NEPAD, the last plan to kick-start Africa’s economic development adopted by the OAU in Lusaka (Zambia) on July, 11, 2001, is articulated around investment in the key sectors of infrastructure, agriculture, health and education. The plan is to be financed by the international community and through private capital flows, mainly from the multinationals. In choosing this way of financing their development, African countries have adopted the neo-liberalism of globalisation as its development strategy.
Globalisation was born out of the combination of three factors: the end of the US dollar link to gold in 1971, the marriage between telephony and computing, and the dismantling of the Soviet bloc. This led to the Americanisation of the world economy.
Counties aspiring to enter the global market have to fulfil prior conditions, among which are the ratio of manufactured goods to GDP and exports and their access to technology, know-how, international capital markets and foreign direct investments.
With the exception of South Africa, sub-Saharan African countries have fulfilled none of these conditions.According to the United Nations Industrial Development Organisation (UNIDO),industrial growth in Africa was under 1 per cent in the 1990s (compared with 8 per cent in the 1960s). As a result, sub-Saharan Africa has lost market shares in both production and exports. Transport, insurance and telecommunications costs, the highest in the world, also make the continent uncompetitive. The region spends 15 per cent of the total value of its exports on freight and insurance costs, compared with 5.8 per cent in other developing countries. In land-locked countries these costs account for over a quarter of export revenue. Africa’s share of world trade fell from 3 per cent in 1990 to 1.7 per cent, and consisted mainly of primary goods and raw materials rather than manufactured goods.
Africa, in addition, has no sufficient access to technology and know-how, nor to international capital markets. As for foreign direct investment, the multinationals are driven by the rates of return they can extract. And yet, although according to the US Bureau of Economic Analysis (quoted in HSBC’s World Economic Watch, October 11, 2001) the rates of return on foreign direct investment were higher in Africa in 2000 – 19.4 per cent compared with 18.9 per cent in the Middle East, 15.1 per cent in Asia-Pacific, 8.3 per cent in Latin America and 10.9 per cent in Europe – Africa attracted only $1.1 billion of direct inflows that year compared to $1.9 billion for the Middle East, $21billion for Asia-Pacific, $19.9billion for Latin America and $ 76.9billion for Europe.
Three countries – Nigeria, Angola and Mozambique – received the lion’s share of Africa’s limited FDI, and it was used to finance investment in the exploitation of natural resources, petroleum and minerals in particular. Private foreign investment in these sectors has merely perpetuated the region’s dependence and impoverishment, systematically exploiting its resources without any productive investment, job creation or exports of manufactured goods by way of compensation. The incursion of private capital is likely to accentuate the control of Africa and its natural resources. This would mean making African countries mere Western Offshoots.
By the same token, the countries of the region complied with the privatisation programmes imposed on them by the Bretton Woods institutions. Still, at the very peak of these privatisation programmes in 1988-94, $2.4 billion was raised in Africa from the transfer of 550 state-owned companies to the private sector compared with $113 billion from privatisation in the developing countries as a whole. The reason was that the sales were not usually conducted through Stock Exchanges, which exist only in a relatively few African countries – notably South Africa, Ivory Coast, Ghana, Nigeria, Kenya, Namibia, Zimbabwe, Mauritius, Uganda and Tanzania. These privatisations were simply tantamount to liquidations. This applied particularly in the franc zone countries, where French industrial groups, anticipating the devaluation of the CFA franc, bought on credit assets in the profitable economic sectors (energy, water, telecommunications, etc.). When the franc was later devalued, the acquisitions and the revenue that they should have earned for the countries lost all their value. It was a legalised fraud that ought to be challenged in court.
Outside Africa privatisation programmes, in the context of the unchecked free flow of private capital in the globalisation era, ignited the return of flight capital in various regions of the world because of higher current interest rates, higher profit margins and controlled inflation under the draconian reforms imposed on the developing countries by the World Bank and the IMF. According to figures released by Salomon Brothers, the American investment Bank, the return of flight capital was estimated to be in the region of $ 40 billion for Latin America in 1991, especially for Mexico, Venezuela, Brazil, Argentina and Chile. The influx was estimated to $ 56 billion for China between 1989 and 1991.
This trend, however, escaped Sub-Saharan Africa despite the fact that, according to the Financial Times, the flight of capital from Africa was estimated in 1991 at $135 billion, five times higher than total investments, 11 times higher than private sector investments and 120 times higher than foreign investments. A return of 10 per cent of this estimated amount would more than double the private capital invested in sub-Saharan Africa.
So sub-Saharan Africa can offer the highest rate of return, allows exchange controls to be lifted, interest rates to be determined by the market, infrastructure administration and maintenance, port management, electricity production and distribution and the establishment of telephone systems to be controlled by the private sector, under the liberalisation policies dictated by the WTO and still remains the pariah of the capital markets, condemned to a ghetto status with the subsidised agricultural products and the more competitive manufactured goods of the industrialised countries inundating its markets, driving local industrialists and farmers out of business and institutionalising famine.
The adoption of NEPAD as the panacea to cure Africa of its woes is therefore the wrong choice, given the fact that Africa is unprepared to enter the frame of the unfettered capitalism of globalisation. Even South Africa, which has one of the most sophisticated stock markets in the developing world, good standards of corporate governance, and companies internationally competitive in sectors such as mining, information technology and financial services has seen, ever since the ANC has assumed power, some of these companies – Anglo American, Billiton, AngloGold, South African Breweries, Old Mutual, Dimension Data and Sappi – shift their domicile and stock exchange listing to the US or the UK, thus threatening the country’s tax base, creating political tensions, and driving down the rand which lost nearly 40 per cent of its value against the dollar last year to hit a record low of 13.85 on December 20. The Congress of South African Trade Unions (Cosatu) regards the exodus, rightly as an unpatriotic flight of white capital from the country.
Africa needs a prosperous agricultural and industrial sectors meeting its domestic requirements in food, housing, clothing and manufactured goods and exporting to pay for the imports needed for industrialisation. A viable development strategy has to give priority to self-sufficiency in food, increasing the purchasing power of farmers and savings. It must be backed by a regional integration commitment and endeavour, encouraging a transition from small domestic markets to wider markets and dismantling the customs barriers. This cannot be achieved without a development programme involving protectionism and subsidies.
The black people have to initiate action through legislation and litigation to recover what is owed to them for unpaid labour, and the assets stolen from them, and secure the cancellation of the unwarranted debts imposed on them. This needs a radical change in attitudes and mentalities among the blacks, mostly within the leadership and the elite, who since time immemorial have collaborated with international capitalism to bring mayhem upon their people through slavery, colonialism, the nightmares of the so called post-colonial independences and, nowadays, the aerial ballet, under the patronage of their western mentors, of some African heads of states around the NEPAD.
NEPAD is a bogus programme recycling the failed development strategies and policies of the Bretton Woods institutions, whose real objective was to reinforce the productive patterns inherited from the colonial times under the disguise of the economic theory of comparative advantage. In doing so, they allocated sub-Saharan Africa the role of raw materials supplier in the international division of labour. The stated idea was that revenue from the sale of these basic products would be used to finance industrialisation. In reality, raw materials prices were deliberately and steadily eroded over the past 40 years or so. The lenders accumulated revenues and reserves while the borrowers were faced with impoverishment and an unsustainable level of debt – $335 billion. Handing over the vital sectors of health, education and agriculture, after the sell off of the strategic sectors of energy, telecommunications and water supply will finalise the process of recapturing Africa, marketed by its leaders.
