Togo: a Structural Adjustment That Destabilises Economic Growth
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Jan Toporowski This second phase came to an end in the early 1960s, A Background Sketch: Economic History of when economic growth just about kept up with Togo population growth. In the second half of the 1960s, economic growth picked up again as development According to World Bank estimates, Togo is a poor projects, started in the years immediately preceding country with a per capita GNP under US$400 per and following independence in 1960, came to fruition. annum. Even within this class, Togo's poverty is This expansion ended adruptly with the collapse of conspicuous, with per capita GNP around US$250 per phosphate prices in 1975-76. annum. But while this probably overestimates how For a while the government kept the momentum going low GNP is, it understates the degree of misery of most by borrowing heavily abroad for productive sector Togolese. Lomé is an important entrepôt for its development projects in tourism, textiles, oil refining, neighbour Benin and the Saharan countries to the steel and cement. These, in the event, produced little in north of Togo. Its urban trading economy has a high the way of GDP or exports, but much in the way of influence on these statistics disproportionate to the deficits and debt service problems. In 1978 the share of the population benefitting, but income from government took over the external debt of the smuggling is significantly understated. increasingly insolvent public corporations established Togo is one of the smallest countries of West Africa, to operate these projects. The following year, as with 35km of coastline, and some 550km interior Togo'sexternaldebt approached US$1 bn,the depth. The German colony of Togoland was occupied government was forced to turn to the International by France and Britain on the outbreak of the First Monetary Fund for assistance. World War and split into two mandates, with the area Togo's economic history thereafter is a sad one. The under British occupation eventually integrated into deflationary policies adopted at the behest of the IMF Ghana. The Germans left behind an indigenous were followed in 198 1-83 by one of the worst droughts plantation bourgeoisie, a tribute to the efficiency with of the century. Recovery since 1983, despite two which the former colonial power fostered private land World Bank Structural Adjustment Loans, has left the ownership during the couple of decades of its level of real economic activity (as measured by administration, as well as to the enterprise of native inflation adjusted GDP) in 1986 still five per cent plantation managers, who seizedtheir German below the 1980 peak, or almost 25 per cent lower at per masters'estatesasBritishand French troops capita level. approached. Like its coastal neighbours Ghana, Benin and Nigeria, Togo has had an African trading, tree A Structural Overview crop agriculture and professional bourgeoisie for at least a century. The structure of Togo's economy, despite a thin veneer of sophistication, is relatively underdeveloped. Between the world wars Togo's economy stagnated, so Agriculture, forestry and fishing employ some 70 per that in 1949 the volume of the country's exports was cent of the labour force, but contribute just over a approximately at the same level as it had been in 1914, quarter of gross domestic production. The technology partly because of the 1920s commodities and 1930s used ranges from primitive subsistance farming in the general depression, and partly because France did not interior of the country, to the plantations established treat the Togo-Dahomey salient as a focus for colonial by the Germans at the start of the century. The chief investment. However, this was succeeded by a period export crops are coffee, cocoa and cotton, which of rapid expansion. Whereas the first such period account for about a quarter of exports and around before the First World War has been based on the 10 per cent of government revenues, although a high establishment of a plantation economy, the second proportion of the cocoa is smuggled from Ghana and period, during the1950s, was based on major is an index of Ghanaian instability, not of Togolese investmentsininfrastructure.These helpedto policies. The conditions of production of these integratethecountry economically,aswellas commodities have, on balance, probably deteriorated, accelerating the pace of urbanisation. due tothe drought, and the priority that the IDS Bulletitt, 1988, vol 19 uo I, Institute of Developntettt Studies. Susses 17 government of Togo has given since the late 1970s to Ghanaian or Nigerian payments with cheques covered food production, especially in the North while the by printing more currency. The CFA route is less government's claim that the country is self-sufficient inflationary but also less transparent, as suppressed in foodstuffs, while true in good weather years is expenditure is nearly impossible to estimate. precarious, and parallels widespread malnutrition, Togo's elected civilian government after independence especially up country. was overthrown followingtheassassinationof The most important commodity production sector is President Sylvanus Olympio by Sergeant Etienne phosphate mining. It accounts for more than 40 per Eyadéma. Its civilian successor fell in the 1967 coup. cent of exports and contributes about 17 per cent of The leader of the coup, Lt. Col. Eyadéma, now government revenues. In the 1970s, made sanguine by General Gnassingbé Eyadéma, still holds power record phosphate pricesin export markets, the today, although he has replaced military officers by government embarked on an ambitious industriali- civilians in government posts.Politically, he has sation and productive sector structural diversification modelled himself on President Mobutu of Zaire, programme that included textile mills, luxury tourist imitating the latter's penchant for 'authenticity' for hotels,asteelmill, and an oilrefinery. The example, by reverting to an African first name. government has also long harboured an ambition to Eyadéma's political party, the Rassemblement du establish Togo as 'the Switzerland of West Africa' by Peuple Togolais, is the sole legal political organisation. developing banking,tourism and otherservice It fosters an ideology based on the personality cult of activities, building on the century-old entrepôt and the President and 'national solidarity'. The govern- smuggling trade which have made it the 'Franco ment favours free enterprise, and is strongly pro- phone Gambia'. So far, it has had only limited success Western. In return for this it has received considerable in this respect. Only four foreign banks, none of them assistance from the United States and France. It was among the major international banks, have branches France that assisted Eyadéma inre-establishing in Lomé. The ECO WAS fund for Compensation and control after an attempted coup in September 1986. In Development has its headquarters in Lomé and the the South the Ewe-who are prominent in the private capitalisa venue forimportantinternational and public bourgeoisie as well as dominating the pre- conferences, which must be rated a diplomatic success 1967 government and among whom exist sentiments for the President, but tourism (unlike in Gambia) in favour of reunion (under whatever aegis) with their remains low. Overall, the services sector contributes fellow Ewe in Ghana - have shown little enthusiasm around half of GDP. for the Eyadéma regime. Statistics on Togo's external trade and economic Coming to Terms with Debt: Initial Cutbacks activity are notoriously unreliable, mainly because of massive smuggling. The chief centre of this activity has As mentioned above, the origins of Togo's debt traditionally been the border with Ghana, where problem flow from the four-fold increase in phosphate agricultural and other commodities are smuggled into prices that occurred in 1974, when Togo's terms of Togo to take advantage of the convertibility of its trade virtually doubled, also doubling government currency and the low import charge structure revenues. With a population growth rate averaging maintained on consumer amenities and luxuries to .3.3 per cent and a record of slow growth, the encourage entrepôt trade. Hence the figures given in government had every reason to take advantage of this article are at best reasonable indicators of overall circumstanceswhichapparently madepossible trends rather than reliable measures of levels of accelerated economic growth. New state enterprises activity, and may not even be good trend indices if the were created and new investments were started in stability of Togo's neighbours (and thus entrepôt social services, infrastructure, public buildings, and trade and smuggling) plunges sharply. the selected productive sectors of manufacturing and In the past, Togo has operated with a sizeable deficit in tourism. its visible and invisible trade. This has been balanced When phosphate prices and volume fell in 1975 and by grants, aid and, more recently, foreign borrowing. after, the government resorted to large-scale foreign Togo is a member of the CFA Franc currency system. borrowing on commercial terms to support con- This provides the country with the advantage of a tinuation of the investment drive. While economic convertible currency backed, ultimately, by the growth was initially boosted by vigorous investment French Treasury, which guarantees convertibility at activity, the latter was slow to show any returns in CFA Francs 50 to the French Franc. However, it production. Those returns that have been obtained limits severely the ability of the government to borrow have been very disappointing in amount. Thus, by the domestically since, formally at least, the budgets of end of the 1970s, growth was already slowing. The countries belonging to the system are supposed to be external debt service problem becoming severe and balanced. This leads to the phenomenon of delayed was compounded by largelossesinthe new payment of wages and other bills - the counterpart to enterprises. 18 The government's attention now switched to grappling supported by an IDA credit of SDR 36.9 mn in May with the financial imbalances caused by the dash for 1983.