.  While sectoral distribution of ODA over the period has continued to
change, the trend favouring social-sector investment is apparent. In
1994-1995, the latest year for which data on sectoral distribution of ODA is
available, DAC donor countries provided 5 per cent of their total
aid as emergency assistance, compared to only 1 per cent in 1975-1976, as the
growing internal and external conflicts and natural disasters on the continent
raise the requirements for humanitarian and other assistance. Productive
sectors, such as agriculture, industry and related activities, have yielded
their claims on aid to the service sectors such as social, economic, and
administrative infrastructure (51 per cent in 1994-1995 compared to 31 per
cent in 1975-1976), because greater emphasis is being put on capacity-building
in those areas (see table 4).

22.  The multilateral donors, especially the World Bank and the Inter-American
Development Bank (IDB), are also shifting their assistance away from large
physical infrastructure projects to social sectors that focus on human
resource development and poverty alleviation. For example, in 1996, the World
Bank devoted 27 per cent of its total lending in Africa to the social sector,
compared to 11 per cent in 1986 and 22 per cent in 1991. The corresponding
ratio for the IDB was 30 per cent in 1996, 11 per cent in 1991, and 31 per
cent in 1986.

23.  The decline in absolute amount in ODA to Africa and in Africa's share in
total ODA does not augur well, with the new orientation of the aid policies of
donor countries aimed at supporting the development efforts of "strong"
performers. Recent years in many African countries are marked by improved
economic performance, greater democratization, better governance and
accountability; and the outlook for the continent has brightened. All of these
developments should have attracted larger ODA flows into Africa under the new
aid policies, but this has not happened.

                          2.  External debt

24.  External debt also constitutes an element of resource flow. Africa's
outstanding total debt stock amounted to $323 billion in 1996. Out of this,
long-term bilateral debt accounted for 40 per cent; multilateral, for about 23
per cent; and for the remaining 37 per cent, private loans and short-term and
IMF credit. The debt profile of African countries for the years 1995 and 1996
is given in table 5. Payment for debt servicing represents a negative flow of
resources. For example, for sub-Saharan Africa, interest payments on long-term
loans accounted for $5.2 billion in 1997 and principal repayments for another
$6.4 billion for the same period. Thus debt service is a significant item in
affecting net resource flows to Africa, and Africa's debt servicing
difficulties have long been recognized.
25.  A number of debt relief initiatives have, over the years, been taken to
tackle the issue of external debt of developing countries. They have not
effectively solved the external debt problem of African countries. In 1996,
the IMF and the World Bank launched a debt initiative for heavily
indebted poor countries with the objective of bringing their debt burdens to
"sustainable" levels.  Since the adoption of the initiative, six countries,
including four in Africa (Burkina Faso, Co^te d'Ivoire, Mozambique, and
Uganda), have reached the decision points and received commitments
for assistance from all the creditors totalling $5.7 billion. Uganda has
already reached the so-called "completion point" which enables it to draw upon
the commitments to reduce its debt ratio. It is calculated to receive debt
relief equivalent to about $345 million (in net present value terms)
which is projected to reduce its debt-to-export ratio to 202 per cent. Burkina
Faso is expected to receive assistance of about $115 million (net present
value terms), representing a debt reduction of about 14 per cent. 9/

26.  The international community has also provided assistance to debtor
countries in the restructuring of their debt to commercial banks. This has
occurred largely through buy-backs supported by the World Bank's Debt
Restructuring Facility and the IMF's Economic Structural Adjustment Facility
for low-income countries and through officially supported debt and debt-
service reduction programmes (Brady operations) for middle-income countries.
As of the end of 1997, 11 African countries had completed operations that
involved buy-backs at large discounts. The total principal debt extinguished
as a result amounted to $1.9 billion, at a total cost of $345 million (implied
discount of over 80 per cent for these countries).

                          B.  Private flows

27.  There are three main categories of private resource flow: loans, foreign
direct investment (FDI), and portfolio equity investment. In the 1990s, while
OF was declining, private flows (debt-and non-debt-creating) into developing
countries surged continuously, from $42 billion (43 per cent of net long-term
flows) in 1990 to $247 billion (87 per cent of total flows) in 1996, and
to an estimated $256 billion (83 per cent of total flows) in 1997.

28.  Most of the increase in private capital flows to developing countries
bypassed African countries, which received only $3.1 billion (3.4 per cent) of
the total flows in 1992, and $6.8 billion (or about 2.7 per cent) in 1996. In
sub-Saharan Africa, the flows are concentrated in a few countries, with South
Africa being the largest recipient. The North African countries also
received net private capital inflows - albeit small - due to large repayments
of private loans (over $6 billion between 1990 and 1996). 

29.  Private loans, which were so prominent in the late 1970s and early 1980s,
have virtually ceased for Africa and have either been negative or only
slightly positive during most of the 1990s. In 1997, total outstanding
short-term private debt of sub-Saharan Africa was $46 billion, or $6
billion lower than in 1990. Commercial bank lending has generally remained
negative or only slightly positive since African countries have yet to restore
normal credit relations with the financial markets and gain access to credit.
However, the increase in lending in 1997 was based largely on increased
lending from commercial banks (35 per cent of the commercial bank flows
went to Angola). Some 13 African countries in sub-Saharan Africa borrowed on
the syndicated loan in 1997, and among them commitments to South Africa
accounted for 73 per cent of the total. Credit-worthiness ratings for most
African countries are still very low, though improving. Bond issuance, which
has acquired increasing importance as the channel for private capital flows
in other regions, has been limited to modest amounts in Africa. South Africa
was the only country in sub-Saharan Africa to issue on international bond or
equity markets in 1997.
30.  Foreign direct investment (FDI) flows to developing countries have
continued to increase during the 1990s, from $23.7 billion in 1990 to $120.4
billion in 1997 10/ or by five times during this period. The surge in FDI
flows to developing countries has been due mainly to the liberalization of
developing countries' economies, particularly privatization and the removal of
restrictions on FDI, strong growth in GDP and trade, and the rising quality of
communication and transportation services, including information technology.

31.  The annual inflow of FDI into Africa, although modest, increased from
$3.1 billion in 1992 to $5.5 billion in 1994 and thereafter declined to $4.5
billion in 1996 (table 2). Even though modest and declining, trends in FDI in
the 1990s are encouraging, compared to a flow of only $800 million in 1990,
but well below the requirements to fill the potential savings investment
gap. FDI flows to sub-Saharan Africa are highly concentrated, with about 70
per cent of the total flow going to Nigeria, South Africa and Uganda. Nigeria
alone accounts for 47 per cent of the flows to sub-Saharan Africa. Another
feature of FDI flows to Africa is that they are largely concentrated in the
oil and mining sectors. 

32.  With the liberalization and privatization of most African countries'
economies, the new enabling environment that has been created in recent years
and the recent economic turnaround in Africa provide better prospects for
attracting increased and significant FDI inflows into the continent. In
addition to the mining and oil sectors, certain other sectors - namely,
manufacturing, especially agro-based industries, energy and tourism - are
promising for foreign investment. 

33.  Portfolio equity flows in sub-Saharan Africa were virtually non-existent
prior to 1990s but are slowly emerging - e.g., increasing from $100 million in
1992 to $4.9 billion in 1995, and then declining to $2.1 billion in 1997. 11/
In North Africa, Morocco has begun to receive small, but growing, amounts of
portfolio investment, mainly in response to its privatization programme
which has also animated its stock exchange. At the end of 1995, there were 15
African countries with stock markets. There are encouraging signs of growing
investor interest in African securities portfolios. Since 1992, 17 African
regional or single-country funds with net assets totalling $600 million have
been set up, and their number may be growing. Initially the focus of these
funds was on South Africa (which accounts for 86 per cent of portfolio flows
to sub-Saharan Africa), but it now extends to a number of other African
countries, including Co^te d'Ivoire, Kenya, and Zimbabwe. 

         IV.  Ways and means of advancing resource flows to Africa

34.  An average real growth rate of about 7 per cent annually, on a
sustainable basis, would need to be achieved to effectively reduce the problem
of poverty in Africa. This would require an investment of 25 per cent compared
to the present rate of 18-19 per cent of GDP. The figures suggested by some
earlier studies of the African Development Bank, the World Bank and the
Economic Commission for Africa on external resource requirements for African
economic recovery up to the year 2000 range between $50 billion and $60
billion. The following are some of the specific areas in which national and
international efforts could be made to meet Africa's need for additional
financial resources. 

               A.  National efforts at resource mobilization

35.  To achieve sustained growth, a major portion of the resources required
for investment must come from domestic sources. Even in present conditions,
when Africa is heavily aid-dependent, more than two thirds of the investment
in Africa is domestically financed. Africa can increase its savings rate in a
variety of ways:

     (a)  As an essential part of their reform programmes, African Governments
should target quantitative and substantial increases in national savings,
separately for both the public and private sectors;
     (b)  Policies to raise savings should include redressing fiscal
imbalances, addressing urgently the problems of weak and unviable state
enterprises, and providing private savers appropriate incentives and
opportunities for savings and efficient financial intermediation facilities;
     (c)  African Governments should improve the productivity of public
expenditures by undertaking, on a regular basis, a systematic economic
analysis and review of public expenditures and reducing or eliminating
unproductive expenditures;

     (d)  Policies to stimulate and mobilize private savings, including
appropriate legal and justice system to enforce property rights, positive real
interest rates, and a savings-oriented tax system, should be reinforced; 
     (e)  Efforts should be made to promote financial intermediation and its
efficiency so as to be able effectively to mobilize and invest domestic
savings and private capital inflows along the lines recommended in the
Secretary-General's report "Towards advancing financial intermediation in
Africa" (A/50/490), and the conclusions of the Asia/Africa High-level Workshop
on Advancing Financial Intermediation in Africa (organized by the Office of
the Special Coordinator for Africa and the Least Developed Countries, of the
Department of Economic and Social Affairs, United Nations Secretariat, in
April 1998).

                         B.  Debt reduction

36.  Africa's external debt burden is the highest among developing countries
in terms of the ratio of external debt to GDP and its debt service ratio. The
recent advances in the international strategy to relieve the debt burden of
highly indebted poor countries (HIPC) will have some effect, but more may need
to be done, not only for the low-income countries of Africa but also for its
highly indebted middle-income countries. Accordingly, the creditor community
may consider the following measures to further relieve the
debt burden of African countries:

     (a)  Provide full support for an expeditious application of the HIPC
initiative to the eligible countries by providing adequate financial
contributions to the World Bank's HIPC Trust Fund;

     (b)  Extend the expiry date of the HIPC initiative at the time of its
scheduled review in September 1998;
     (c)  Provide, at the time of the review, further flexibility in the
sustainability ranges and include national savings ratios in the
vulnerability criteria;

     (d)  Assess the debt sustainability of middle-income countries in Africa
and elsewhere and extend appropriate debt relief, if needed;

     (e)  Encourage debt conversion programmes, particularly for social

           C.   Meeting aid targets and improving aid coordination

37.  As noted above, aid flows to the developing countries, in general, and to
Africa, in particular, have been decreasing. For DAC member countries, ODA has
fallen for five consecutive years, to 0.22 per cent of GNP in 1997. The
decline in ODA is inconsistent with the policy pronouncements of the donor
community. As noted in the Secretary-General's report to the Security Council
in April 1998, "The causes of conflict and the promotion of durable peace and
sustainable development in Africa" (A/52/871-S/1998/318), concrete actions
must be taken, since it is in deeds rather than in declarations that the
international community's commitment to Africa will be measured.

38.  The following recommendations are made to improve both the quantity and
the effectiveness of aid:

     (a)  DAC countries in general, and G-7 countries in particular, should
halt any further decline in their ODA as a proportion of GNP and restore their
ODA to their own historical high ratios within a mutually agreed, but short,
     (b)  DAC countries and other traditional donors should fulfil the aid
target of 0.7 per cent of their GNP;

     (c)  Make aid more effective through promotion of African "ownership" of
the programmes and projects being assisted and through better coordination of
donor assistance;
     (d)  Make greater use of the budget-support approach to enhancing
sector-level coordination, particularly in those countries that have
successfully completed the stabilization phase and have embarked on the
development phase;

     (e)  Reverse the tendency to tie donor assistance, directly or

                          D.  Private flows

39.  Of the three forms of private capital flow (loans, FDI and portfolio
equity), FDI and portfolio equity investments are more relevant in the present
context of African economies. Complementary actions on the part of
African and capital-exporting countries could assist in attracting and
increasing private flows.

40.  African Governments should establish and enhance an environment of
economic security that promotes the savers' and investors' confidence by
taking the following steps: 
     (a)  Take a proactive role in fostering financial intermediation and
improve the efficiency of their financial systems; 

     (b)  Improve the collection and dissemination of financial and other data
necessary for investors to take judicious investment decisions; 
     (c)  Liberalize their trade and payment systems and proceed judiciously
with capital liberalization, as circumstances permit, to make possible, inter
alia, the promotion of the investment climate;

     (d)  Promote regional money markets and stock exchanges as well as
cross-listing of stocks;

     (e)  Encourage the establishment of global/regional mutual funds to
minimize risks associated with a single-country fund.

41.  Capital-exporting countries, in their turn, should eliminate any
restrictions, legal or informal, on capital exports. Alongside, the
international community should consider ways to reduce the volatility of
capital flows and avoid the Asian type of financial crisis through better
international surveillance mechanisms, regulatory and prudential frameworks,
and information dissemination.

                           V.  Conclusion

42.  The issue of resource flows to Africa has been an ongoing concern in the
United Nations and for the international community. Despite this concern, the
net flow of resources to Africa has been declining. Donor countries have
cut back on their aid budgets as part of their fiscal consolidation and are
relying more on private capital flows to meet the resource requirements
of developing countries. Even more disconcerting is the fact that Africažs
share in this shrinking pie has fallen at a time when economic growth in
Africa has picked up, in response to strong policy reforms being implemented
by African countries. As the international community has tried to contain the
spillover damage of the crises in South-East Asia and in the Russian
Federation, aid funds and aid donors' attention have been diverted away from
the success story in Africa. Finally, even the huge increase in private
capital flows to developing countries has bypassed the Africa region so far,
partly reflecting its underdeveloped financial system.

43.  The international community cannot be complacent about the present
African recovery. Based as it is on stagnant investment rates, the
recovery is very fragile and could well unravel despite policy reforms, if not
sustained with higher investment rates. Furthermore, the growth rate of
the recent years (4 per cent in 1996, down to 2.7 per cent in 1997) is well
below the target of 6 per cent set in the New Agenda and is not sufficient to
meaningfully reduce poverty levels in Africa, which are unacceptably high. For
all these reasons Africa's growth rates need to be substantially higher than
at present, and thus Africa must mobilize additional domestic and external

44.  African countries must first of all look to the domestic sources, if the
higher growth rates are to be sustainable. Savings rates in Africa are low and
have stagnated. African Governments should adopt specific savings targets and
policies for promoting domestic savings as part of their overall macroeconomic
policies and programmes. Enhancing and improving financial intermediation
would be a precondition for the realization of higher savings targets.

45.  Notwithstanding the need to increase domestic savings rates in Africa,
those rates will still fall short of total investment requirements, and Africa
could legitimately look to the international community to provide
supplementary resources. In recognition of the changed character of
international flows and the dominance of private flows, African Governments
must take measures, including trade liberalization and accelerated
privatization, to provide an environment of economic security and an efficient
financial system, in order to attract foreign private investment. Recent
inflow, albeit relatively small, of private capital into Africa demonstrates
that, with appropriate institutions, structures, and policies, Africa could
potentially be a beneficiary of much higher inflows. The international
community should support those initiatives on the part of Africa by
removing any remaining obstacles to capital migration and liberalizing their
markets to allow free entry for African exports.

46.  In the foreseeable future, nonetheless, private capital flows are
unlikely to meet the residual financial requirements of African countries.
Moreover, in certain sectors - e.g., social and infrastructure - it is
difficult to attract private capital. Thus such sectors must be developed with
public funds. In fact, without appropriate development of infrastructure, even
private capital may not flow in. Thus official assistance is pivotal, even as
a catalyst. The international community, therefore, must not only continue
with its current assistance but increase it and provide it on concessional
terms - preferably as grants. With a good track record and the continued
implementation of "strong" policy measures, African countries have legitimate
claim on the international aid purse and, consistent with the reorientation of
aid policies, on increasing its share of that purse. 

                                   Table 2

             Aggregate net long-term resource flows to Africa a/
                               (Billions of US$)

                                1992    1993    1994    1995    1996
1. External debt                 4.9     2.3     5.8     5.5     1.2
   a. Official                   6.3     5.5     4.7     3.5     2.5
      (Multilateral)            (4.2)   (4.2)   (3.8)   (3.1)   (2.9)
      (Bilateral)               (2.1)   (1.3)   (0.9)   (0.4)  (-0.4)
   b. Private                   -1.4    -3.2     1.1     1.9    -1.2
2. Non-debt creating flows      17.3    15.3    20.1    22.7    19.6
   a. Official grants           14.2    11.7    13.7    12.8    12.8
   b. Private                    3.1     3.6     6.4     9.9     6.8
      (FDI)                     (3.0)   (3.4)   (5.5)   (4.9)   (4.5)
      (Portfolio equity)        (0.1)   (0.2)   (0.9)   (5.0)   (2.3)
3. Interest and profit 
   remittances                 -15.7   -13.0   -13.6   -13.7   -13.4
4. Aggregate net resource 
   flows (1+2)                  22.2    17.6    25.9    28.2    20.8
5. Aggregate net transfers 
   (1+2) - (3)                   6.5     4.6    12.3    14.5     7.6
6. Official development 
   finance (OF) (1a+2a)         20.5    17.2    18.4    16.3    15.4
7. OF as percentage of net 
   resource flows               92.3    97.7    71.0    57.8    74.0

Sources: World Bank, Global Development Finance, 1997; ..., 1998 (Washington,
D.C.), country tables; World Debt Tables, 1994-1995 (Washington, D.C., 1996).

a/  Including sub-Saharan Africa, Algeria, Egypt, Morocco and Tunisia.

                                  Table 3
                 Africa: official development assistance
                             (Billions of US$)

                                  1992           1993           1994
                             Total    DAC    Total   DAC     Total   DAC
Net ODA (Africa)              25.0    20.7    21.5   16.2     23.5   17.6
North Africa                   5.4     4.4     3.7    2.6      3.9    3.1
  Algeria                      0.4     0.4     0.3    0.3      0.4    0.4
  Egypt                        3.6     3.0     2.4    1.8      2.7    2.3
  Morocco                      0.9     0.7     0.7    0.4      0.6    0.3
  Tunisia                      0.4     0.3     0.2    0.1      0.1    0.1
Sub-Saharan Africa a/         19.1    16.3    17.3   13.6     l8.9   19.5
  Cameroon                     0.7     0.6     0.5    0.5      0.7    0.4
  Co^te d'Ivoire               0.8     0.5     0.8    0.7      1.6    0.8
  Ethiopia                     1.2     0.5     1.1    0.4      1.1    0.6
  Ghana                        0.6     0.3     0.6    0.3      0.5    0.3
  Kenya                        0.9     0.5     0.9    0.4      0.7    0.4
  Mozambique                   1.5     1.0     1.2    0.8      1.2    0.7
  Nigeria                      0.3     0.1     0.3    0.1      0.2    0.05
  Senegal                      0.7     0.5     0.5    0.4      0.6    0.5
  South Africa                 0.2     0.2     0.3    0.2      0.4    0.3
  Uganda                       0.7     0.3     0.6    0.3      0.8    0.3
  United Republic of Tanzania  1.3     0.8     1.0    0.7      1.0    0.6
  Zambia                       1.0     0.7     0.9    0.5      0.7    0.4
  Zimbabwe                     0.8     0.5     0.5    0.3      0.6    0.3
Africa unspecified             0.5     0.4     0.4    0.3      0.7    0.6

                                             1995             1996
                                      Total       DAC     Total      DAC
Net ODA (Africa)                       22.0       15.6     20.7      15.4
North Africa                            2.9        2.4      3.4       2.6
  Algeria                               0.3        0.3      0.3       0.3
  Egypt                                 2.0        1.7      2.2       1.9
  Morocco                               0.5        0.3      0.7       0.4
  Tunisia                               0.1        0.1      0.1       0.1
Sub-Saharan Africa a/                  18.5       13.2     16.7      12.8
  Cameroon                              0.4        0.3      0.4       0.3
  Co^te d'Ivoire                        1.2        0.7      1.0       0.4
  Ethiopia                              0.9        0.5      0.8       0.4
  Ghana                                 0.7        0.4      0.7       0.3
  Kenya                                 0.7        0.5      0.6       0.3
  Mozambique                            1.1        0.7      0.9       0.6
  Nigeria                               0.1        0.2 
  Senegal                               0.7        0.4      0.6       0.4
  South Africa                          0.4        0.3
  Uganda                                0.8        0.4      0.7       0.4
  United Republic of Tanzania           0.9        0.6      0.9       0.6
  Zambia                                2.0        0.4      0.6       0.4
  Zimbabwe                              0.5        0.3      0.4       0.3
Africa unspecified                      0.6        0.4      0.6       0.5

Source: OECD/DAC, Development Cooperation, 1997 (Brussels), p. 38 and 
table 33.

a/  Selected countries.

                                   Table 4

                    Major sectoral distribution of DAC aid
                       (Percentage of total commitments)

                                             1975-1976      1994-1995
Social and administrative infrastructure         20.2           29.0
Economic infrastructure                          10.5           22.7
Agriculture                                       8.1            7.4
Industry and other production                    13.6            3.1
Commodity aid/programme assistance               18.9            7.0
Emergency aid                                     1.0            5.0
Other                                            27.7           25.7
          Total                                 100            100

Source: OECD/DAC, Development Cooperation, 1997 (Brussels), table 26.

     Table 5: Structure of External Debt in African Countries, 1995-1996

                              [ not available ]


1/ IMF, World Economic Outlook (Washington, D.C., 1998).

2/ ECA, Economic Report on Africa, 1998 (Addis Ababa), para. 32-34.

3/ Ibid., para. 34.

4/ Michael T. Hodjimichael and others, -Sub-Saharan Africa: growth, savings
and development, 1986-1993ž. IMF, Occasional Paper 118, January 1995.

5/ Defined as the sum of net resource flows on external long-term debt
(disbursements minus reimbursements), excluding net IMF credits, foreign
direct investments, and public grants (excluding technical assistance)
received by the recipient country.

6/ Defined as net resource flows minus the interest payments on long-term
debt and profit remittances on account of FDI.

7/ Defined as the sum of total official flows (loans and grants), excluding
officially supported export credits.

8/ Based on World Bank data.

9/ IMF, "Official financing of developing countries", February 1998.

10/ World Bank, Global Development Finance, 1998 (Washington, D.C.), analysis
and summary tables.

11/ Ibid.


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Date last posted: 10 January 2000 10:05:30
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