| UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER |
Modest economic upturn for Africa:
But more genuine support needed from donors, says ECA head
By Nii K. Bentsi-Enchill
Africa Recovery, United Nations, Vol.8 No.3, December 1994
Africa's 2.8 per cent growth rate in 1994, the highest in five years, permits "modest optimism" for 1995. But with its population growing even faster, at 3 per cent a year, per capita incomes continue to fall and enormous challenges remain, warned UN Economic Commission for Africa (ECA) Executive Secretary Layashi Yaker in an end-of-year review of Africa's economic prospects. Mr. Yaker said in Addis Ababa on 15 December that assuming "normal conditions", economic output could rise by 3 per cent in 1995, continuing the steady climb from negative growth in 1992.
He stressed that promising results from African initiatives could founder without donor support: just when aid is most needed to buttress Africa's drive for economic reform, democratization, capacity-building and regional integration, current trends in aid budgets "point towards contraction."
With per capita output falling by nearly 1.5 per cent a year since 1990 and poverty spreading rapidly, Africa is losing ground "both in absolute and relative terms," Mr. Yaker said. Faced with potential annual losses of some $2.6 bn under the Uruguay Round's "sweeping liberalization" of global trade, he stressed that Africa had no choice but to proceed "without delay on an equally sweeping overhaul of its economic structure." This meant reforms to inject efficiency and dynamism, empower the private sector, attract domestic and foreign investment and promote popular participation in conditions of peace and stability.
Performance in 1994
Africa's modest overall improvement in growth had significant subregional variations. The six North African countries posted 2.5 per cent growth, well up on their 0.8 per cent in 1993, while growth in 16 West African countries fell from an average 3.2 per cent to 2.6 per cent in 1994. In East and Southern Africa, average growth in 21 countries jumped from 1.5 to 3.7 per cent. Seven Southern African countries, including South Africa, did even better, moving from 1.2 per cent in 1993 to 3.8 per cent in 1994. There was even a turnaround in 10 Central African countries where negative growth slowed from -4.8 per cent in 1993 to -0.4 per cent in 1994. Overall, only 11 African countries had negative growth in 1994 (down from 17 in 1993) while 12 countries exceeded 5 per cent growth, the same number as in 1993.
Despite surging commodity prices, the ECA estimated that Africa's exports rose only 4.2 percent in nominal value (from $91.3 bn to $95.2 bn), and only 2 per cent in volume. But imports rose by some 6.5 per cent, resulting in a bigger current account deficit of $7.8 bn. The impressive rally of commodity prices saw a turnaround in Africa's term so trade from a 4.9 per cent fall in 1993 to a 0.6 per cent gain in 1994. However, Mr. Yaker pointed out, while the gain for non-oil commodity exporters was 17 per cent, terms of trade worsened by 9 per cent for oil-exporters.
After the CFA franc devaluation, exports had revived in some countries but had yet to reach levels appropriate to this "quantum leap" in competitiveness. Devaluation had largely curbed domestic demand and slowed imports, but it had also "repressed economic growth somewhat." Initial negative effects should lessen in time, but other factors determining competitiveness such as infrastructure, labor skills and incentives needed "at least as much attentions macroeconomic stabilization" in the CFA countries' adjustment programmes.
Turning to the crucial agricultural sector, Mr. Yaker said favourable weather boosted total output by 3.1 per cent from 1.8 per cent in 1993. But up to mid-1994, failed rains brought famine conditions to 22 million people in 10 countries of the Horn and massive death and displacement was averted only through timely distribution of food imports and food aid. Adequate rains in the same subregion were now bringing good harvests, above-average harvests were likely in the Sahel belt and coastal West Africa, while bumper grain harvests were expected in Egypt and Morocco as well as in Zimbabwe and South Africa.
Continued favourable conditions could see agricultural output rising by 5 per cent in 1995, although growth in the food subsector had slowed from an "impressive" 4 per cent in 1993 to only 2.5 per cent this year. With population growth still high at 3 per cent, per capita food output was down 0.5 per cent, leaving Africa "no nearer its goal of food self-sufficiency." Important factors for higher production included good supply of inputs and less damage from pests, but rural infrastructure, incentives for producers and marketing structures all had to be improved.
Market Reforms
African countries had made progress in market and tax reforms aimed at improving investment conditions But privatization had often been "thwarted by the paucity of domestic savings" as well as by the "understandable reluctance ... to dispose of public enterprises entirely to foreign investors often at give-away prices." Mr. Yaker argued that privatization should "accelerate economic growth and development with equity, rather than widening disparities in society by increasing the concentration of economic power."
He noted that some perennial social problems had worsened. Africa now had 7 million refugees, a third of the world's total, and some 21 million people internally displaced. Population growth was outstripping food and economic output, while "severe" spending cuts and the "emphasis on cost-recovery and cost-sharing" continued to hit education and health. Yet development in all its aspects was "essential" for slowing population growth. Africa had to build and fully utilize the critical human, institutional and infrastructural capacities "for managing a modern economy and polity."
This applied at national and continental levels as Africans also had to work collectively to cope with world economic trends. The African Economic Community (AEC) was a "strategic response" to a world economy evolving around trading blocs, and he urged African and donor countries to make a priority of supporting the AEC's first phase-strengthening Africa's subregional economic communities.
Meaningful support
Turning to the UN's New Agenda for the Development of Africa in the 1990's (UN-NADAF), Mr. Yaker said African countries were fulfilling their commitments, unlike the donor countries. Annual net resource transfers had "fallen far short" of UN-NADAF targets. At some $14 bn, net external funding for Africa (including South Africa) in 1994 was only slightly better than 1993. And with its economies not yet able to attract adequate foreign investment, Africa would still need more substantial development aid.
Donors had also taken "no meaningful steps" to significantly reduce the debt stock of any African country except Egypt. In 1991-94, Mr. Yaker said, 21 African countries had $7.14 bn of debt rescheduled, compared to Africa's $301.8 bn aggregate debt at end-1993 (including South Africa).
Mr. Yaker recalled that"much of what passed for aid during the Cold War" promoted ideology and military sales, not development. Now that Africa needed more support for its economic and political reforms, donors seemed more reluctant to provide that support. This "so-called 'aid fatigue'" contradicted growing international cooperation on issues of sustainable development, he argued.
Calling on the UN system to facilitate the transfer of experience from Asia and other regions, he says South-South cooperation was vital for Africa. Mr. Yaker stressed Africa's enormous potential and the shared responsibility of African and donor countries. "Africa cannot afford to be left behind in the development race," he concluded.
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Africa Recovery is published by the United Nations Department of Public Information, with support from the UNDP and UNICEF. Subscriptions are available to individuals for $20 and to institutions for $35. A limited number of complimentary subscriptions is available. Correspondence should be addressed to:
The Editor, Africa Recovery Secretariat Room 931 United Nations New York, NY 10017 Tel: (212) 963-6857 Fax: (212) 963-4556 Message-Id: [199503131950.LAA03032@igc3.igc.apc.org] From: "Washington Office on Africa" [woa@igc.apc.org] Date: Mon, 13 Mar 1995 14:50:00 +0000 Subject:Africa Recovery: Modest Economic Upturn
Editor: Ali B. Ali-Dinar
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