Published by The New York Sun on 2005-07-05
Africa, as they say, is en vogue. Huge concerts in the cause of alleviating the continent's wide-scale poverty were held on Sunday in several industrialized countries. It's unlikely, of course, that the vast majority of 800 million Africans got to see those concerts on television, let alone show gratitude for the musical contributions of well-meaning rock stars troubled by growing poverty and disease.
And tomorrow, the Group of Eight leaders who will meet for three days at the Gleneagles Hotel in Scotland will be exhorted by their host, British Prime Minister Blair, to increase aid to Sub Saharan Africa's 48 countries by $25 billion, a tripling of the current figure.
The G-8 leaders may not quite agree on that figure - which would be half of the total annual aid now given by the world's 30 wealthiest countries to the 135 poorest ones - but they may well pledge a tad more to regenerate sustainable economic development in Africa.
If such aid is approved, it will come on the heels of the G-8's announcement last month that Britain, Japan, Canada, the United States, France, Italy, Germany and Russia would write off all the multilateral debts of 18 poor nations, including 14 in Africa.
That would amount to $40 billion, a fraction of the $1.5 trillion owed by developing states to mostly Western governments and financial institutions, but no small change either. Benin, Burkina Faso, Ethiopia, Ghana, Madagascar, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia, will be the countries to benefit most from the debt forgiveness.
Is any of this generosity going to make the slightest difference in stimulating economic growth in Africa?
Because, with the exception of South Africa, the huge continent lacks capital markets that are essential to economic velocity. In fact, Morgan Stanley Capital International's influential emerging markets equity index doesn't list any corporations north of South Africa until Egypt and Morocco.
"You have a limited number of countries...where you have stock markets," Credit Suisse's vice president of asset management, Bob Parker, perceptively told Reuters yesterday. "Where you do have stock markets ... the size of the markets is small, liquidity is small, corporate governance is a problem. What the G8 has not focused on [in its deliberations about poverty] is the development of local capital markets."
That's another way of saying that unless foreign direct investment (FDI) and the involvement of the domestic and international private sector are dramatically enlarged, Africa's development is likely to stay stagnant - no matter what warm and fuzzy rhetoric Tony Blair and his chancellor of the exchequer, the excitable Gordon Brown employ.
The efficiency and accountability that the private sector brings to entrepreneurship simply cannot be instituted by Africa's states, many of which still cling, however implicitly, to the socialist dogma that their post-colonial satraps imposed, often violently, and mostly with the benediction and benevolence of leftist European governments.
Indeed, from 1960 - when Europe's African colonies started to gain independence - to 2004, Western donors poured more than $600 billion into the continent's coffers. The beneficiaries? Mostly bureaucrats, kleptocrats, plutocrats and povertycrats. And yes, also Swiss banks that welcomed the contents of plundered national treasuries. A continent rich in natural resources rapidly became capital poor.
Consider these figures from the Organization for Economic Cooperation and Development, the Paris-based think tank of the world's wealthiest 30 countries: In 2000, FDI was $1.4 trillion; Africa received $19 billion of that. By 2002, global FDI had fallen to $651 billion, mostly because of the bursting of the technology bubble and the weakening dollar. That year, Africa got barely $11 billion, a decline of 40% from 2002.
Now FDI appears to be increasing, according to the OECD. Last year, the figure was $667.8 billion, a 12% increase from 2003. Investors in rich countries began to see enticing opportunities in emerging markets of the third world, and increased their participation in local equity markets, as well as in manufacturing. Those countries included China and India, but hardly any in Africa - with the exception of South Africa, Uganda, Ghana, Morocco, Tunisia and Egypt.
That's six countries. But what about the other 42?
What G-8 leaders need to do beyond displaying their compassion for a continent that has 13% of the world's population but 28% of its poverty, where 13 million people died last year from AIDS - and 26 million of the world's 39 million AIDS patients live - is to demand the following in exchange for their largesse:
Conditionality. Third world officials have long considered that a dirty word, suggesting a master-slave relationship. But it's perfectly appropriate for donors to predicate their aid - whether it's debt-forgiveness, outright grants, or urging private-sector investment - on institutional reforms. These reforms would include trimming of parasitical bureaucracies, punitive measures against corruption, and the end of subsidies. They would include better tax collection. And they would include establishment of proper legal and regulatory frameworks, and policy benchmarks that would reassure foreign investors and perhaps bring them in.
Sum Export-oriented growth. In Africa, agriculture, fisheries and fisheries account for 70% of employment, 34% of gross domestic product, but only 20% of exports. High tariffs and protectionism among African countries are a deterrent to export promotion. The continent's leaders habitually blame rich countries for subsidizing their own agriculture and thus keeping out products like West African cotton and Zambian copper. But their own markets need to be more open in this age of globalization. Only export-oriented growth can create the jobs that Africa needs.
Sum Greater focus on health and education. That mans better mobilizing of domestic resources for primary health clinics, more schools, particularly for girls, and greater attention to the growing problem of AIDS orphans. With half the continent's population under the age 30, Africa needs to plan more diligently for its future governance and for good citizenry.
Regrettably, too many African leaders are taking the benevolence and tolerance of Western donors for granted. By all means, America and other G-8 members should show love toward a despairing continent. But that despair is largely self-inflicted. It's time for tough love: No reforms, no rewards.
Senior Writer and Global-Affairs Columnist