Confronted with the relentless march of global competition, Africa must intensify its economic reforms, boost domestic savings and investment, and expand foreign trade. Local and foreign investors should also take advantage of opportunities created by the improved policy environment, declared African ministers responsible for economic and social development and planning at a 5-8 May conference held in Addis Ababa, Ethiopia, by the UN Economic Commission for Africa (ECA).
Strong partnerships between the public and private sectors are vital in expanding trade and stimulating private investment, said UN Secretary-General Kofi Annan in a message to the conference read by ECA Executive Secretary K.Y. Amoako. Touching on the conference theme -- "Accelerating trade and investment in Africa" -- Mr. Annan said that increasing collaboration with the private sector is an important means to enhance the impact of the UN on development.
Africa is at a crossroads, he added, pointing to the persistence of conflict on one hand, and on the other, to the economic reforms and strong growth, the dynamism of its private sector and civil society and the consolidation of democratic rule. The UN will stand steadfastly behind Africa through its peace-building and humanitarian programmes, as well as through economic analyses, technical assistance and regional cooperation, he said.
Opening the conference, Ethiopia's Deputy Prime Minister Kassu Ilala noted positive developments in the continent and warned against complacency. So immense are Africa's challenges, he said, that countries must strive to reverse their economic marginalization. He singled out the debt overhang as the paramount challenge and urged African governments to continue pressing, individually and collectively, for swifter and more effective means of reducing the debt-servicing and debt stock burdens.
Africa needs 8-10 per cent growth to make a "significant dent" in poverty, said Mr. Tom Allen of the World Bank's Africa Private Sector Finance Department. But in stressing the importance of the pattern and distribution of growth, Dr. Ali Ali, the ECA's new Director of Economic and Social Development, observed that in 17 sub-Saharan countries, nearly 53 per cent of the population live under the poverty line -- in three countries, the figure is over 60 per cent -- and only in two sub-Saharan countries do less than 40 per cent of the population live below the poverty line.
The recommended growth rates, Mr. Allen added, require much higher investment rates and a private sector acting as the driving force. Underlying conditions include social and macro-economic stability, functioning markets, as well as "robust" and effective institutions, he continued. He said the Bank would provide direct help to the private sector through project finance and encourage a stronger partnership between the public and private sectors in order to accelerate trade and investment.
Another major challenge for Africa is to reverse its shrinking market share in traditional commodities, said Dr. J.C. Saigal of the UN Conference on Trade and Development (UNCTAD). African Development Bank Vice-President Ferhat Lounes explained that Africa has lost market share to Asia in cocoa, coffee and timber, to Latin America in iron ore, and to other regions also in cotton, rubber and copper. Most striking, he said, was the fall in Africa's share of cocoa exports from 80 per cent in 1970 to some 67 per cent in the mid-1990s.
Noting that 39 of 47 sub-Saharan countries depend on two primary commodities for over 50 per cent of export revenue, Mr. Lounes said the alarming fact is that since 1970, market share of such products has fallen by an average 70 per cent. He drew the lesson that the post-Uruguay world offers far greater opportunities for processed goods than for primary products.
Africa must therefore promote diversification, said Dr. Saigal, not only to increase competitiveness in traditional exports but also to move away from them. Besides pursuing policy stability, higher overall productivity and lower transaction costs, he said African countries must stimulate the services sector, modernize ports and communications, and connect to the information highway. It would be no surprise if the lack of information becomes a non-tariff barrier, he added.
The continent also needs stronger participation in multilateral negotiations and discussions, he said, noting that some sub-Saharan countries are still not members of the World Trade Organization (WTO). Admittedly, proper entry requires negotiating skills and Africa, he said, must build negotiating capacity to identify where its interests lie in the face of further trade liberalization and issues -- such as new investment rules -- coming before the WTO. Here, he cited UNCTAD's work in helping developing countries in commercial diplomacy. Dr Saigal also urged African countries to prepare well for the October conference on least developed countries (LDCs). The ECA is to help coordinate the African contingent (33 of the world's 48 LDCs).
Calling for a "revitalization" of regional and subregional economic integration, Dr Saigal recommended shifting from a narrow trade focus to a production-based focus on integration, a view supported by Mr. Lounes who said Africa needs to promote regionally based projects that go beyond the orthodox approach of integration through trade liberalization.
Many African economies are too weak to benefit from globalization, said the South African delegate, adding that structural adjustment programmes had forced countries to deregulate without adequate human and institutional capacity. He recalled the warning by the Southern African Development Community that Africa has little to gain from proposed new multilateral investment rules, despite the pressure from the US and the European Union to adopt them.
The Libyan delegate said some of the main speakers had an idealistic and impractical approach to trade liberalization. "Will the big powers allow fair and equitable competition?" Libya asked rhetorically, noting that several countries are "already under pressure" from these world powers. Growth, while necessary, is not equivalent to development and the post-Uruguay projections of African agriculture are very optimistic, the delegate said. But in view of Africa's dependence on rainfall and the widespread illiteracy among its producers, Africa needs more development than growth.
Several speakers, including those from Mali and Zambia, said deeper debt reduction would spur development, and backed the retention of trade preferences. Tunisia noted that several countries are unable to raise resources for investment in infrastructure at a time of demand for higher production and competitiveness. It recommended faster agricultural development and better partnerships within Africa, adding that 30 years of economic controls will not disappear overnight.
Among the key areas for enhanced external support, Nigeria drew attention
to debt and poverty reduction, elements which the World Bank had omitted
in its presentation. It was ironic, the delegate said, that Nigeria, the
world's premier palm oil exporter in 1960, had given seedlings in the 1960s
to Malaysia, the world's current top exporter.
Accelerating Africa's participation in the information age was the theme of a one-day symposium during the conference, with a focus on increasing public-private cooperation in the information sector.
Such participation, said Mr. Amoako, is "inextricably linked with extending trade and investment." Just as in the past, local and foreign investors hesitated to invest in countries without roads, investors now "hesitate to invest in countries without adequate information and communications services," Mr. Amoako stated. It is crucial, added Dr. Karima Bounemra Ben Soltane, Director of ECA Development Information Services Division, for every country to decide clearly what its specific information and development needs are.
The main organizer of the event, telecast live across Africa, was the Global Information Infrastructure Commission (GIIC). One of its Commissioners is Mr. Koos Bekker, president of MultiChoice Investment Holdings Ltd., with headquarters in South Africa. He told delegates that the GIIC, set up in 1995 and composed of 40 chief executives of mainly transnational information technology companies, has a primary aim of connecting the private sector and governments and increasing the private sector role in building the information society. Mr. Bekker was certain that the most important industry in Africa and in the world by the year 2020 will be the broad field of information and communications, including all networks, media, computers and software.
The keynote speaker, Dr. Ernest Wilson, Director of the Centre for International Development and Conflict Resolution at the University of Maryland, asked delegates what each of their ministries could do to leverage the resources and power that they have to bring more information and communications technologies and services into the service of their own countries.
Greater coherence in national information society policy is clearly needed, said Mrs. Christina Kissiedu, head of the University of Ghana's Balme Library, noting the setting up of a Ghana National Internet Connectivity Committee and other initial steps to develop a national information society policy in Ghana. The university is the national host for an electronic mail provider with a site in her library, enabling some 300 clients -- university dons, research institutions, NGOs, private sector organizations, individuals and government organizations in most of Ghana's regions -- to discuss informational and other problems and to help one another with difficulties in all aspects of electronic transfer of information, including equal gender access.
Transformation is under way for the operational arms of the Economic Commission for Africa (ECA) at country and subregional levels. The old Multinational Programming and Operational Centres (MULPOCs) are now called Sub-Regional Development Centres (SRDCs), armed with a new mandate by Africa's ministers of economic and social development and planning. The SRDCs will facilitate subregional economic cooperation, integration and development, and also help UN system organizations integrate their development activities.
To improve the quality and immediacy of its support to African countries and their subregional bodies, the ECA aims to deploy 25 per cent of its professional staff in the SRDCs -- up from just 9 per cent -- and allocate up to 40 per cent of its financial resources. In line with the Commission's strategic directions, the SRDCs will also coordinate policy dialogue among the countries, convening meetings to share experiences and plans on development issues and practices.
Five SRDCs will provide advisory services to Africa's 53 countries. The centre in Tangiers, Morocco, serves seven North African countries; Niamey, Niger, serves 15 in West Africa; Yaoundé, Cameroon, serves seven in Central Africa; Lusaka, Zambia, serves 11 in Southern Africa; and Kigali, Rwanda, serves 13 countries of Eastern Africa and the Indian Ocean islands.
African countries must themselves devise and implement strategies to accelerate trade and investment, declared African ministers responsible for economic and social development and planning at their 4-8 May conference in Addis Ababa. They said that besides promoting a positive image of Africa as a safe business and investment location, the cost of setting up and doing business must also be reduced. Along with peace and stability, African countries also need a better regulatory framework and more capable institutions. Production must be modernized, expanded and diversified, the ministers added, in order to make the continent more competitive in world trade.
While committing themselves to "strive for genuine regional integration," the ministers noted that a public-private partnership is necessary for financing the extension and modernization of infrastructure on a national and regional basis.
Poverty is Africa's "most serious problem," the conference declaration said, but could be reduced and eventually eradicated by high and sustained economic growth that is broad-based and job-creating. This would in turn require high levels of investment and savings, as well as increased production and efficiency in resource use. The ministers invited transnational corporations (TNCs) to channel more capital into Africa "while respecting our countries' business principles," assuring TNCs of the considerable dividends they would reap.
Despite Africa's reform efforts and the acknowledged role of development aid in creating the conditions for both local and foreign investment, the long-term declining trend of such aid is an aspect of Africa's marginalization, the declaration said. The ministers urged bilateral partners to provide direct financial support, "on concessional terms at increased levels" and indirect support through tax incentives to their national investors participating in infrastructure development in Africa.
Identifying external debt as a continuing drain on productive resources, the ministers said the latest debt initiative of the International Monetary Fund and World Bank is a "first step in the right direction." They called for its reinforcement by further measures to substantially reduce the bilateral and multilateral debt stock and debt service of all African countries.
The continent's efforts to expand trade in the post-Uruguay world have been "frustrated by deteriorating terms of trade and continuing protectionist practices" by Africa's trading partners, particularly affecting agricultural products, textiles and clothing exports, the ministers declared.
Despite great efforts by African countries to attract foreign direct investment (FDI), the continent continues to receive very little of FDI flows to developing countries, says the World Investment Directory, Volume V, Africa, 1996, published recently by the UN Conference on Trade and Development (UNCTAD). And Africa's meagre investment inflows were overwhelmingly concentrated in 1991-95 in eight countries, evenly divided between North and sub-Saharan Africa (Egypt, Libya, Morocco, Tunisia; Angola, Ghana, Nigeria, South Africa). Nigeria was the biggest recipient, followed by Egypt, Morocco, Angola and South Africa.
Among these countries, Angola, Egypt, Libya, Nigeria and Tunisia are
oil exporters, and Angola is also a least developed country (LDC). The eight
got 92 per cent of Africa's total FDI inflows in 1991-95. Angola alone received
72 per cent of FDI flows to Africa's 33 LDCs, which all together received
only 14 per cent of the total.
According to the report, the continent's nine oil exporters -- the others are Algeria, Congo, Cameroon and Gabon -- usually get the lion's share of FDI inflows, but this share has declined since the early 1980s: 84 per cent in 1981-85, and 73 per cent from 1985 to 1995. The two biggest oil exporters, Egypt and Nigeria, alone accounted for 65 per cent of total inflows during the 1980s but their share dropped to 51 per cent in 1991-95.
One reason why so little FDI flows to Africa, according to UNCTAD, is the high concentration of LDCs in the region (33 of the world's 48), with the attendant investment deterrents such as small markets, poor infrastructure, unskilled labour and high levels of external debt.
Another major reason is the negative international perception of the continent, says Mr. Georg Kell of the UNCTAD office in New York. African countries have adopted numerous measures to facilitate foreign investment, ranging from tax and duty concessions, liberalized currency markets and guaranteed repatriation of capital and profits. They have also concluded numerous multilateral and bilateral investment treaties -- some 260 bilateral treaties by 1996 -- most of them with developed countries. Yet investors hesitate to put their money in the continent, despite relatively higher rates of returns, since their perception of the region is heavily influenced by media coverage dominated by news of crises and conflicts in a few troubled spots. Mr. Kell hopes this report will help dispel the negative perception of the investment climate in Africa and that it will also be a useful tool for both investors and government policy makers.
Although UNCTAD finds the low levels of investment a cause for concern, it nevertheless points to some "signs of vitality," including growing investor interest in the secondary and tertiary sectors. Moreover, given the small size of most African economies, even small FDI inflows can have a significant impact.
The industrialized countries, especially those of Western Europe, are the primary sources of Africa's FDI inflows, the report says. Of these, France and the United Kingdom, with their colonial ties to the continent, are particularly significant, accounting for 75 per cent of flows from industrialized countries in 1991-93. Investment from the US amounted to about 20 per cent of combined flows from the UK and France in the same period, while Japan actually registered a negative average figure.
Other sources of FDI inflows to the continent include African countries themselves -- a significant development. The African firms are based mainly in South Africa and Nigeria, as well as in the Maghreb countries.
