Africa – Drivers of Change

Roger Williamson

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AFRICA – DRIVERS OF CHANGE

Roger Williamson

December 2006

Wilton Park Paper

Report based on Wilton Park Conference 813: 24 – 27 April 2006 on ‘Africa – Drivers of Change’.

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Contents ______

1 2005 – ‘The Year of Africa’ – and The Africa Commission Report

2 Perspectives on Continental Challenges

Peace and Security Good Governance Economic and Social Challenges Social and Economic Policies Pan-African Institutional Challenges

3 Africa on the Move: An Urban Crisis in the Making

4 East African Perspectives

5 West African Perspectives

6 Religion, Culture and Development in Africa

7 Governance and Institution Building

8 Leadership in Africa

9 Business, Investment and Development in Africa

10 Africa and the International Financial Institutions

11 Financing Social Development – The Approach of the African Development Bank

12 China in Africa

13 Conclusions

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1 2005 – ‘The Year of Africa’ – and The Africa Commission Report

With British presidency of the G8 and of the European Union coinciding in 2005, there was a unique opportunity for concerted action on the Africa and development agendas. In preparation for these meetings, the British Prime Minister, , established the Commission for Africa to review the ‘state of the continent’.1 Nine of seventeen Commissioners were African. In order of overcome the scepticism concerning ‘yet another Commission’, the Prime Minister insisted that the representation should be current leaders, rather than those who have retired – as is often the case with prestigious Commissions. Considerable diplomatic effort went into ensuring that the African Union and New Economic Partnership for African Development (NEPAD) were fully on board.

The logic of the Report is that single issues cannot be addressed in isolation. There has to be a coherent package of policies, owned by African leadership, addressing such issues as governance, peace and security, economic development and investment. The challenge could not be reduced solely to the need for additional aid resources. The Commission concluded economic growth is essential for Africa’s development. In practice, in parts of the continent, economic growth has been quite fast. A number of countries have been posting growth rates of 6 - 8% per annum for a number of years. There is a need for such growth rates to be replicated across the continent in order to address poverty in any meaningful way. In addition, infrastructure has to be updated and improved. Unlike the Indian sub-continent, in Africa infrastructure tends to be what is required to get the product of extractive industries to the ports – from a ‘hole in the ground to the port’. Africa needs to develop the capacity to trade. This needs ‘joined-up thinking’. For example, it has been argued that the best investment for Malawi is to improve Mozambique’s roads.

The agenda of the Commission for Africa is an African agenda driven by Africans. It addresses the debt issue, the need for more aid and the need for economic development. There are also certain areas where there is a clear message to the West. The West, for example, needs to stop subsidising its own farms which harm or impede African agriculture, ensure that it s citizens are not involved in corrupt practices and sign an effective arms trade treaty.

The numbers being discussed are significant. The argument of the Commission for Africa, substantially accepted by the G8, is that $50 billion per annum should be available for Africa, meaning an additional $25 billion per annum. The European Union has moved significantly in this direction in a number of decisions during 2005.

The G8 Summit accepted the message for the need to double resources for development for Africa. It also ensured that these gains at the G8 were consolidated at the Millennium Review Summit in September. The main problem is that the ‘Development Round’ of the World Trade Organisation negotiations has achieved so little. Progress in Hong Kong was disappointing.

1 http://www.commissionforafrica.org/

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For 2006 and beyond, the issue is one of delivery. The World Bank and major agencies had moved away from infrastructure financing. It is now increasingly recognised that infrastructure is very important. The Commission for Africa recommends that $10 billion per annum should be made available through an infrastructure consortium under the African Development Bank (ADB).

Reporting on Africa is also an area that requires considerable attention. In the major western media, often the ‘bad news’ stories are covered more effectively than the more encouraging developments on the continent. The media facility to encourage the freedom of the media and professionalism within the media under the United Nations Economic Commission for Africa (UNECA) is making good progress.

It was a worrying development that Russia initially showed no particular commitment to African issues in its formation of the G8 agenda for St Petersburg; in the event energy issues became the main focus. Responsibility for implementation of the G8 Africa agenda has been placed primarily on the May 2006 Africa Partners Forum. The key question was whether the Joint Plan of Action would be implemented. It was a sign of the astuteness of the British Prime Minister to ensure that the G8 communiqué was signed in front of the world’s press to insist that the leaders of the main industrialised countries be held to account for what they had agreed.

It is increasingly obvious that for Africa to meet the Millennium Development Goals, progress in all of the areas indicated in the Commission for Africa is essential. Sustained growth rates of 7% per annum are required during the next decade to meet poverty eradication targets; no development will be possible where serious conflict continues; and governance must be improved. Rather than 2005 being seen as one year for Africa, it should mark the beginning of sustained attention from the international community. The African Peer Review Mechanism (APRM) can help the process. The APRM has begun slowly with only two reports submitted by mid-2006 on and Rwanda. These are apparently good and well balanced.

There are many other aspects of Africa’s situation which need further illumination, for example, the health consideration of the spread of HIV/AIDS. The new involvement of China and India in Africa, particularly in resource acquisition, must also be addressed. The current high price of oil provides a windfall in revenue for some countries, but places additional burdens to most African countries.

2 African Union Perspectives on Continental Challenges

Thirty-four of the forty-nine poorest countries in the world (about 70%) are on the African continent. Almost half the population lives in extreme poverty and hunger. HIV/AIDS prevalence is the highest of any continent. Africa suffers from poor infrastructure, limited investment, continuing debt problems and many other challenges.

In spite of these difficulties, there is a new determination by Africa’s leaders to address the problems. In recent years, the Organisation for African Unity (OAU) has been reshaped as the African Union (AU). NEPAD has been created and integrated into the structures of the African Union.

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Peace and Security

There are many security situations which will remain challenging to African institutions and governments. Clearly the emphasis has to be on conflict prevention. The further dimensions of conflict management and post-conflict reconstruction remain important. The Peace and Security Commission of the African Union has a central role in these areas of concern. Work on responsibility to protect, the UN’s Peace Building Commission and also individual conflict situations such as DRC and Sudan will continue to exercise decision-makers.

There is considerable scepticism about the capacity or willingness of the United Nations to deal with African conflicts. The example of the deployment of the Chinese veto, e.g. vis-à-vis Sudan can be mentioned. There is also a clear lack of political will by the governments of rich countries to deploy troops in African conflicts.

Policing and police capacity are further dimensions of security concern. The continuing need for security sector reform must also be highlighted. Wars in Africa are likely to continue to include the ‘resource war’ dimension. There are also increasing pressures on land, for example, for pasture in times of drought. Although a number of the wars in Africa, both those between states and civil wars, have recently been resolved, there remain a number of continuing or latent conflicts. These include Sudan (Darfur and Southern Sudan), Côte d’Ivoire, Ethiopia-Eritrea, , the Democratic Republic of Congo (DRC)2, the Comoros and the . Both in terms of the direct and indirect impacts of these conflicts, the cost to life and lost development remains high. This can be measured in the loss of life, displacement of people, number of refugees, child soldiers, the vulnerability and social exclusion of people, destruction of infrastructure and erosion of institutional capacity. In brief, it is hard for countries with open or latent conflicts to achieve Millennium Development Goals (MDGs). As a response, building on detailed work by African leaders between 2000 and 2004, the African Union has established its Peace and Security Council (PSC). It has also been recognised that greater investment in post-conflict reconstruction (through institutions such as the ADB) is essential. Furthermore, whilst it is universally accepted that there should be ‘African solutions to African problems’, it is vital to provide additional resources through the UN and European Union so that African institutions can respond adequately.

The Constitutive Act of the African Union in July 2002 was recognised that peace and security was one of the key elements for Africa’s further development. The OAU had already rejected unconstitutional changes of government. In institutional terms, the foundation of the PSC launched in Durban 2002 and operationalised in March 2004, is the central mechanism for responding to threats to peace and security. In addition, African countries have developed instruments to combat terrorism and trans-national

2 A peace agreement was signed in January 2005 relating to the South of Sudan. It remains to be seen whether this guarantees a durable peace and the end to a civil war which has lasted much of the last 50 years, with an interlude from 1972-83. http://www.reliefweb.int/rw/RWB.NSF/db900SID/EVIU- 6AZBDB?OpenDocument; http://www.crisisgroup.org/home/index.cfm?id=3582&l=1 By late 2006, the DRC had conducted surprisingly successful elections.

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organised crime, improve drug control, anti-corruption and money laundering. Disarmament measures are also on the agenda.

Good Governance

The importance of good governance for sustainable development in Africa is of central importance. Human rights violations, the absence of the rule of law, the lack of democracy and the failure of government to be fair and inclusive must all be addressed. It is also becoming increasingly recognised that a fair and reasonably well functioning state is the best guarantee for provision of services. Corruption, lack of transparency, lack of accountability and opaque institutions mean that resources are often not applied in the most effective way. The AU is encouraging all African countries to join the APRM as the flagship programme for improving governance, and to sign the African Union Convention on Corruption. The capacity of African states needs to be strengthened so that they can carry out poverty reduction strategies, de- centralise their state responsibilities and restructure education and health systems. Privatisation of public enterprises has also been pursued as part of the strategy, sometimes with questionable results, e.g. in the provision of water services. Political parties remain weak and leaders remain reluctant to hand over power. The African Union is insisting all countries, not only the twenty-five which have so far signed up, should join the APRM and be ready to submit to evaluation by their colleagues.

Civil society also faces a challenging time. African governments have often not been tolerant of civil society as it is seen as ‘opposition in disguise’. The relationship between governments and civil society can, therefore, be antagonistic. The difficulties of journalists working in Africa remain. Nonetheless, it is increasingly recognised that civil society has an important role in the development of democratic culture in Africa.

Human rights concerns and effective responses to human rights will further occupy the international community and human rights organisations. Questions relating to impunity, amnesties and the appropriate role of the International Criminal Court (e.g. the difficulties of prosecution and the question of the impact that, for example, the prosecution of Joseph Kone of the Lord’s Resistance Army has for the prospects of peace in Northern ) remain acute. The tension between peace and justice will have to be negotiated carefully in many conflict situations.

Economic and Social Challenges

Africa is the continent that continues to suffer most from HIV/AIDS, TB and Malaria. Although the global HIV prevalence rate in 2003 was below 1%, in Africa it was 8.5%. Approximately 25 million Africans were estimated to be living with HIV/AIDS in 2003 and 2.2 million died as a result of it in the same year (UNAIDS 2004).

The proportion of Africans living on less than $1 per day in sub-Saharan Africa increased from 44.6% in 1990 to 46.5% in 2001. In the same period the absolute numbers also increased dramatically - from 227 million to 313 million people living on less than US$1 per day. One-third of the population live below the minimal level of dietary energy consumption, giving the continent the highest levels of malnutrition and non-nourishment. Furthermore, Africa has the lowest levels of primary education 8

enrolment rate and progress in achieving access to safe drinking water is too slow to achieve the Millennium Development Goal targets. Nonetheless, a number of African countries including Mauritius, , Namibia, Cape Verde, Lesotho, Ghana, , Guinea, , Mozambique, , and Ethiopia have made good progress in reducing income poverty.

Little has been achieved so far through the Doha ‘development round’ of trade negotiations. The rich countries have pledged to reduce tariffs from developing countries and reduce farm subsidies, but there is little progress to date. Africa increasingly is asking what it means that this has been called a ‘development round’?

Inflows of foreign direct investment to Africa remain low at 5% of the world total. The outstanding debt stock of Africa at the end of 2004 was estimated at $330 billion with African countries continuing to pay $30 million a day on loans they have contracted over the last thirty years. A number of debt relief initiatives have begun to make significant progress, including the enhanced Highly Indebted Poor Countries initiative (HIPC) and the Gleneagles summit decision to cancel debt for eighteen HIPC countries, including fourteen from Africa. The African Union and its member countries continue to demand debt cancellation be extended to all African countries.

Many African countries have been hit by sharp increases in oil prices from US $25 per barrel in 2003 to the mid-2006 price of over US $70 per barrel.

Social and Economic Policies

Regional Economic Communities (RECs) have a key role in development plans for the African continent. The AU is also working on establishing three financial institutions mentioned in its Constitutive Act, the African Investment Bank, the African Monetary Fund and the African Central Bank. It is clear, however, that the uneven development and overlapping mandates of the RECs has not developed the optimal consideration for assisting development.

Sound macro-economic policies and stimulation of investment and growth are a key to Africa achieving the necessary 7% per annum overall growth rate required to meet the MDGs by 2015. From 1995 to 2002, average growth has been 4% per annum, up from 1% in the early 1990s. The inflation rate for sub-Saharan Africa has come down from 41.4% in 1994 to 9.3% in 2002. Fiscal deficits have also been halved to 3.4% of GDP in 2002, down from 6.9% in 1993. Savings and investment levels remain far too low. Investment-to-GDP ratios are considerably below the 25% level estimated to be necessary to achieve required levels of growth to meet the MDGs.

Poor growth and rapid human development in Africa will require many key measures, including: rural transformation and an agricultural revolution to improve productivity and food security levels; promotion of the private sector with an emphasis on small and medium-scale enterprises; pursuit of export-oriented industrial development; development of national and regional infrastructures including transport, communications and energy; and continued efforts on education and health.

Financing for development, according to the Monterrey consensus, requires not only commitment by external donors, but mobilisation of resources within African 9

countries.3 Domestic resource mobilisation requires sustaining macro-economic stability, financial sector reform, broadening the tax base and improving tax administration and ensuring peace, security and good governance.

During 2005, progress was made towards achieving the necessary levels of ODA from the developed countries, but more needs to be done. Transnational companies operating in Africa also need to be encouraged to invest in MDG-related activities. The demands of African countries for a fair and equitable global trading system is perhaps the area where most still needs to be done. This requires: improvement of access of African products to developed country markets; elimination of trade distorting subsidies by developed countries (particularly in agriculture); assistance to African countries to integrate more fully with the global trading system; provision of assistance to mitigate the poverty-deepening consequences of trade liberalisation in Africa (rising unemployment, etc) and addressing issues related to commodities, by ensuring that African countries can move up the value chain and diversify their production.

Thinking further ahead, African countries need to develop ‘aid exit’ strategies by improving their domestic resource mobilisation efforts.

Pan-African Institutional Challenges

One of the key issues is whether the African Partnership Forum4 (APF) is sufficiently high level to deliver. There are concerns that implementation has been delegated to too junior a level to ensure the impact needed. The APF needs to ensure that representatives have access to Heads of State and that the policy momentum generated in 2005 continues. The EU has accorded Africa a higher level of attention with its strategy for Africa and its attention to an EU + AU business fund.

The AU has also taken significant steps in terms of mainstreaming gender issues with significant female representation at senior level within the organisation. However, such demonstrative and symbolic appointments need to be reinforced by relevant policies in all AU countries, including attention to culturally conditioned and sensitive questions, such as the right of women to inherit property. The weak institutional position of UNIFEM within the UN system is also cause for concern.

Youth unemployment and education issues will remain a challenge. This is true for demographic reasons and also the difficulty in creating suitable jobs. The recent emphasis on the need for universal primary education has to be reframed as a commitment to lifelong learning and development of a skilled workforce.

Financial resources remain scarce. The peace mission in Darfur is costing about $22 million per month, when the AU total budget is roughly US $150 million. There are also questions whether the AU mission, unless significantly strengthened, is

3 http://www.un.org/esa/ffd/

4 http://www.dfid.gov.uk/news/files/africa-partnership-forum.asp

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adequate to the challenge. There have also been questions whether the UN should take over the responsibility or share responsibility. However, the blocking vetos of Russia and China in the Security Council present a continuing problem.

3 Africa on the Move: An Urban Crisis in the Making

Humanity has now reached the point where 50% of the population live in cities and towns. As recently as 1980, there was very little mention of urbanisation in the Brandt Commission Report. In the Americas, Europe and the Caribbean, 75% of the population live in cities and towns, whereas in Africa 37.3% and in Asia 36% of the population are urban. Africa is urbanising faster than any other continent. By 2030 it is estimated that 50% of the population will be urban and 60% by 2060. By 2015 many cities will double their population – an explosive rate of growth leading to considerable social tension unless good policies are put in place. Conceptually, what is occurring has been called ‘premature urbanisation’. The traditional pattern of urbanisation has been increasing agricultural productivity pushing people off the land and into the city in search of jobs in industry. Often it is conflict, not the draw from jobs, which is pushing people into the cities of Africa. What one is experiencing is the arrival of ‘the chaotic city’ (Rem Koolhaas). For example, Lagos will become the third mega-city in the world with a population of twenty-three million by 2015.

Africa’s cities are also hubs of economic activity. For example, Abidjan has a population of 3.3 million, 40% of the country’s population and 33% of GDP. Nairobi has a 2.6 million population, 5.2% of the total and 20% of GDP.

There is a huge ‘housing gap’. has a backlog of 4 million units and a backlog of 2 million. Only 1% of the land has actually been titled. Mortgage mechanisms are inadequate with a low percentage of people able to buy secure housing. There are very few co-operative banks.

Surprisingly, until 2003, there was no universally accepted definition of ‘slum’. Key characteristics include: lack of adequate clean water; lack of decent sanitation; the temporary nature of the housing; over-crowding and lack of security of tenure.

In sub-Saharan Africa, 72% of the urban population live in slums. In thirty-four African least developed countries this figure is over 80%. In 2001, 166 million people in sub-Saharan Africa lived in slums. For example, Nairobi has 60% of its population living on 5% of the land. Social conditions in Africa reflect what has been called ‘the urban penalty’. In Kenya, the prevalent ‘urban myth‘ is that 87% of the population have access to clean water and 97% to sanitation. UN Habitat figures suggest that, in practice, more accurate figures are 48% with access to water and only 19% in slums, and with 31% with access to sanitation and 7% in slums. It is estimated that 150 million urban residents do not have access to clean water and 180 million lack adequate sanitation. The twenty-first century African city is struggling with a huge influx of population with an infrastructure and by-laws often established during the colonial period.

The international community has begun to address these issues, but is faced with the possibility of 2 billion slum dwellers by 2030 unless adequate policies are rapidly put

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in place. However, the work of novelists such as Zola and Dickens show cities can change given sufficient political will.

Water and sanitation are very much on the international agenda. The challenge of cities was mentioned in the Millennium Development Goal 7. Building on the work done by Habitat 1 and 2, the World Summit on Social Development also took up these challenges. In 2005 the concept of slum prevention was recognised at the UN Millennium Summit. The AU in Maputo and NEPAD have taken up city concerns at continental level. The most notable development has been the African Ministerial Conference on Housing and Urban Development (AMCHUD). UN Habitat has been given greater status through a General Assembly resolution. The driving concepts are ‘the inclusive city’, campaigns for good governance, secure tenure and spreading of examples of best practice.

The Commission for Africa recognised urbanisation as the second greatest challenge facing Africa. It also provided an analytical basis showing how rural and urban development are linked. The Commission for Africa Report called for the slum upgrading facility to be part of the International Financing Facility. This would need to set up international guarantee mechanisms to support investment and pro-poor mortgage mechanisms. In line with the challenges of Africa as a developing continent, mortgage mechanisms would need to recognise ‘two generation mortgages’. In the United Kingdom, the Executive Director briefed Parliamentary Committees5 on this agenda and the US Senate is also showing serious interest in African urbanisation. The infrastructure consortium is also a key element to response. At the same time, however, a number of developed country donors are reorganising or cutting back on their urban development commitments. It can be argued that the urban crisis is not ‘in the making’, but already here. The Zimbabwe crisis is, in part, a crisis of cities.6 African leaders cannot plausibly entertain the rural romance that city dwellers will go back to their villages. They have to address the reality that however chaotic the urbanisation is, and however acute the lack of adequate organisation and infrastructure, slum dwellers are there to stay. The new Tanzanian president has stressed that functioning cities are essential for development. African leaders often fear the slum dwellers as, in democratic elections, they tend to vote with the opposition, having such a limited stake in the well-being of the country. Slums are also the centres for likely conflict and riots. In certain countries such as Djibouti, climate change and desertification are additional causes driving people into city slums.

It needs to be recognised that no ‘grand plan’ will solve the urban crisis. Incrementalism, provided it is radical rather than palliative, can be very important. This can include regularising the situation of unauthorised city dwellers, communal decision-making and partnership models. The concept of ‘sweat equity’ with the poor contributing the labour to build their own houses provided the state and/or banks

5 http://www.unhabitat.org/content.asp?cid=4141&catid=5&typeid=6&subMenuId=0

6 See: “Evictions fail to address the root cause of urban poverty in Zimbabwe”, UN-Habitat, State of the World’s Cities 2006-7, pp. 98-9. , UN Special Envoy to assess the Zimbabwe crisis and Head of UN-Habitat estimated that 700,000 people were directly affected by the evictions and 2.4 million indirectly affected.

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provides capital is essential. This can include the provision of basic services such as electricity and sanitation with the poor, organised by community groups, actually conducting the building work.

It is increasingly being recognised that displacing people in significant numbers is highly problematic. At the same time, it is clear that with basic housing, if funding can be available, this could be profitable with poor people paying for their housing in as little as two years.

As the work of De Soto indicates, there is huge capital locked up in the potential of poor people.7 This needs to be harnessed and mobilised for regeneration. The potential for conflict should not be underestimated if nothing is done. Even in the poorest slums, through television, the poor have access to idealised visions of the western way of life. Unless there are improvements in housing and social conditions, levels of frustration can quickly reach boiling point. The challenge of cities is thus one requiring considerable levels of investment, innovative financing arrangements, better planning at national and municipal level, social organisation and economic regeneration.

4 East African Perspectives

In common with other East African countries, Tanzania has emphasised a focus on poverty reduction and economic growth. Tanzania has also stressed the importance of transparency, good governance, strengthening of democratic institutions and zero tolerance of corruption. The Tanzanian government has also welcomed the reports of the Commission for Africa and the Commission on the Social Dimensions of Globalisation, co-chaired by the former President of Tanzania, Benjamin William Mkapa.8 During the 1990s, poverty eradication strategies have led to a small reduction in the proportion of the population below the national poverty line - from 38.6% in 1991-2 to 35.7% in 2000-1. This has led to further intensification of the poverty eradication strategy focusing, for example, on infrastructure development in poorer districts and regions, community participation in planning and development strategies and emphasising tourism. Tanzania has benefited from the HIPC initiative and qualified for debt relief on US $3 billion out of a total debt of US $8.2 billion. Tanzania therefore welcomed the decision of the Gleneagles summit to provide 100% debt cancellation for the outstanding debt of the HIPC countries.

Along with many other countries in sub-Saharan Africa, Tanzania faces major problems with HIV/AIDS. According to UNAIDS statistics for 2003, the adult HIV prevalence was 8.3%. 1.5 million adults (age group 15-49) had AIDS, of these 800,000 were women, and 100,000 were children out of a total population of 35 million. The government has ensured the mainstreaming of HIV/AIDS policies into all government sectors with clear budget allocations. A programme to distribute anti- retrovirals to affected people has begun.

In the East African region, perhaps 45 of the 70 million population are young people. Combined with the forces of urbanisation, this leads to the potential for conflict. The

7 See Hernando de Soto, The Mystery of Capital. 8 http://www.ilo.org/public/english/fairglobalization/report/index.htm 13

spill-over effects of conflicts in neighbouring countries in the region, such as Burundi, Rwanda and the DRC place a huge burden on the economies on East Africa. This has included hosting refugees, degradation of the environment and deployment of budgetary allocations. Tanzania has been working actively for peace and security in the Great Lakes region. Tanzania has held regular elections since President Nyerere handed over. Every five years there have been elections with the Presidency limited to a maximum of two five-year periods. The Tanzanian government stresses that this is an exemplary model. Tanzania has also sought to ensure gender equality and gender equity and has done so through formation of Ministry of Community Development, Gender and Children as early as 1990. Every public institution is now required to establish a gender mainstreaming unit in its planning division to ensure the effectiveness of such strategies.

The Tanzanian government stresses the importance of the East African community as a regional framework for shared experiences and stresses the importance of the APRM with its emphasis on good governance, rule of law, democracy and observance of human rights – all of which are important for economic development. In common with other sub-Saharan African countries, Tanzania wishes the WTO ‘Doha Round’ to progress on trade issues. Even though Tanzania is still heavily dependent on aid, the country is seeking to move from a donor-driven agenda to its own political and economically relevant agenda. This has been achieved through consultative processes, not only within the country but also with partners.

East Africa, with its combined population of 70 million remains a small market with a strong need for regional integration. Increasingly, a form of ‘open regionalism’ is developing with cross listing of companies on different stock exchanges. There are East African meetings to co-ordinate the effective use of Lake Victoria. There remains a disconnect, however, since not even the World Bank has instruments aligning regional systems. Whilst there are ‘country assistance programmes’, there is no similarly developed mechanism for regional assistance. The private sector, and to a lesser extent governmental institutions, is taking advantage of regional opportunities.

5 West African Perspectives

African heads of state have played a leading role in the drive to establish NEPAD. However, economic growth and development are still far from the desired goals. Political leadership plays an essential role. Capacity building, peace and security remain key issues as do poverty eradication, effective running of utilities and increased productivity and output. In Nigeria, 60% of household income is spent on food and the savings rate at 12% is low. There is a low level of judicial independence. Technological capacity is needed, and state-designed policies need to be carried through. In many regards, African states are often ‘anti-developmental’ states. Growth may well be occurring but its benefits are often not redistributed to any considerable degree. Small and medium enterprises do not get the benefit of economic growth. Effective strategies are needed in both urban and rural areas. The most strategically effective approach will depend on the demographic and sociological mix. Families remain powerful units in West Africa and other African economies. There is a strong need for integrity in public life. Cities are not fully 14

functional and it is difficult for people to earn a decent living honestly. A reform of the political system is needed as many people simply wish to be ‘left alone’ by the state (interactions with the state often perceived as having negative consequences). There is a high level of dissatisfaction among populations who perceive elites as living well and interpret this as being at their expense. Even a country like Nigeria is, in many ways, perceived as a source of raw materials, and there is under-investment in other economic sectors.

6 Religion, Culture and Development in Africa

The identification of ‘religion’ as a separate area of human activity can be traced back to theorists of the early modern state. Secular development theory is a descendent of political theory which stresses the importance of secular constitution. The social reality of the poor is, however, by and large, not interpreted by them in this compartmentalised way. For example, the World Bank study ‘Voices of the Poor’ gives the example of Pakistani rural women indicating, as their top priorities, rural development, health and learning how to pray.9 Early Nigerian trade unionists in Kano, Nigeria had, as one of their key demands, time off for prayer. Definitions of ‘religion’ are contested, but it is generally accepted that religious views relate to behaviours and beliefs considered appropriate for the relationship between human beings and God or the spirit world. Religion relates to experiences of, and aspirations towards, human transcendence. In Africa, the predominant forms of religious expression are primal local religions, Christianity and Islam. Religious expression finds itself depending on texts and narratives on how to live, and finds expression in worldviews and codes of ethics embedded in local cultures. The mode of expression of religion is trans-national not national. Many Africans share the experience of being part of a number of ‘stories’. The intensification of religion in recent decades has coincided with the failure of nationalism. However, identities do not entirely break down. Even in situations where ‘things fall apart’ (the title of Chinua Achebe’s novel) some elements of family and communal support or other social structures persist. In religious cosmologies, the issue of evil is paramount. How can one respond to all that detracts from and destroys life? The experience of many of the African poor is quite simply not that of the ordered existence of a rich, reasonably rational parliamentary democracy. Religion provides a set of ‘interpretative keys’ or the software of change to help people predict, explain and even control their circumstances.

Poverty and injustice are often explained in religious terms. What went wrong? Perhaps the response is ‘the government was not sufficiently Islamic’. In religious communities, the predominant value is trust, which lowers transaction costs. Trust is the currency of society. For example, Sufi groups have spread out to form an international network from its place of origin in based on trust as the key cohesive element in a transnational trading network. Religion, however, is socially ambivalent. It can create cultures of spiritual apathy and take away human responsibility and agency. There are inappropriate forms of religious activity, such as exorcism of young children and the denunciation of the use of condoms to stop the spread of HIV/AIDS. One should not accept all religious claims as equally valid; and

9 See: http://www1.worldbank.org/prem/poverty/voices/index.htm

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should particularly challenge them if religious practices conflict with human rights. Cultures and religions change. In situations which cannot well be explained through theories of secularisation, it has to be recognised that religion is not only an individual expression of ‘what goes on inside you’ or inside religious buildings. Religion is occupying more of the public space. This can lead to unfortunate clashes that not only increase social tension but also impair development such as the tension between Pentecostalists and Muslims in northern Nigeria.

Religious organisations with representation in every village, have many possibilities of outreach into local communities. The local priest, pastor or imam has a privileged position for stressing the importance of social service and developmental vision. There are many examples of Islam promoting a developmentalist agenda.

There are examples of both progressive and also traditionalist attitudes towards women within religious organisations. Many of these organisations, with a strong sense of community identification, lead to women engaging in mutually supportive activities which have a positive impact on the social fabric.

The former president of the World Bank, James Wolfensohn, understood the development potential of religious organisations and initiated the World Faiths Development Dialogue.10 There is a need for a much more mature reflection on development, not conditioned by an assumption that ‘religion should be kept out of development’.

As Amartya Sen argues, development requires destruction as well as creation. It is rational for people in the communities affected to be involved in these decisions. It must also be recognised that religion is a key element in the lives of many of these individuals. Religion provides the communities with clear values related to wealth and well-being. Wealth is seen not only in material things, but also in the richness of social relationships, client accumulation and household accumulation. It is essential that development policy takes a holistic view rather than dividing development into two parts, ‘economic growth’ and ‘human and social development’.

The Commission for Africa stated: “we want culture to become an inherent component of all development strategies – not just in terms of cultural products but also in defining the terms of the development debate and the actions that follow. Culture becomes a way of working as well as an end in itself.” Culture is not an unchanging tradition. It was a new and ambitious departure for the Commission for Africa to launch its report at the British Museum.11 The British Museum itself is actively involved in co-operation with African museums, for example in Kenya and Ethiopia, to pioneer a new form of cultural co-operation between museums. In addition, new ways of opening up vital social issues have been approached, for example the sculpture of the ‘tree of life’ made by the Nucleo de Arte collective in Mozambique from decommissioned weapons from the Mozambican civil war.12 The

10 See: http://www.wfdd.org.uk/

11 See: http://www.commissionforafrica.org/english/about/pressroom/photos/11-03- 05_report_launch/index.htm

12 See: http://www.thebritishmuseum.ac.uk/newsroom/current2004/africa05.html 16

weapons handed in were exchanged for e.g. sewing machines and bicycles. Bishop Dinis Sengulane strongly made the point that addressing the issue of reconciliation is not only appropriate to Mozambique but also has resonance’s in the Northern Ireland situation.13

The symbol of the Tree of Life is also deepened, for example, by the ‘Made in Africa’ exhibition focusing on the origins of humanity in Africa. 14 Understanding one’s history helps one understand oneself. The museum has sought to transform itself from being a depository of ancient artefacts to being a cultural centre which helps to explain both history and tradition as well as current social reality. On Africa Day 2005 at the British Museum 25,000 people attended.15 The network of exchange with African museums also provides opportunities for North-South partnership.

7 Governance and Institution Building

Critics of the approach adopted by the G8 argue that if resources alone were able to solve the development problems of Africa, these would already be solved as a result of the inflows of resources already provided. Critics argue that the G8 approach and, indeed, the Sachs Report downplay the issues of governance.16 Making states into aid administering entities will not solve the development problems of Africa. A recent report by the Council for Foreign Relations in the USA argues foreign aid in the national interest stresses needs to stop mis-government.17

Institution-building is vital. Key elements of a policy agenda could include: funding Africanist research; building on African successes (such as Ghana’s electoral commission); creating institutional partnerships; transferring institution-building capacities within Africa; transferring institution-building capacities from outside Africa: Strengthening higher education in Africa; providing opportunities for spending time teaching in schools in Africa after graduation for US graduates; increasing corporate involvement in executive training; providing special incentives such as prizes and awards for good governance; securing the rights for women; rescuing youth from conflict situations such as the DRC, Liberia, Nigeria and Sierra Leone; engaging the new and old African Diasporas; forging a new pan-Africanism; rebuilding nation states and strengthening democracy.18

13 http://www.commissionforafrica.org/english/about/pressroom/photos/11-03- 05_report_launch/index.htm

14 http://www.thebritishmuseum.ac.uk/newsroom/current2004/africa05.html

15 http://www.bbc.co.uk/africalives/myafrica/blogs/005013/archive/2005/07.shtml

16 On the UN Millennium Project Reports, see: http://www.unmillenniumproject.org/

17 Council on Foreign Relations, Morew than Humanitarianims: A Strategic U.S. Approach toward Africa, CFR, New York, 2006; see also http://www.cfr.org/publication/9302/

18 Based on proposals from Professor Richard Joseph, CFR Task Force Member, presented at Wilton Park.

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8 Leadership in Africa

At the present time there are real challenges for leadership in Africa in such areas as building peace and security; promoting the rule of law and accountable governance; as well as working for sustainable economic growth and social development. Leaders care called on to be effective at the national level, the regional level and the international levels. Africa faces huge challenges so leadership must be shared. African leaders must help to develop the country together rather than focusing on narrow national interests. The readiness of the international community to help brings its own challenges. The complexity of co-ordinating the different agendas is considerable, particularly on peace and security issues the co-ordination task is vital. Multiple visions and diverse agendas are a recipe for continued conflict.

Some specific issues that require particular attention are a joint approach to the issue of unconstitutional changes of government. Both African leaders and the international community have ‘called time’ on the era of coups d’état. It is not enough simply to condemn coups and assert a policy of ‘zero tolerance’ without addressing the problems that generate such coups. The EU could look again at Article 96 of the Cotonou Convention and the USA could re-examine Section 508 of the Foreign Assistance Act to make these more effective and applicable to current conditions. The resistance to African leaders sitting with others who take power ‘through the barrel of the gun’ is a positive step, but the unjust social conditions and undemocratic forms of government which lead to such coups must also be addressed.

Massive youth unemployment is a further area requiring strong leadership. 70% of Africans are less than 25 years old. How can initiatives such as UN Global Compact,19 the Millennium Development Goals,20 the World Bank’s Poverty Reduction Strategy Papers21 and the proposals of the Commission for Africa be carried through in a way to deliver job opportunities for young people.

The ‘curse of natural resources’ also brings challenges on how to use such wealth. President Festus Mogae of Botswana has said “Natural resources, no matter how lucrative, cannot develop a country without political stability, sound economic management and prudent financial husbandry … Many factors were responsible for Botswana’s success. These include the political leadership at the time of independence. The leadership was genuinely committed to development and responsive to the needs of the people through an inclusive political process”.22 The Extractive Industries Transparency Initiative23 and the World Bank’s new commitment

19 See: http://www.unglobalcompact.org/

20 See: http://www.un.org/millenniumgoals/

21 See: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPRS/0,,menuPK:384207~ pagePK:149018~piPK:149093~theSitePK:384201,00.html

22 Lecture at IDS University of Sussex 2005

23 See: http://www.eitransparency.org/ 18

to tackling corruption,24 as well as the initiatives of NGOs such as Transparency International25 help monitoring on governments with substantial resources. In terms of development and resources, many African countries are actually rich in resources and potential but the vast majority of Africans continue to live in poverty. Governments need to recognise that a strong and responsible opposition and a well functioning civil society help to improve the quality of leadership. Leadership also works better when the private sector is fully involved. The old era of leadership by ‘big men’ is ill-adapted to the challenges of the twenty-first century. Furthermore, the resources of the state are not the resources of the president or the government – they are resources for the common good.

Leadership in Africa can be contrasted between the charismatic or messianic approach on the one hand and a participatory approach on the other. The charismatic leader can be successful in communicating a vision, defining national priorities, but there is a danger that when such leaders seek to impose their views, the people do not have a sense of ownership of the project. If the situation gets out of control, the temptation to government is to impose the ‘vision’ by authoritarian means. Participatory leadership is based on broad discussion including discussion in civil society, the media and academia. The whole society is involved in the national project.

For example, in the 1980s Angola as a socialist economy was reaching the point where it was clear that the model was not functional. The direct and indirect impact of the civil war was obvious. As a result, the leadership adopted a new model based on free market and a multi-party system. Largely following the advice of the IMF, the Angolan leadership simplified the tax structure, introduced user fees and charges for energy, forests, fisheries and water; rationalised expenditure, including military spending and engaged in moves towards peace. To encourage economic growth, they liberalised the financial system, diversified the economy away from excessive reliance on oil and implemented fiscal and redistributive mechanisms. Critics of the Angolan model insist, however, that power and the access to resources are still excessively concentrated in the hands of the political elite. The Angolan government insists they are not neo-liberal and that the economic advice offered by the international financial institutions has to be seen in context. The state still has a fundamental role in economic development as the market does not have all the answers. It was for this reason that the Angolan government did not open its capital account. Public expenditure remains very important for rebuilding the capital stock destroyed in war and for development of human capital.

24 See: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPUBLICSECTORANDGOVERNANCE/E XTANTICORRUPTION/0,,menuPK:384461~pagePK:149018~piPK:149093~theSitePK:384455,00.htm l

25 See: http://www.transparency.org/

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9 Business, Investment and Development in Africa

Business is increasingly realising that the most important impact of business on development is through the responsible and profitable operation of its core business activities.

The private sector can play an important role for delivery of growth in Africa by holding the G8 to account for commitments entered into, promoting a more balanced view of Africa and promoting good business practice.

Business Action for Africa was created from companies involved in the Commission for Africa consultation process to build on the momentum generated by the activities of 2005.26 The Commission for Africa recognised the importance of the private sector for poverty reduction. Growth is central to poverty reduction and the private sector is the major force for achieving growth. The focus must be on delivery of the right policies and actions. A study in the year 2000 concluded 5% growth per annum is needed in Africa to stop the number of people living in absolute poverty (living on under US$1 per day or less) from rising. 7% growth is needed for sub-Saharan Africa to halve extreme poverty for 2015. Each 1% rise in growth rates means 2-3% less people living below the absolute poverty line.

The private sector is the main engine for growth in an economy, but governance and geography can curtail in its effectiveness. Business Action for Africa has identified four areas for action:

• Governance and transparency including such initiatives as the African Peer Review Mechanism and the Extractive Industries Transparency Initiative, as well as national anti-corruption drives; • Improving the business environment, for example, the Investment Climate Facility for Africa and filling the infrastructure gap;27 • Improving assessments of business risk in Africa through providing more balanced and differentiated analysis, thus influencing perceptions of Africa; • Improving market access to rich country markets, improving African countries’ trade capacity and regional trade frameworks, as well as ending agricultural subsidies in rich countries.

A balanced approach to economic development will lead to increases in assets based on deployment of human, social capital, natural and physical capital. Work is the best route out of poverty. Job creation and the development of small and medium enterprises are essential. The agricultural sector remains important and raising rural productivity is essential in many countries. Youth employment and enterprise are also key areas. Education and health systems, including effective strategies against HIV/AIDS are vital.

26 See: http://www.businessactionforafrica.org/

27 See: http://www.investmentclimatefacility.org/

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New initiatives such as Business Action Against Corruption, which involves many of the leading multinationals, investment organisations, national working groups in African countries and other associations is being expanded.28 The Investment Climate Facility is a major private-public initiative to support investment climate reform in Africa. Initiatives have also been taken to improve customs administration in Africa, which is essential for ensuring that goods can cross boundaries quickly. Local sourcing of products is also increasing. For example, the Eagle Lager project of Nile Breweries has meant that 8000 local Ugandan farmers are benefiting from selling Sorghum at guaranteed prices. Anglo-American is perhaps the largest, but only one, company that is taking its responsibilities to its workforce seriously with respect to HIV/AIDS. For example, 2200 Anglo-American employees are now receiving anti-retroviral treatments.

Business is increasingly seeing that the right policies and actions are not only profitable for companies, add to their reputation but also contribute to accelerated growth and opportunities in African countries. Business increasingly sees itself as a partner with African governments and the international community in delivering growth and therefore poverty eradication.

The contribution of business to development is much wider than the corporate social responsibility agenda. For example, Unilever employs 40,000 employees in Africa so 1-2 million Africans are benefiting indirectly from Unilever’s investment. The presence of foreign companies generally raises standards, increases accountability and contributes significant levels of tax to the economy. Major multi-nationals have common concerns. They refer to the slow movement of consumer goods across boundaries, the need for inter-regional trade to be facilitated and tariffs to be reduced. Unilever stresses that whatever actions they take must fit the business logic of their company. Whether this is the printing of educational messages on health related products or iodising salt with direct health benefits, or packaging products in affordable sizes. In addition, major firms can take part in projects such as National Coalitions for HIV/AIDS, the Global Alliance for Improved Nutrition, the Global Business Coalition on Aids or provision of scholarships.

African Diaspora groups such as the Africa Foundation For Development29 (AFFORD) stress that job creation in the private sector has to be emphasised as the most effective means of poverty eradication. A BBC survey (2004) of 7,500 Africans in ten countries found their three top priorities were: to secure a well paid job; to secure training and/or education; and to start their own business. A survey of 60,000 poor people found their best prospects for escaping poverty were: self-employment or business; income from wages or salaries; and benefit from family and kin. The Economic Commission for Africa concurs: ‘The creation of decent jobs that can be performed by poor people is the single most effective way to reduce poverty in Africa’.

28 http://www.businessactionforafrica.org/themeAnews.htm

29 See: http://www.afford-uk.org/

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Diaspora

The is likely to continue to be active and engage with the media. Many of the Diaspora groups have the nature of transnational communities. They can be sources of expertise and venture capital in the countries of origin from which they come. The African Diaspora can assist in job creation through transfer of knowledge and skills, remittances, connections and influence. Diaspora groups have a common interest with business in creating jobs. The Diaspora is probably particularly well placed to assist in the small and medium enterprise sector. The Diaspora network, for example, can help attract investors with skills and money, can identify needs, for example in financial services, can invest in ancillary business to help create local jobs through local Diaspora ‘hometown associations’. Through connections and organisations such as Mobilising African and Home and Diaspora Resources for Enterprise in Africa (MAHDREIA) training can be provided and skills transferred.

Many of the Diaspora initiatives tend to be small scale, but through consolidating their networks African groups are seeking to scale up such an approach.30 A key network in this regard is Connections for Development. Africa groups are also seeking actively to generate more positive media stories of the ‘good news’ about Africa. Diaspora groups are also becoming much more experienced in providing support in such a way as the remittances and skill transfers have a multiplier effect in their countries of origin.

10 Africa and the International Financial Institutions

Liberalisation of exchange rates and trade was intended to facilitate African exports through policies that promoted private sector investment. The long-term benefits of such liberalisation have, however, been limited. This is not necessarily because the policy was wrong, but also due to other factors. One of these is lack of reciprocity with rich nations that have not allowed African exports to reach their markets. An additional factor is lack of trade capacity in Africa. Africa has thus lost market share of exports and this has contributed to lower incomes and rising poverty. Many African countries, therefore, remain sceptical about globalisation. Trade openness must be maintained and policies must be found to increase private capital flows, thus leading to enhanced and sustained growth. At the same time, African policy makers struggle with conditionality attach to developing financing imposed by the International Financial Institutions (IFIs).

When African countries opened their markets, rich countries flooded African markets with cheap exports, often subsidised by their governments. This impact, together with the lack of export diversification of African exports (often basic raw materials) led to a significant deterioration in the terms of trade for Africa. Africa has very limited capacity for enforcing or negotiating progress and access to rich country markets in trade negotiations. The opening up of the trade sector seems to have been too abrupt to allow African firms adequate time to adjust to new conditions. In recent years, China has also taken advantage of access to the African market.

30 See: http://www.cfdnetwork.co.uk/

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Competitiveness in trade requires much more than simply adopting liberal attitudes. It also requires export diversification, development of the infrastructure to reduce the cost of doing business, strengthening institutions, capacity development, dealing with non-tariff barriers and establishing vertical and horizontal linkages. Initially, the IFIs did not give adequate emphasis to a holistic approach. This left most African economies with little capacity to trade. The Infrastructure Plan is intended to address this, but it is under-funded and progress remains slow.

The model for market-based policies in Africa was that liberalisation and privatisation in a stable macroeconomic environment would trigger foreign direct investment. This would mean that the jobs lost through privatisation would be created through the private sector. In practice, even countries that have followed these policy prescriptions have not received the assumed benefit of significant inward flows of foreign direct investment. The fact the Asian success stories, such as China, South Korea, Malaysia, Taiwan and Thailand have followed policies not in line with the ‘Washington consensus’ has raised further doubts about the validity of the model. However, the weak fiscal situation of most African countries has meant that they are not in a position to pursue alternative strategies. Critics of the IFIs stress that they are ready to impose conditionality, but less ready to accept responsibility for shortcomings in the effects of their policies.

Whilst it has been welcome, the debt initiative at the G8 meeting in Gleneagles has resulted in a debt sustainability framework crafted by the World Bank and IMF which has paid more attention to preventing countries from requiring additional borrowing than to provide a framework for financing economic growth in a sustainable way. Unless African countries have access to multilateral financing, they will be pushed back further onto bilateral assistance for critical areas of investment such as infrastructure.

Whereas in the 1980s, the IMF basically provided short-term balance of payments support to countries faced with external sector imbalances and cushioning countries against fiscal shocks while they undertook structural reforms, more recently the IMF has played a ‘signalling’ function to aid donors. In effect, the IMF has suggested that countries were ready to use development assistance effectively. The Policy Support Instrument (PSI) is intended for countries which no longer need fund resources or which have graduated from the Poverty Reduction and Growth Facility (PRGF), but will still need a ‘stamp of approval’ in order to access finance.31 Only Nigeria and Uganda have so far taken advantage of this facility. Most countries in sub-Saharan Africa are able to access funds through the International Development Association (IDA) which enables richer countries to assist with the development problems of the poorer countries without entering into direct political power relations with them.32 In Africa in recent years, the World Bank has expanded its area of engagement and now acts in policy areas where it has previously had little experience. This has

31 For more details see: http://www.imf.org/external/np/exr/facts/prgf.htm

32 IDA is the mechanism within the Bretton Woods Institutions through which interest free loans and some grants are provided to developing countries. For more on IDA see: http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/IDA/0,,menuPK:83991~pagePK:11864 4~piPK:51236156~theSitePK:73154,00.html

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diminished the role of the World Bank in e.g. infrastructure, and emphasised areas such as governance where the link to the World Bank’s core mandate is less clear.

In Africa in particular, the traditional division of labour between the IMF and World Bank has become blurred. The range of conditions for IMF lending has expanded and the World Bank no longer concentrates only on longer-term development issues. Furthermore, the IMF has a much broader range of activities than macroeconomic stability.

Such middle-income countries as there are in Africa have also sought to achieve macroeconomic stability. This has led to a diminished role for the IMF in these countries. Their economic performance has made them less ready to accept stringent IMF conditionality; in short, they look for financing elsewhere.

The decline in World Bank lending to middle-income countries also has a negative implication for the net income of the Bank and the long-term sustainability of the International Development Association which has been the most predictable source of development financing for Africa.

The imposition of conditionality has not necessarily translated into positive outcomes at country level, as the Independent Evaluation Group of the World Bank has stressed.33 Conditionality can help to get countries to undertake difficult reforms, but on the whole, it can undermine country ownership and policies. This has long been a complaint of African governments and there is now some evidence that they are being listened to. The shift in the direction of policy ownership at country level is recognition that African ownership and thus sustainable development would be enhanced if aid donors and all multilateral institutions gave African governments more policy room. African countries emphasise they need more voice in the IFIs.

11 Financing Social Development – The Approach of the African Development Bank

The approach of the African Development Bank (ADB) has been outlined in its vision statement (1999), its 5-year Strategic Plan (2003-2007) and its 2004 Policy on Poverty Reduction.34 One of the policy approaches followed by the Bank is to emphasis sector-wide approaches. Given that five of the eight Millennium Development Goals (MDGs) call for improvement of social indicators. The ADB intervenes on a variety of social development issues, including education, health, population, nutrition, gender equity and micro-credit. Education is both an intrinsic right and also contributes to better socio-economic opportunities. The contribution of education of girls, in particular, is well documented. The burden of ill-health falls predominately on the poor and is both a cause and a consequence of poverty. The relationship between population growth and economic development is complex, with high fertility, migration, productivity and poverty interacting in ways in which the direction of causation is hard to establish. However, it is clear that economic development and education provide an incentive to limit the number of children.

33 For the reports of this department, see: http://www.worldbank.org/oed/ 34 http://www.afdb.org/portal/page?_pageid=473,1&_dad=portal&_schema=PORTAL

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The work programme of the ADB for 2006 is intended to give priority support to: agricultural and rural development; human capital development with a focus on primary and technical vocational education, primary healthcare and the fight against communicable diseases, particularly HIV/AIDS, Tuberculosis and Malaria; promotion of private sector development; promotion of good governance and improved private sector management; economic co-operation and integration at regional levels; and cross-cutting initiatives in the area of gender equalities, sustainable management of the environment and institutional capacity building.

In 2005, 74% of total loan and grant approvals were to four focus areas: agriculture and rural development; human resources development and human capital formation; socio-economic infrastructure; and private sector development.

Bank development assistance to 38 low income countries eligible for concessional financing from the African Development Facility (ADF) is particularly important for achieving the MDGs.

Donors are responding by making more finances available to the ADB under its new leadership. This will enable further expansion of the infrastructure support and also its other priority areas. The ADF, in 2005, allocated more than 40% of its approvals to the transport, water supply and sanitation, and power supply sectors. The emphases within education have stressed pro-poor policies, strong emphasis on education of girls and making primary education provision more robust. The education policy is also promoting higher education, including ICT and is currently considering a Higher Education Science and Technology strategy.

The health sector policy paper (1996) identified three areas for action – public health and health promotion, investing in health systems and creating a supportive environment for health. This has been further developed through policy guidelines (1999) with an emphasis on pro-poor interventions and a development of a malaria control strategy (2002). The bank also has an HIV/AIDS paper (2001) to identify policies in this area. At the same time, it has to be recognised that much of Africa is still off track in tackling malnutrition. Gambia has been an exception in this regard with very positive results. In the education field, a number of countries have significantly increased primary completion rates, especially and Guinea, Ethiopia and Mozambique. Mauritania has made significant progress in gender equality through increasing the primary enrolment ratio for girls. Zimbabwe has reduced HIV prevalence. Sub-Saharan Africa has made slow progress on water and sanitation, with only an estimated 64% of the population with access to safe water and only 37% to improved sanitation.

Faced with these challenges the ADB is involved in a major programme of institutional reform to strengthen its impact, and presence in its member countries.

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12 China in Africa

China is an increasingly important actor in Africa.35 Over the last two decades, the world’s manufacturing price, on average, has declined. However, in recent years China’s share of world consumption of base metals has been increasing rapidly. The commodity boom continues. China and India are huge countries and their rapid economic development means that they are becoming economic, social and political actors of an increasingly great significance. One impact of China’s access into Africa’s markets is that it wipes out the possibility of unprotected industrialisation in most of sub-Saharan Africa. Firms in China can manufacture 25-50% cheaper than their western and South African competitors. Chinese involvement in African infrastructure projects has grown considerably because of the cost advantages for Chinese firms. The comparative advantage is attributed to a number of factors: lower production margins; Chinese firms have access to cheaper capital in local investors; Employment of low paid Chinese staff; little use of local (i.e. African) sourcing; use of standard designs; lack of attention to environmental impact; access to a hard currency premium paid by the Chinese government; and subsidies provided by the Chinese government.

Six policy challenges can be enumerated:

• The sub-Saharan African countries face particular challenges in the manufacturing sector; • Even though the commodity boom favours some sub-Saharan economies, the resource boom can easily become a resource curse unless there is strong economic management; • The changing price incentives moving in the direction of capital intensive production of hard commodities, particularly minerals, and shifts against the labour intensive production of manufactures. This creates particular problems for poverty alleviation strategies; • China has made closer links with some fragile states (often mineral producers) and this has undermined the attempts by the global community to enhance transparency and better governance (e.g. Sudan); • At a political level, African economies are being pulled in different directions – there are the traditional links with Europe and America; many aspire to enhance regional or continental African co-operation; at the same time there is a recognition that China and India will be increasingly important for the future; • Unless African economies quickly develop a skilled elite in economic management, the challenge represented by Chinese growth could easily undermine their economic strategies.

Particularly in certain areas, such as clothing, even between 2004 and 2005, the volume of clothing exported from China to the European Union has increased dramatically. The export of cheap Chinese clothing and textiles to Africa has undermined the African clothing industry. Lesotho, Swaziland, and Kenya have all suffered badly as has South Africa. Employment loss has been

35 The following draws on work from Professor Raphael Kaplinsky et al. presented at the conference. http://www.ids.ac.uk/ids/global/AsianDriverpdfs/DFIDAgendaPaper06.pdf

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considerable. Lesotho registered a loss in employment in the textile industry of 29% from 2004-2005; in Swaziland the figure was 56%.

With the massive thirst of China for raw resources, oil exporters in Africa and other commodity producers such as Zambia, South Africa, DRC, Botswana, Ghana and profit. The oil importers, because of the high oil prices, (i.e. most of sub- Saharan Africa) lose.

Growing demand for resources raises the spectre of the ‘resource curse’ and ‘greed wars’. Many of the minerals are from countries which are unstable or involved in civil or inter-state conflict, e.g. oil from Sudan and coltan (an essential element of mobile phone construction) from the DRC. Resource windfalls could lead to greater levels of corruption unless good tax regimes are put in place and governance improves.

13 Conclusions

Since 2005, the ‘year of Africa’ for the G8 and the international media, a more sober realism has entered many discussions. Much of the diagnosis has been done – implementation is always difficult and ‘the devil is in the details’. The African institutions and initiatives, in particular the African Union, NEPAD, the African Development Bank and the regional bodies face difficult challenges of resource mobilisation and political will. The security challenges, most clearly exemplified by the Darfur crisis is a case in point. The African Peer Review Mechanism faces the test of Africans addressing the continuing governance issues on the continent.

With rapidly urbanisation and many relying on the informal economy for their income and welfare, no easy solutions are in view for this dynamic continent. Global plans and solutions do not easily take root in the specific contexts of different African countries. Imported solutions have been tried and failed. Development in an African context can use tools such as the poverty reduction strategy paper, but the process must be authentic, not just an exercise in ‘ticking the right boxes’ for the donors and consulting as an exercise to get aid. The cultural dimension, including an awareness of the social, religious and ethnic dynamics within each society, is an essential element of human development.

Growth and job creation are the best routes out of poverty. Many countries are achieving impressive growth rates, but still find it hard to break into export markets. The WTO ‘development round’ has not (or not yet) delivered on its promises. The impressive record of many African countries in moving towards macro-economic stability has brought down inflation rates and achieved many of the preconditions for sustainable economic growth. Inward investment is still in short supply, except in the extractive industries.

Internationally, a new dimension is the fast expanding role of China in Africa. This causes some concern among western analysts who fear that China’s approach undermines attempts to improve governance in eg Sudan and Zimbabwe. It is clear, too, that China is seeking the resources needed for its rapid economic expansion. Many African countries are only too willing to accept additional inflows for resources and assistance, in aid or infrastructure development. Some see the emergence of 27

China as a key player in Africa as a means of gaining greater space to choose their development path and partners.

Aid, trade and investment remain key to Africa’s economic development. Perspectives for growth are improved as a result of debt cancellation, provided that the previous problems of irresponsible borrowing and lending are not repeated.

The readiness of the international community significantly to support key sectors such as health and education is important provided commitments are kept. There is also a greater readiness to provide budget support to countries with a proven track record of responsible use of aid. The need to improve infrastructure is also more widely recognised.

The commitment to ‘African solutions for African problems’ remains key. African initiative is key and requires international support. There are problems enough and these are widely know. However, encouraging signs of democratic elections and conflict resolution, post-conflict recovery and economic growth are equally part of an objective analysis of Africa’s prospects.

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