Demba Moussa Dembele examines the external and internal challenges faced by Africa in the face of globalization and the US led war on terror and asks if the current African leadership is up to building the United States of Africa in the present global environment.

'Africa must unite or perish!' Kwame Nkrumah

This year marks the 50th anniversary of the independence of Ghana, the first sub-Saharan African country to break from the dreadful colonial yoke. It was under the leadership of President Kwame Nkrumah, enlightened, visionary and Pan Africanist leader, who devoted time and energy to liberating other African countries. Nkrumah fought tirelessly for the unity of African countries into a single African Federal State. He was convinced that the newly independent countries needed to unite to liberate other African countries and lay the ground for their economic emancipation. He understood that a divided Africa would still remain under domination and be an easy prey for global capitalism.

It is in part for his vision and far-sightedness that the Anglo-American imperialism co-opted Ghanaian felons to stage a coup that toppled Nkrumah and sent him into exile until his death. But Nkrumah’s vision and dream did not die with him. Quite the contrary: they remained very much alive throughout the years. As Africa got deeper into crisis, as its external dependence worsened, bordering on the threat of re-colonization, Nkrumah was largely vindicated while the proponents of ‘balkanization’ were completely discredited.

An illustration of this is the foundation of the African Union (AU) in 2001 and the decision of the Heads of State and Government to move toward the United States of Africa by the year 2015. This is a fitting tribute to the memory of President Nkrumah!

But the road to realizing this dream faces great hurdles, both externally and internally. In particular, the current world system, characterized by an increasing militarization of neoliberal globalization, presents overwhelming challenges for the African continent.

A) The challenge of globalization

The decision comes at a time when corporate-led globalization has entailed very high costs for the African continent, as a result of the acceleration of trade and financial liberalization and privatization of national assets to the benefit of multinational corporations. Trade liberalization, combined with western countries’ disguised or open protectionism and subsidies, resulted in the deterioration of sub-Saharan Africa’s terms of trade. Trade liberalization alone has cost the region more than $270 billion over a 20-year period, according to Christian Aid (2005). An illustration of these costs is Ghana, which lost an estimated $10 billion. According to Christian Aid, it is as if the entire country had stopped working for 18 months! Capital flight, fuelled by trade and financial liberalization, has reached alarming proportions, estimated at more than half of the continent’s illegitimate external debt, according to the Commission for Africa (2005).

The privatization of State-owned enterprises and public services has resulted in a massive transfer of the national patrimony to foreign hands, precisely to western multinational corporations. This, combined with the illegitimate and unbearable external debt, has deepened external domination and increased the transfer of wealth from Africa to western countries and multilateral institutions, as acknowledged by the Commission for Africa (2005), put together by the British Prime Minister, Tony Blair. And members of the Commission had reliable sources to back up their claim, since Britain is one of the main beneficiaries of this transfer of wealth. Quoting a study published in 2006 by Christian Aid, Archbishop Ndungane (2006) indicated that:

'Britain took away far more money from sub-Saharan Africa than it gave in aid and debt relief last year, despite pledges to help the region. In all, it took away £27 billion from Africa. In the 12 months since an annual Group of Eight (G8) summit in Scotland last July, the British economy gained a net profit of more than £11 billion ($20.3 billion) from the region. The charity calculated that almost £17 billion flowed from Britain to sub-Saharan Africa in the past year, including donations, remittances from salaries earned by Africans in Britain and foreign direct investments. At the same time, more than £27 billion went in the opposite direction, thanks to debt repayments, profits made by British companies in Africa and imports of British goods and capital flight.'

This is just one example of the financial hemorrhage hurting Africa. This is compounded by the ‘brain drain’, which has deprived Africa of thousands of highly trained workers in all fields. The World Health Organization (2006) says that more than 25% of doctors trained in Africa work abroad in developed countries. About 30,000 highly skilled Africans leave the continent each year for the United States and Europe. Still according to Archbishop Ndungane (2006), in the US alone

'African immigrants are the highest educated class in the range of all immigrants…there are over 640,000 African professionals in the US, over 360,000 of them hold PhDs, 120,000 of them (from Nigeria, Ghana, Sudan and Uganda) are medical doctors. The rest are professionals in various fields – from the head of research for US Space Agency, NASA, to the highest paid material science professors. ...'

B) The challenge of the US 'War on Terror'

The challenge posed by neoliberal policies to Africa will be aggravated by the militarization of globalization, with the doctrine of ‘pre-emptive strike’ adopted by the Bush Administration. One of the tragic illustrations of this doctrine is the illegal aggression and occupation of Iraq with the numerous crimes against Humanity committed by the occupying forces the world has been witnessing since the invasion. Another illustration of that doctrine is the threat of war against other sovereign countries, such as Iran, North Korea or Syria.

These aggressions and threats are part of what the US imperialism calls 'war on terror'. The Bush Administration is attempting to draw African countries into that strategy, which poses an even greater threat to Africa’s security and development. Since 2002, the US government has put together a special program, named “PanSahel”, whose stated objective is to train the armed forces of the countries involved to enable them to track down groups supposed to be linked to Al Qaeda.

The recent announcement of the creation of a US military command for Africa - Africa Command (AfriCom) - is a major step toward expanding and strengthening the US military presence in Africa through more aggressive policies to enlist support from African countries for its 'war on terror'. According to George W. Bush, 'the new command will strengthen our security cooperation with Africa and create new opportunities to bolster the capabilities of our partners in Africa.”

In reality, the objectives of the Africa Command are to be found in the US drive for global dominance and its growing appetite for Africa’s oil. US imperialism seeks to protect oil supply routes and American multinational corporations involved in oil and mineral extraction. In fact, several studies have forecast that the United States may depend for up to 25% of its needs on crude oil from Africa over the next decade or so. One clear sign of this trend is that several US oil companies are investing billions of dollars in oil-producing countries, notably in the Gulf of Guinea region. Thus, oil is one the main driving forces behind the US activism on the continent. It has nothing to do with Africa’s ‘security’. On the contrary, this is likely to increase the insecurity of the continent!

Therefore, the US strategy aims to secure strategic positions in Africa by using the threat of “terrorism” to gain military facilities and bases to protect its interests. The countries which accept to cooperate with the US may become more and more dependent on the US and inevitably on NATO for their “security”. They will be forced to provide military bases or facilities for US forces and serve as a canon fodder in the US ‘war on terror’, as Ethiopia has done in Somalia. The US strategy will sow more divisions among African countries and undermine the goal of African Unity.

C) Internal challenges

To the challenges posed by the global context described above one should add the internal challenges facing African countries.

As indicated above, the neoliberal policies imposed by the IMF and World Bank and the violence of corporate-led globalization have further weakened Africa. The principal characteristic of the continent is its weakness and divisions, despite the foundation of the African Union and the adoption of the New Partnership for Africa’s Development (NEPAD). The divisions are ideological and political. Neo-colonial ties are still strong with former colonial powers. There are still many foreign military bases and facilities on the continent. Several countries still depend on western countries for their “security”. France is intervening in the Central African Republic in an attempt to help the government push back attacks by rebel groups.

A similar operation took place a few months ago to help the Chadian government repel a rebel attack that threatened some parts of the capital. These countries are home to foreign military bases and have signed defense agreements with their ‘protectors’. These military bases are also used to launch criminal aggressions against other African countries, as the United States did when it launched air strikes against innocent civilians in Somalia from their air base in Djibouti! France is using its military bases in West Africa – Senegal and Togo- to destabilize Cote d’Ivoire.

These examples underscore the vulnerability of the continent and the fragile nature of many States, some of which have all but collapsed, in large part as a result of structural adjustment policies. Africa’s vulnerability is also reflected in the widespread poverty affecting its population, in the deterioration of the health and educational systems and in the inability of many States to provide basic social services for their citizens. Poverty is the result of policies imposed by the IMF and World Bank, using the pretext of the illegitimate debt with the complicity of African governments. This has aggravated economic, financial, political dependence on western countries and multilateral institutions. Food dependency has dramatically increased. According to the FAO and other UN agencies, more than 43 million Africans suffer from hunger, which kills more people than HIV/AIDS, malaria and tuberculosis combined! As a result, Africa spends billions of dollars in food imports, paid for by credits and ‘aid’ from western countries and multilateral institutions.

The external dependency and the extreme vulnerability of the continent are also reflected in the surrender of economic policies to the World Bank and western “experts” by many countries.

II) Can Africa overcome these challenges?

In view of these formidable challenges, building the United States of Africa may seem an impossible task, a Promethean undertaking. Indeed, one should be skeptical about the ability and willingness of current African leadership to build a genuine African unity. Because not only are the odds overwhelming but also past experience does not show any sign of optimism. Therefore, if African leaders are really serious about achieving this noble objective, they need to make tough and courageous decisions.

A) Need for political will

The document on the United States of Africa, published by the African Union (2006) claims: 'it should be realized that what unites Africans far surpasses what divides them as a people' (page 8). Yet, this did not translate into a political will to overcome their divisions and move toward strengthening African unity. Therefore, what African leaders need first and foremost is the political will to make the tough decisions and the courage and determination to implement them. In reality, the decision to establish the United States of Africa is the latest in a long series of decisions and agreements, most of which were never implemented. Some of the agreements on regional integration are more than 30 years old, but they are still lagging behind for lack of genuine will to implement them. The slow pace of integration and lack of solidarity is a reflection of the unwillingness of many African leaders to place the fundamental interests of the continent above national or even personal interests in order to move decisively toward genuine unity and cooperation.

The lack of political will is better illustrated by the fate of key documents adopted over several decades and that should have strengthened African unity and laid the foundations for the United States of Africa. Think of the Lagos Plan of Action (LPA), adopted in 1980 and which was quickly forgotten in favor of the IMF and World Bank-imposed structural adjustment programs (SAPs). Think of the African Alternative Framework, which was among the first documents to level a devastating critique of SAPs in 1989. Think of the Arusha Charter for Popular Participation in Development and Social Transformation, adopted in 1990 and which contains a blueprint for citizen participation in the design and implementation of public policies within a democratic and participatory decision-making process. Think of the 1991 Abuja Treaty, for the creation of the African Economic Community. This list is not exhaustive. Yet, when some African leaders proposed NEPAD in 2001, it made a scant mention of these documents. Instead, it attempted to rehabilitate failed and discredited neoliberal policies.

B) Freeing the African mind.

The political will has an ideological dimension, which is the need for African leaders to free their minds and understand once for all that they must take responsibility for their own development. No country or group of countries, no international institution, no amount of external ‘aid’ will ever ‘develop’ Africa. Likewise, no foreign country, no matter how powerful, will ever guarantee the ‘security’ of African countries. It is therefore illusory to assume that the United States, France or Britain will provide ‘security’ for Africa! Quite the contrary: these countries’ interest is to see a weak, divided and defenseless Africa. African countries must take responsibility for their own collective security! In this regard, African governments must close down all foreign military bases and scrap all defense agreements signed with former colonial powers and US imperialism. Furthermore, African governments must end their allegiance to neo-colonial institutions, such as ‘Francophonie’, Commonwealth and so forth.

C) An enlightened leadership

For these dramatic changes to take place, Africa needs an enlightened and visionary leadership, who would listen to the voices of the people. This also means promoting leaders who are accountable to their own citizens, not to outside powers or institutions, as is the case in many countries. Furthermore, Africa needs leaders who can define an agenda consistent with Africa’s interests, not let someone else do it in their place. In other terms, African leaders must no more accept that others speak or define policies in their place for their continent. A case in point is the US “war on terror”. As indicated earlier, some countries are supporting the US agenda. But fighting ‘terrorism’ is not a priority for Africa. The continent has other priorities, which have nothing to do with terrorism.

D) Involve the African people

So far, African leaders seem to have forgotten the African people in the conception and implementation of their agreements. To overcome the challenges outlined above, African leaders must understand that they must move from a union of States to a union of peoples. This means that the success of the United States of Africa depends on putting African the people at the center of the project. The popular participation in decision-making and implementation of public policies, as called for by the Arusha Charter, is a critical factor in building a genuine and strong Union. This seems to be understood by the document published by the African Union (2006), which says that 'the Union Government must be a Union of the African people and not merely a Union of States and Governments' (page 4).

This seems to be just a lip service paid to the idea of popular participation, because so far, there are no concrete steps to make it a reality. Despite the establishment of some institutions, like the Economic, Social and Cultural Council (ECOSOCC), the people have no say in the decisions of the Union. To achieve a genuine Union of the African people, the first step should be to allow a free movement of people –on the continent and in the Diaspora- throughout the continent. It is unthinkable to build the United States of Africa by keeping the current borders in place and limiting the free flow of African citizens across the continent. The building of the Union must be rooted in the mobilization of the African masses across the artificial borders set by former colonial powers in order to divide and weaken the African people.

III) Conclusion

The paper has reviewed the challenges facing Africa in its attempt to build the United States of Africa. External factors, such as the high costs of neoliberal globalization and the US ‘War on Terror’, are likely to hamper African efforts at unity and independence. These external factors take advantage of Africa’s internal weaknesses and tend to aggravate them.

But does the current African leadership have the capacity and will to overcome the internal and external challenges in the process of building the United States of Africa? It is doubtful. Most of current African ‘leaders’ take their orders from western capitals and have surrendered their policies to the IMF, the World Bank and the World Trade Organization. In the words of the late Professor Joseph Ki-Zerbo (1995), these are ' "leaders" with frightened minds' who can only 'imitate” their western masters. How can anyone trust such ‘leaders’, some of whom contemplate providing military bases to the United States in the name of fighting 'terrorism'?

The building of the United States of Africa requires a new leadership with the political will to follow through their commitments. This means promoting a new type of leadership in Africa, imbued with the ideals of Pan Africanism, genuinely dedicated to the unity, independence and sovereignty of the continent and to promoting the welfare of their citizens. It is a visionary leadership, like Nkrumah and others of his generation. A leadership who refuses Africa’s enslavement and will never accept that others speak or define policies for Africa.

So, building the United Sates of Africa requires a different kind of leadership with decolonized minds, who are willing to stand up to foreign domination, who would listen to their own citizens and promote policies aimed at recovering Africa’s sovereignty over its resources and policies. In other words, the success of such undertaking requires a leadership imbued with the values and ideals of Pan Africanism and genuinely committed to the unity, independence and sovereignty of Africa.

References

African Union (2006). A Study on an African Union Government. Towards the United States of Africa. Addis Ababa

Christian Aid (2005). The economics of failure. The costs of ‘free’ trade for poor countries. London

Commission for Africa (2005). Our Common Interest. London (March)

Ki-Zerbo, Joseph (1995), Which Way Africa? Reflections on Basil Davidson’s The Black Man’s Burden.

Ndungane, Njongonkulu, “A CALL TO LEADERSHIP: The role of Africans in the Development Agenda”. Harold Wolpe Memorial Lecture (30 November 2006), Howard College Campus, University of KwaZulu-Natal

New Partnership for Africa’s Development (NEPAD)

* Demba Moussa Dembele is Director, African Forum on Alternatives based in Dakar. He can be contacted at [email][email protected] or [email][email protected]

* Please send comments to [email protected]

Deadlock. That’s the current state of trade negotiations in the lead up to a crucial World Trade Organisation meeting in Hong Kong from 13-18 December. Expect “rude battles and fierce negotiations” during the meeting, writes Demba Moussa Dembele, as the United States and European Union try their utmost to wrangle a deal that will give them license to loot. In the face of intense pressure, African trade ministers must remember the welfare of their people, stand firm and resist the heavy-handed tactics they will be subjected to, Dembele writes.

In just a few days, Hong Kong will host one of the most important meetings of the World Trade Organisation (WTO). After the failure of the last ministerial meeting in Cancun (Mexico) two years ago, there are fears that history may repeat itself, because so far there is no consensus on some of the key issues to be discussed. The Draft Declaration issued by the Director General on November 26, 2005 and revised on December 2, 2005, has been criticized by several developing countries as being biased in favor of developed countries in many of the issues under negotiation, notably on services and industrial tariffs.

For African and other developing countries the stakes are clear: will this round be a real development round or will it be subverted by developed countries, notably the United States and the European Union (EU), to push for more liberalization and the opening up of developing countries’ economies to multinational corporations? Indeed, the current round of negotiations, called the Doha Development Round (DDR), was supposed to foster development and give more attention to issues of interest to developing countries. In particular, it was supposed to correct the egregious inequities and imbalances of the Uruguay Round Agreement on agriculture which allowed industrial countries to increase their support for their farmers, leading to a dumping of subsidized products on developing countries’ markets and to big distortions in the world prices of agricultural products.

But the Cancun fiasco and the current impasse illustrate the gap between developing and industrial countries regarding the interpretations of the Doha Round. The major sticking points of the negotiations include agricultural subsidies by developed countries, liberalization of the services sector and non-agricultural market access (NAMA).

Over the last two years, African countries have tried to harmonize their positions so as to strengthen their solidarity and defend more effectively their interests. This is especially the case for African least developed countries (LDCs) which joined other LDCs to raise their specific concerns. In their last meeting held in Arusha (Tanzania) on November 24, 2005, African trade ministers issued a statement called the Arusha Development Benchmarks for the 6th WTO Ministerial in Hong Kong, in which they exposed their views on some of the key issues to be discussed in Hong Kong.

Agricultural subsidies

They stressed the inadequacy of the proposals made so far on agricultural subsidies, which are one of the most contentious issues in the current negotiations. As is well known, cotton subsidies are the best illustration of the inequities and injustice inherent in the world trading system. The United States, which controls around 40 percent of the market, spends between $3 and $4 billion annually to support 25,000 farmers. This has had the effect of depressing cotton prices in world markets, hurting some 10 to 11 million African farmers. For African countries, the elimination of agricultural subsidies has become one of the key tests of the sincerity of developed countries to correct the imbalances that characterize the world trading system. In their statement, African trade ministers insist that agricultural subsidies be phased out by the year 2010 and call for the removal of all other structural distortions.

Given the formidable pressure from African and other developing countries on agricultural issues and the fear of another failure, the United States and Europe are maneuvering to shift the blame to developing countries. Both have made superficial concessions recently aimed at ‘meeting’ developing countries’ demands. For instance, on October 10, 2005, the United States issued a proposal indicating that it is ready to slash its agricultural subsidies by 60%. However the proposal is conditional on the EU and Japan agreeing to slash their subsidies by percentages, already rejected by both. In other words, the US proposal leads nowhere. On the other hand, the European Union, while criticizing the US proposal as ‘unrealistic’ and not feasible, has put on the table a proposal of its own, which puts the onus on the US.

Industrial tariffs

African trade ministers insist that obligations of African countries in this area should be commensurate with the continent’s development level and that they should be granted flexibilities and retain policy space. Moreover, any appropriate formula should allow Africa to pursue development objectives, such as industrial policy, employment creation and product diversification.

This position contrasts with developed countries’ push for drastic tariff reduction and rapid liberalization of industrial markets. The satisfaction of these demands would have a devastating impact on African economies. Already, crippled by structural adjustment programs, the remaining African industrial base would be eliminated and industrialization would be put on hold for an indefinite period. With little industrial prospects, Africa would attract ever fewer FDIs, except in the mining and extractive industries, which would reinforce the continent’s specialization in primary products. Industrial impasse will translate into the acceleration of the ‘brain drain’, further clouding Africa’s development prospects. Therefore, African countries should not heed the call for significant tariff concessions. They should retain these tariffs as a development tool.

Trade in services (GATS)

In this area, African trade ministers have rejected the call for rapid liberalization and the introduction of new approaches to the GATS framework. They have reiterated Africa’s right to regulate the services sector, to open up and liberalize fewer sectors in line with its development level and priorities. African resistance in this area is strongly echoed by other developing and emerging countries.

To understand the stakes in the services trade, one must keep in mind that they permeate all aspects of economic, social and cultural development. They range from education to health, from transportation to housing, from banking services to trash collection. Trade in services accounts for more than 25 percent of world trade and is growing rapidly. In several developed countries, services account for about two thirds of economic activity and over half of the world economy.

Therefore, liberalization in trade in services would represent a tremendous opportunity to boost these countries’ economies and pave the way for foreign control of key sectors in developing countries, as already is the case in many African countries. Indeed, a further liberalization in this sector would deal a major blow to African development prospects since this would lead to market delivery of many of these services, making them inaccessible to the overwhelming majority of the population. Moreover, liberalization in services would increase the role and power of foreign investors, thus hampering or severely limiting state-led development strategies. Furthermore, this would reinforce the current division of labor. In light of this, African countries are right in opposing further liberalization and the opening up of their services sector. They must have the right to use them as development tools under the control of national authorities to serve national development objectives.

The African agenda in Hong Kong

In light of the above, for African countries, a successful conclusion of the Hong Kong meeting should mean the satisfaction of the following:

- Removal of structural distortions in agricultural goods markets as a result of industrialized countries’ policies;

- The sovereign right to use industrial tariffs and other instruments to pursue their development objectives, especially to promote industrialization and full employment;

- Non-reciprocal market access and trade liberalization given the asymmetry between African and industrial countries in the world trading system;

- The right to protect their agricultural sector and use other policy tools to enhance the welfare of their citizens, in particular the right to food sovereignty;
- Set a firm deadline and a timetable for the elimination of agricultural subsidies, with transparent and verifiable monitoring mechanisms;

- Set up compensatory mechanisms for the trade losses due to those subsidies;

- Opposition to the imposition of services liberalization and the right to regulate services and liberalize them in line with their development priorities;

- Maximum flexibility in identifying special products (SP);

- Implementation of effective special and differential treatment (SDT) measures;

- Inclusiveness and transparency in the negotiation process.

Conclusion

Given the gap between African and other developing countries’ positions and those of developed countries, the Hong Kong Ministerial will give rise to rude battles and fierce negotiations. African countries will face an uphill battle. Agricultural issues will be the make or break issue in Hong Kong. As things stand now, only concessions by the US and the EU on subsidies and on other areas may break the deadlock and give a chance to the Doha Round.

The efforts of the United States and the European Union to convince world public opinion that they have made all the concessions needed have received the help of several leading multinational corporations. On November 8, 2005, CEOs and Chairmen from a number of these corporations published an editorial in the Financial Times, calling on WTO negotiators to conclude the negotiations “on time”! This elicited a swift response from several NGOs, which published a statement in the November 15, 2005 issue of the same Financial Times.

All this shows that governments of industrial countries and multinational corporations are united in pressuring developing countries into accepting to make concessions to further liberalize their economies to the detriment of their own populations. This campaign aims to intimidate developing countries’ negotiators and implicitly send the message that they would be to blame if the Hong Kong meeting were to fail. Intense pressure, heavy tactics and even physical threat may be applied by the US and the EU to get African and other developing countries’ negotiators to accept what they have refused since Cancun.

However, African trade ministers must stick with their demands and resist the pressures put on them. They must have in mind the fundamental interests of their countries and citizens. They must not fear another failure of the WTO, because Africa has nothing to lose. In reality, another failure of the WTO ministerial will further expose the hypocrisy, lies and injustices of the current trading system and illustrate its illegitimacy.

* Demba Moussa Dembele is Director, African Forum on Alternatives Dakar (Senegal)

* Please send comments to

Meeting the Millennium Development Goals (MDGs) requires billions of dollars. The fix-all solution often mentioned is simply to increase aid flows. Demba Moussa Dembele critiques the foreign aid industry, explaining why aid is more of an enemy than a friend, how aid dependency has been augmented by IMF and World Bank conditions and what the hidden political and economic costs are for African countries.

The present focus on the Millennium Development Goals (MDGs) has reignited the debate on the need for more aid to developing countries to help them meet the MDGs by 2015. However, this has inevitably rekindled the parallel debate as to whether more aid is really the answer. Will extra money simply shore up inefficient governments and feed government corruption? One response to this is to say we must bypass government and make money available directly to NGOs and other organizations. At the same time, others claim that what is needed is not more aid, but a fundamental transformation of international power relationships, especially reform of international trade and finance rules to allow African and other developing countries to sell their goods and services at a fair price.

A number of ideas for raising more money to meet the MDGs have been floated recently. While the UN Millennium Project’s report, Investing in Development,[1] calls for an overall huge increase in aid, the Commission for Africa report calls for a doubling of aid to Africa.[2] The French government’s Landau Report suggests a number of innovative sources of financing,[3] while Gordon Brown’s International Finance Facility proposal envisages selling bonds issued by industrialized countries with a view to raising money in financial markets to finance development.

A central misconception about aid

But before going into the debate on whether aid does encourage dependency and inefficiency, we need to address a particular misconception: that aid to developing countries, known as official development assistance (ODA), is an act of simple generosity towards poor countries in dire need of capital to invest in education, health, infrastructure, and so forth, and that it comes with no strings attached. Development assistance is neither value-free nor benevolent. It has served and continues to serve the economic, political and strategic interests of ‘donor’ countries. This was particularly so during the Cold War period. It is even more evident today, especially from the USA.

The Millennium Challenge Account (MCA), for instance, the Bush Administration’s main tool for foreign ‘aid’, is laden with ideological, political and economic conditions. Eligible countries should support, or not oppose, US foreign policy; they should adopt ‘free market’ reforms, good governance practices, and so forth. It could also be added that so far, not a single dollar from the MCA has been delivered to African countries.

Furthermore, with the onset of the debt crisis in the late 1970s, Western governments and multilateral institutions under their control started imposing crippling conditions on aid to impoverished countries.

An instrument, not a gift

So aid is an instrument, not a gift. For many Western countries and institutions, it plays a key role in their overall strategy to maintain and even expand their influence in Africa. This is particularly true for former colonial powers such as France and Britain, which have used aid to maintain their influence in former colonies, in economic, financial, military and strategic areas. This type of aid does create dependency and it is intended to, since its primary objective is to shore up regimes that are ‘friendly’ to Western countries, regardless of the nature of those regimes. This explains, among other things, why a dictatorial and inept regime like Mobutu’s in the former Zaire was kept afloat despite the looting of his country’s resources and the rampant corruption that characterized his regime. Billions of dollars looted by Mobutu are still stashed in Western banks while the Congolese people continue to live in abject poverty.

Giving with one hand …

Another problem with aid is that it mostly benefits donor countries. Despite the formal end to the practice of ‘tied aid’, the money disbursed as aid goes mainly to foreign-controlled enterprises and aid flows are used to buy goods and services from donor countries. The prices of those goods are often higher than the market price of similar goods. Export credit agencies and banks in Western countries have played a key role in that area. A recent report by ActionAid pointed out that for every dollar disbursed by France and the US in the form of aid, 89 per cent and 86 per cent return home, respectively.[4]

More strings attached

Moreover, since the start of the debt crisis, aid dependency has been aggravated by conditions imposed by the IMF and World Bank. Since the 1980s, aid from Western countries has been conditional on recipient countries implementing policies dictated by these two institutions. Even aid from former colonial powers to their former colonies is now conditional on signing an agreement with the IMF. But it has become clear that these policies have done more harm than good. A recent report by Christian Aid indicates that over the last 20 years, the imposition of trade liberalization has cost African countries a staggering $272 billion, a sum that could have paid back the continent’s debt.[5] The report adds that the loss was roughly equivalent to the amount of foreign aid received by African countries during the same period.

The Christian Aid report corroborates findings by UNCTAD in 2001[6] which show that policy conditionalities imposed on African countries, especially trade liberalization and deregulation, have also cost the continent in deteriorating terms of trade and increased capital flight, which is higher than in any other region in the world. UNCTAD observed that, had Africa’s terms of trade remained at their 1980 level, the continent’s share in world trade would have been twice its current share; per capita income could have been 50 per cent higher; and annual growth would have increased by an additional 1.4 per cent. Worse still, this deterioration, combined with increased capital flight and debt repayments, led to a net transfer of real resources from Africa to the rich countries! Clearly, with stable terms of trade, African countries would have been much better off and would depend less on foreign aid.

Unfair trade and aid dependency

To give an illustration: in 2002, subsidies for cotton provided by the US caused a 25 per cent decrease in cotton prices, which translated into a loss of $300 million by African exporters, such as Mali, Benin and Burkina Faso, a higher sum than the entire ‘debt relief’ ($230 million) promised by the IMF and the World Bank to all African countries eligible for the HIPC Initiative.[7] Subsidies by OECD countries – which, according to UNDP, cost more than six times what they spend on aid to poor countries – have increased African countries’ food deficit and dependency.[8] By flooding African markets with cheap, subsidized food, industrialized countries destroy domestic food production and increase African countries’ dependency on food imports, which are paid for through new loans or ‘aid’ from the same industrialized countries.

The debt crisis and aid dependency

These things – the cost of complying with conditions imposed by donors and lenders and subsidies on domestic produce by OECD countries – help explain, among other things, the worsening of the debt crisis, which in turn has meant greater dependency on foreign aid. In the 1980s and 1990s, the average debt service was roughly equal or even higher than foreign aid to African countries. Part of that aid was even used to pay back old debts, including multilateral debts. All this reinforced dependency on external sources, especially the World Bank, the IMF and the African Development Bank. And, as a report by UNCTAD in 2004 indicates, Sub-Saharan Africa’s debt soared in the 1980s and 1990s, the peak years of structural adjustment.[9] According to the report, though African countries had reimbursed $550 billion to creditors against $540 billion in loans between 1970 and 2002, Africa is still saddled with a debt estimated at $300 billion. This is a vicious circle which, up to now, has shown no sign of being broken.

Internal factors

What about the question as to whether aid simply encourages corruption and inefficiency? According to a recent article in the Ugandan daily, The Monitor, the country depends on international donors for 50 per cent of its budget. But the Uganda Revenue Authority collects only about 57 per cent of taxes due because of institutional weaknesses in tax administration and because ‘the rich and politically powerful don’t pay taxes’. Meanwhile, Uganda spends $200 million on the military, where $70 million is enough for its security needs, and a Ministry of Finance study shows that public administration expenditure could be cut by 50 per cent. Uganda, therefore, does not need aid, says the article; what it needs is to improve its tax administration, clamp down on tax evaders, and abandon its corrupt and profligate military and public administration expenditure.

It is true that corruption is still rampant in many African countries and African civil society organizations have raised this problem time and again. In several countries anti-corruption NGOs are working tirelessly to raise public awareness and expose corrupt officials and practices. This is part of our struggle for more democratic, accountable and transparent governments. There is no doubt that the elimination of corruption would contribute to reducing dependency on foreign aid through improvement in public savings and more effective tax collection systems that would help raise significant amounts of money for the state.

But, once again, the problem of corruption has two sides: the corruptor and the corrupt. However, Western governments and multilateral agencies tend to focus exclusively on African governments and overlook the role of foreign companies and banks in maintaining corruption.

But here too Western countries have had a crucial influence. First, the imposition of structural adjustment programmes by the IMF and World Bank has considerably weakened African states and impaired their ability to fight corruption more effectively. In the 1990s, for instance, many countries lost some of their best civil servants as a result of ‘voluntary leaves’ recommended by these two institutions, more concerned by the wage bill than the quality of the civil service. In addition, they propose fighting corruption by a further financial squeeze of the state through the establishment of a myriad of ‘independent’ agencies that take away resources that should normally go to the state. But this is a mistake, since corruption may simply move from central government to local governments and so-called ‘independent’ agencies. The best way to fight corruption is through democratic scrutiny and accountability of elected officials.

African economies have inherited structural weaknesses from colonization, which have made them more vulnerable to external shocks, such as commodity price fluctuations and higher interest rates. In addition, these economies depend to a large extent on trade and financial flows with former colonial powers. This also tends to foster aid dependency: when exports fall, African countries rely on hard currencies for imports of equipment, foodstuffs and essential goods.

The costs of aid dependency

The dependency on foreign aid has political as well as economic costs. It is obvious that a country that depends on foreign assistance for up to 40 per cent of its budget cannot control its own policies. Instead, as the IMF and World Bank’s structural adjustment programmes show, donors dictate economic and financial policies, based on their own world view and interests. The structural adjustment programmes, imposed by the IMF and World Bank, are a reflection of that reality. As already indicated, this has worsened the economic crisis and deepened external dependency, while the conditions attached to such multilateral aid are the principal cause of the abject poverty affecting more than half of the African population.

In short, much of the so-called aid given by Western countries and the loans made by multilateral institutions are not based on developing countries’ real needs, nor on any performance criteria, but primarily on the interests of ‘donors’. It’s time, now, to consider some possible alternatives.

What is the alternative?

Obviously, there is no easy solution to the problem of aid dependency. There are no quick fixes nor a general policy applicable to all countries. However, we think that the following proposals should be explored by African and Western countries as a basis for a lasting solution to the problem.

- Cancel unconditionally the debt of all African countries. This is a precondition for any possibility of recovery. Once the burden of debt is lifted, aid will no longer be simply a means of perpetuating an instrument of domination.

- Repatriate stolen wealth. Even the Commission for Africa Report acknowledges that tens of billions of dollars in stolen wealth are kept in Western countries. Some estimates put that stolen wealth at 70 per cent of private wealth, excluding land. The repatriation of that would significantly limit African countries’ need for foreign aid.

- End IMF and World Bank policies. Trade liberalization, deregulation, fiscal austerity and privatization have been some of the leading factors behind the worsening of African countries’ financial crisis and their growing dependence on foreign aid. They have also increased capital flight, which reached unprecedented proportions during the 1980s and 1990s.

- Abolish unfair trade policies and promote fair trade. Africa needs fair trade (rather than ‘free’ trade, which has exacerbated African countries’ need for hard currencies and thus their dependence on foreign aid).

In a fair trade framework, one acknowledges the asymmetry between African and industrialized countries’ economies. Fair trade would therefore keep in place special preferences for African exports, especially agricultural exports. Subsidies in Western countries which make African imports prohibitively expensive would be abolished. It would stop the dumping of subsidized products in African markets to the detriment of local production. Finally, it would support proposals for international agreements, as often suggested by UNCTAD, aimed at stabilizing commodity prices so as to limit, if not eliminate, the decline in African terms of trade.

This set of policies is the opposite of ‘free’ trade, which pretends to establish a ‘level playing field’ between African and industrialized countries!

- Change internal policies. The above policies must be complemented by fundamental internal changes. They include eliminating wasteful spending and fighting corruption more effectively. They also include more transparent decision-making and more accountable governments and institutions. At the continental level, the African Union must pursue its efforts to hold member states to some common standards so that economic and financial policies can be improved for the benefit of their citizens.

Summing up

Does aid create dependency? The short answer is that, on the terms on which it has generally been given, it does, but it need not. Aid dependence is the result of both internal factors and deliberate external policies. Aid has been made to serve both the foreign policies of Western states and their wider economic interests. The terms of that aid, combined with Western protectionism, have been designed to keep Africa as a source of commodities and a consumer of manufactured goods from industrialized countries. This creates further aid dependence as the need for hard currencies is made more acute by the deterioration in the continent’s terms of trade.

On the other hand, aid which is consistent with African countries’ needs and priorities can certainly be a positive factor. The solution to aid dependence does not lie in a further privatization of that aid through corporations, like the MCA, or through Western NGOs. It lies rather in fundamental policy changes, both at the international and internal levels, which will rebalance many of the transactions, both economic and political, between Africa and the richer countries. More fundamentally still, Africa needs to put its own house in order and count first and foremost on its own resources. No amount of foreign aid alone will ever develop the continent.[10]

* Demba Moussa Dembele is Director, African Forum on Alternatives, Dakar (Senegal). He can be contacted at [email][email protected] or [email][email protected]

* Please send comments to [email protected]

* This article first appeared in the September issue of the Alliance Magazine and is gratefully reproduced here with permission. Alliance is the leading magazine on philanthropy and social investment across the world. Published quarterly by Allavida, it tracks the latest trends and developments providing expert analysis from northern and southern perspectives. Visit http://www.allavida.org/alliance/alliancehome.html

References:

1 See Aid Real Aid.pdf

5 Christian Aid (2005) The economics of failure: the real costs of ‘free’ trade. See www.christianaid.org

6 UNCTAD (2001) Economic Development in Africa. Performance, prospects and policy issues. New York & Geneva: United Nations.

7 UNCTAD (2003) Trade and Development Report 2003 New York & Geneva: United Nations.

8 UNDP (2003) Making Global Trade Work for the Poor London: Earthscan.

9 UNCTAD (2004) Economic Development in Africa. Debt Sustainability: Oasis or mirage? New York & Geneva: United Nations.

10 For further information on African positions that are critical of the whole set of relationships between Africa and Western countries, see Firoze Manji and Patrick Burnett (eds) (2005) African Voices on Development and Social Justice. Editorials from Pambazuka News 2004 Dar es Salaam: Mkuki Na Nyota Publishers. See also AFRODAD Reality Check on Development Aid Annual Reports. See

Far from being a development tool, Demba Moussa Dembele argues that Economic Partnership Agreements (EPAs) seek to take control of the continent’s resources and undermine its drive toward autonomous economic and social development. The result would be the transformation of Africa into a playground of multinational corporations. Trade and Africa’s ‘integration’ into the global economy must not be allowed to take place on terms dictated by Europe, Dembele concludes.

In February 2000, the new framework agreement, signed between the African, Caribbean and Pacific (ACP) countries and the European Union (EU), marked a major departure from previous agreements in that it opened the door to a profound transformation of the relationships between the two groups. Arguing that the new international trade environment requires that both parties comply with the rules of the World Trade Organisation (WTO), the EU has compelled its ACP partners to engage in separate free trade zones, dubbed 'economic partnership agreements' (EPAs), whose fundamental aim is to remove the trade preferences granted to ACP countries and establish reciprocity in trade relations:

Negotiations of the economic partnership agreements shall aim notably at establishing the timetable for the progressive removal of barriers to trade between the Parties, in accordance with the relevant WTO rules. (EU 2000, Article 37-7).

However, the EU insists that the partnership agreements will be negotiated only with countries which feel that their economies are able to sustain competition from European products. All the other non-least developed countries (LDCs) that do not fall within this category would be granted some undefined 'alternative possibilities'. The necessity to bring the ACP/EU relationships into compliance with the WTO framework stems from the belief that it would be almost impossible to get a waiver for an indefinite period for maintaining the trade preferences granted to ACP countries. In fact, the EU claims that under WTO rules, these preferences are both discriminatory – applying only to ACP countries rather than all LDCs – and non-reciprocal – European exports are not granted similar preferences in ACP markets.

Apart from the need to comply with the WTO provisions, the economic partnership agreements are intended to achieve two other objectives. One of them is the necessity to maintain the 'special relationship' established between Europe and the ACP countries. From the EU perspective, the necessity to comply with the rules of the new international trade framework does not mean giving up all the benefits associated with decades of special trade and financial relationships with ACP countries. According to the dominant view, Europe has invested too much in these countries to let others undermine the close relationships that have been nurtured over decades.

The other objective assigned to the EPAs is to make the economic partnership more 'efficient'. The concern with efficiency stems from what Europe perceives as a 'poor' performance of the Lomé Convention. The EU's own studies, corroborated by several other studies, indicate that ACP countries’ share in the EU market has consistently shrunk over the years to the benefit of other developing countries in Asia and Latin America. The reasons for this 'poor' performance are both internal and external to ACP countries. The internal constraints are weak supply conditions, a limited awareness of Lomé preferences, the lack of well-functioning trade channels, and so forth. Among the external constraints are the stringent rules of origin imposed by the EU, which require an added value of between 50% and 60% of ACP exports to Europe, and complicated and cumbersome trade procedures. To these constraints, one may add numerous non-tariff barriers, such as sanitary and phytosanitary measures and transportation costs that are a real handicap for small or medium-sized exporters, particularly those in landlocked countries.

In addition, the Lomé mechanism has not helped export diversification in African countries, but contributed to reinforcing their trade dependence on the European Union, which is estimated at more than 45%. In the light of this, the European Union tends to draw the conclusion that trade preferences granted to ACP countries have been a waste and have had little impact on the development of ACP countries.

But despite their emphasis on trade liberalisation and reciprocity, the EU insists that the EPAs will promote 'integration' and stimulate 'economic development' on the continent. For this to be the case there would need to be a fundamental reorientation of the EPAs, to transform them into a development-enhancing scheme, as spelt out below.

Non-reciprocity in trade liberalisation

Article 53-1 of the Cotonou Agreement stipulates that: 'Economic and trade co-operation shall be based on a true, strengthened and strategic partnership.'

If that is really the case and if the EU is sincere in adhering to these principles, then, it should accept that the huge asymmetry that exists between the two economies should prevent the establishment of a free trade zone between African and European countries. In other words, the EU should give up its intention to impose reciprocity in trade relations. It is said that the EPAs seek to go beyond what is allowed under the WTO rules, such as special and differential treatment as well as non-reciprocity which have been integrated into the WTO since the Punta del Este Declaration. Even the Commission for Africa, established by the British Prime Minister, Tony Blair, has challenged the free trade stance of the EPAs, to such an extent that it seems to have alarmed Peter Mandelson, the EU trade commissioner.

Indeed, given the asymmetry between African and European economies and the huge subsidies the latter enjoy, any reciprocity in trade liberalisation, as implied by the economic partnership agreements, would deal a major blow to Africa’s development prospects. It would mean not only more unemployment and poverty on a larger scale, but worst of all, the total collapse of the agricultural sector in sub-Saharan Africa, which in turn would aggravate the food crisis on the continent. It is widely acknowledged that trade liberalisation has already entailed huge losses to African countries. It has been estimated that the combination of deteriorating terms of trade and the trade restrictions introduced by developed countries has led to an average annual loss of $60 billion for Africa, about four times the amount of development 'assistance' to the continent. Admittedly, sub-Saharan Africa has suffered disproportionately from trade losses over the last 25 years. In particular, the costly protectionist European agricultural policies are undermining the objective of 'poverty reduction' in sub-Saharan Africa, one of the other objectives that the EU claims to pursue in Africa.

Findings reported by the United Nations Conference on Trade and Development (UNCTAD 2004) confirm that trade liberalisation has aggravated the economic and social conditions of the least developed countries, most of which (34) are in Africa. These findings are consistent with the analysis made in 1997 by the United Nations Development Programme (UNDP), which made the following observation, based on a number of case studies around the world:

In the real world, distinct from the imaginary world of free-trade proponents, the survival in agricultural product markets depends less on the policy of comparative advantage than on the comparative access to subsidies. To liberalize local food markets in the face of such an unequal competition is not a policy aimed at improving efficiency, but a recipe for the destruction of livelihood on a large scale. (UNDP 1997: 86)

This observation and those by other UN agencies must convince the EU that reciprocity in trade liberalisation with Africa would be a recipe for disaster. Indeed, agricultural policies left to the free play of market forces, combined with the continued subsidising of developed countries’ high-cost production, have led to the collapse of commodity prices in world markets and contributed to a low level of investments in productive capacity in Africa. Therefore, unless European agricultural policies are dismantled or substantially reformed, to take into account the interests of African countries, the latter must insist that agriculture be kept outside of any negotiations with the EU, while they reserve the right to protect key sectors of their domestic economies. Thus, it can be argued that reciprocity in granting trade preferences should not be based on a theoretical timetable proposed or decided on by the EU. Rather, it should be linked to tangible achievements by African economies in being able to sustain competition from European products.

No to TRIPS

If the EU is really committed to promoting 'a true … partnership' and establishing 'a strategic partnership' with Africa, it should help African countries take full advantage of all the WTO provisions that allow them to protect their economies under certain conditions. The EU should not be forcing them to forgo those provisions, or to go beyond what is allowed under the WTO framework. The compliance with some of the WTO key provisions would represent a major threat to African economies. For instance, the continent’s industrial policy would be particularly hurt if African countries were forced to comply with some of the most basic WTO provisions such as the trade-related intellectual property rights (TRIPS). The following paragraph in the Cotonou Agreement clearly indicates the EU's determination to force ACP countries to abide by these provisions:

Without prejudice to the positions of the Parties in multilateral negotiations, the Parties recognise the need to ensure an adequate and effective level of protection of intellectual, industrial and commercial property rights, and other rights covered by TRIPS.
(EU 2000: 40, Article 46-1).

If there are not profound modifications to these provisions, complying with TRIPS would compel African countries to enact laws designed to protect the intellectual property rights of European multinationals for 20 years, even for essential drugs. In effect, these provisions protect intellectual property through patent arrangements that exclude third party use, offering for sale, selling or importing of such products for a minimum of 20 years. This would make it impossible to produce generic copies for at least 20 years. This policy would strengthen developed countries’ technological monopoly and deprive African countries of the opportunity to catch up through adapting technology and producing generic copies of drugs, which was possible before the WTO provisions entered into force in 1995.

Even worse, African countries would be required to enact laws to protect patented products, including those owned by companies in the EU that patent plants and products found in developing countries. In other words, Western multinational corporations operating from the EU can freely patent products found in African countries and get protection from these countries’ governments! This is unacceptable. Thus, development-oriented EPAs should support the call for a comprehensive review of some WTO provisions that are detrimental to developing countries and for an extension of the transition period for these countries. In particular, the EU should support African countries in calling for a profound transformation of TRIPS to limit the threat to Africa’s industrialisation, technological progress and food sovereignty.

Indeed, these provisions have been called into question by developing countries and even by some institutions within the United Nations system. For instance, UNCTAD has made some recommendations to that effect. One recommendation is for a comprehensive reassessment of the links between property rights and development. Another is to extend the transition period to allow more time for developing countries’ industries to adapt. The third recommendation is to allow developing countries to use compulsory licensing to ensure technology transfer and meet public health concerns. These recommendations apply more specifically to African countries, given their extreme economic vulnerability. Therefore, the EU should take into consideration those recommendations and change its view of the EPAs, not as a trade-enhancing tool, but as a development-oriented instrument.

Taking into account the real costs of the EPAs

The EU tends to minimise the costs of the EPAs to African economies even if it says that it has put in place mechanisms aimed at compensating for the transition costs incurred by African countries. However, the real costs of that transition cannot be estimated. First of all, a free trade zone means full reciprocity when it comes to granting trade preferences, which means a complete removal of all quantitative and tariff barriers between African and European countries. In other words, African industries would be exposed to competition from European products. One important implication is that infant African industries would be deprived of the minimum protection they need, which would result in the collapse of many national industries that would not be able to sustain competition with European companies. This would have dire consequences in terms of lost income, higher unemployment and an increase in the level of poverty.

On the other hand, the removal of tariff barriers would entail heavy financial losses for the state as a result of lower revenues from import duties. Since in many African countries’ more than 20% of their budget revenues depend on import duties and more than 50% on primary export revenues, those countries would lose up to 50% of their revenues, because a free trade agreement with the EU would abolish or drastically bring down tariffs on European imports. All this would lead to a further sacrifice of the social sector, because financial compensation from the EU is not likely to match the magnitude of the losses incurred by these states.

In addition, a free trade agreement implies not only a free flow of goods and services, but also a free flow of capital, which means that European multinationals would have a legal basis for freely investing and selling in many African countries. The economic partnership agreement would give fiscal privileges to European investors and protect their investments. The free movement of capital would result in a free and unlimited repatriation of profits. The free flow of capital could aggravate capital flight from Africa and foster short-term capital movements that would be harmful to Africa’s development, as the East Asian case demonstrated a few years ago. All this would exacerbate the financial problems experienced by African countries.

To limit these losses and help African countries overcome some of the most intractable obstacles to development, any development-oriented economic partnership agreement must be linked to unconditional debt cancellation for all African countries, to a rise in official development assistance (ODA) and to the repatriation of stolen wealth. In addition, the EU could provide incentives to stimulate foreign direct investments (FDIs) that are compatible with African countries’ development needs and priorities.

Keep the Singapore issues out of the EPAs

In connection with the above, the Singapore issues must be kept out of the EPAs. These issues include competition policy, government procurement, investment policy and trade facilitation. They had been one of the principal subjects of contention in Cancun, when African and other developing countries rejected discussion of these issues within the WTO framework, leading to the collapse of the meeting. The EU is trying to use the EPAs to force these issues on African countries. This would deal an even greater blow to the continent’s development prospects. Joseph Stiglitz (2004) has stated that acceptance of these issues by developing countries would certainly 'stop the process of development'. Even the British government has asked for the issues to be removed from the negotiations unless the ACP countries feel ready to discuss them.

Accordingly, EPAs that envisage making a contribution to Africa’s development must remove the Singapore issues from the negotiations until general consensus is reached among African and other developing countries. Indeed, the inclusion of the Singapore issues would compel African countries to comply with trade-related investment measures (TRIMS), which would deal another big blow to a regional industrial policy, since it would mean granting 'national treatment' status to European investors and allowing them to invest in any area of their choice. Worst of all, it would mean adapting African economic and social policies to the needs of these investors, since they would be allowed to sue host countries for any losses they might suffer as a result of domestic economic and social polices. These provisions are similar to those embodied in the failed Multilateral Agreement on Investment (MAI), which was strongly opposed by African and other developing countries. For individual African countries, as well as for the continent as a whole, this would spell the end of any chance of industrialisation for the foreseeable future. Indeed, the provisions for support and protection of investments, contained in the current post-Lomé IV Agreement, are far more extensive and stringent than those found in previous Lomé Conventions. An illustration is given by Article 78-3 of the agreement, which indicates:

The Parties also agree to introduce, within the economic partnership agreements, and while respecting the respective competencies of the Community and its Member States, general principles on protection and promotion of investments, which will endorse the best results agreed in the competent international fora or bilaterally. (EU 2000: 61)

According to critics, these 'general principles' do not contain any mechanisms to ensure investors’ responsibility for their labour force or the host country’s national development. Nor do they include mechanisms that ensure a clear relationship between investments, poverty reduction and sustainable development. Worst of all, these provisions have no mechanisms for allowing ACP countries to control the flow of portfolio capital, which is the most speculative part of foreign capital for developing countries. It is precisely the absence of such mechanisms that led to the Asian financial crisis in the late 1990s, with its devastating economic and social consequences.

Without such mechanisms, the free flow of capital that would accompany a free trade agreement with the EU would devastate African economies as a result of speculative short-term investments. A development-oriented partnership agreement must therefore aim at promoting long-term and stable investments in productive sectors, in infrastructure, in telecommunications and human resources development. It must also recognise African countries’ right to restore capital controls and set performance criteria for foreign investors in terms of technology transfer, job creation, etc, to meet the objectives of their economic and social development.

Provide genuine support for economic integration

A development-oriented partnership agreement should encourage real economic integration, at both regional and continental levels. This means that it should avoid imposing different trade arrangements within regional economic communities (RECs). But such a risk is associated with the current EPAs, which are dividing African countries into LDCs and non-LDCs. By offering some undefined 'preferences' to LDCs, the EU knows that selfish and narrow 'national' interests may override regional solidarity and compliance with the Abuja Treaty and Africa’s interests as a whole. Therefore, some countries may be tempted to sign separate agreements with the EU for short-term gains at the expense of the long-term interests of their regions or the continent.

Another risk of split lies in the possibility that European countries may attempt to establish closer relationships with some more 'developed' countries, such as South Africa, Nigeria and others, the so-called 'emerging markets', at the expense of the other countries, while nominally encouraging the process of integration. Indeed, by giving a free ride to market forces, the EU may seek to develop closer economic ties with countries presenting better opportunities for its industries and investors. This would lead to a two-level economic partnership and expose African countries to great risks of implosion, if they were to opt for different trading arrangements as proposed by the EU.

But the adoption of two or more trade regimes in the same regional bloc would violate the provisions of the Abuja Treaty, since the African Economic Community (AEC) is a supranational community. This would be even more incomprehensible for countries which already have a common external tariff for third countries. In addition, if there were several trade regimes, it would be almost impossible to control the flows of goods and services between countries of the region, a fact which was underlined by the EU's own study. Thus, African countries must insist that any economic partnership agreement with Europe must be compatible with the provisions of the Abuja Treaty, since it requires the regional economic communities to:

…make [their policies] compatible with those of continental integration and align their statutory instruments such as their Treaties and Protocols to the provisions of the Abuja Treaty establishing the African Economic Community. (AEC, 1997).

From this perspective, any economic partnership agreement must contribute to strengthening the region’s economic integration and accelerating the process toward building the African Economic Community. Therefore, if the EU is committed to promoting and strengthening regional integration, it should clearly demonstrate its willingness to invest in African countries’ productive sectors, in infrastructures, in human resource development, in promoting cross-border investments in order to improve supply conditions and strengthen the continent’s production base. To demonstrate this commitment, the EU should allow African countries to complete their integration process before engaging them in any discussions about any kind of economic partnership agreement. It was indicated that the SADC, which is the most advanced example of integration in sub-Saharan Africa, would complete its integration only by 2010 or 2012. Therefore, a genuine commitment to African integration should allow this process to run its full course.

Conclusion

Most observers argue that if the proposed economic partnership agreements between the EU and African countries remained in their original form and if they were implemented they would represent a fatal blow not only to Africa’s economic integration but also to its development prospects for the foreseeable future. These agreements risk dealing a fatal blow to the production model of integration adopted by the Abuja Treaty (1991), which was a major departure from the previous models followed by African countries. Several critics have argued that integration in sub-Saharan Africa cannot be conceived of as a trade-enhancing instrument, but as a development tool, that is, as a comprehensive approach to the continent’s complex economic and social problems. From that perspective, its first and foremost priority should be to develop a strong production base in order to meet the continent’s basic needs in food production, in industrial products, in technology, in employment, in human resource development, etc. This conception is embodied in the Abuja Treaty, which laid the foundations for the AEC. Since the signing of this treaty, all African economic communities have adopted the production model.

It is clear from this analysis that a free trade agreement with an African regional grouping – which would not be compatible with the treaty – would only serve the EU's interests at the expense of the continent’s drive toward building the AEC. Development-oriented EPAs must be compatible with the priorities defined by the integration process in Africa. For instance, any free trade agreement with the EU must be compatible with African countries’ own trade liberalisation scheme, while keeping sensitive areas vital to their economies out of the negotiations.

But Europe has little interest in strengthening Africa’s productive capacity. On the contrary, its fundamental aim is to perpetuate the current trading relations with African countries, whereby Africa remains a market for its products and a source of cheap commodities and labour. One could argue that the proposed EPAs are a response to the US-sponsored Africa Growth and Opportunity Act (AGOA). The EPAs and AGOA would in all likelihood transform Africa into an arena of confrontation between Western multinationals, which have been taking over assets in strategic sectors in Africa as a result of the liberalisation and privatisation imposed on African countries by the IMF and the World Bank. In reality, neither the EPAs nor AGOA would bring 'development' to Africa. Quite the contrary, both seek to take control of the continent’s resources and undermine its drive toward autonomous economic and social development. AGOA violates Africa’s sovereignty and overlooks Africa’s priorities. In short, AGOA aims to 'integrate' Africa into the world economy on 'America’s terms' (South Centre, 1999). So will the proposed economic partnership agreements. But Africa’s 'integration' into the world economy must be on its own terms, and not on America’s or Europe’s.

* Demba Moussa Dembele is Director of the African Forum on Alternatives
Dakar (Senegal)

* Please send comments to

REFERENCES

African Economic Community (AEC) (1997) 'The main conclusions and decisions of the first summit of the African Economic Community', AEC Newsletter 1 (4)

European Union (EU) (2000), The Cotonou Agreement between the African, Caribbean and Pacific States and the European Community and its Member States. Brussels: European Union

South Centre (1999) Lopsided Rules of North-South Engagement: The African Growth and Opportunity Act. Geneva: South Centre

Stiglitz, Joseph E. (2004) An Agenda for the Development Round of Trade Negotiations in the Aftermath of Cancun. London: Commonwealth Secretariat

United Nations Conference on Trade and Development (UNCTAD) (2004) The Least Developed Countries Report 2004. New York and Geneva: United Nations

United Nations Development Programme (UNDP) (1997) The Human Development Report. New York: Oxford University Press

The statement on debt issued on February 5, 2005 by G 7 Finance Ministers after their meeting in London dashed hopes and expectations raised by an impassioned plea made by Nelson Mandela to the same Ministers the day before. Yet, Mr. Gordon Brown, the British Chancellor of the Exchequer, hailed the statement as “a breakthrough” and said that “it is the richest countries hearing the voices of the poor.”

However, when one reads carefully between the lines, one finds nothing new in the London statement. Indeed, it repeated the same platitudes heard many times before: promises of “debt relief”, but on a case per case basis and with strings attached in the form of the usual conditionalities. For instance, the statement says that to qualify, a country must have “sound, accountable and transparent institutions.” We all know what this means: a State and public institutions able to implement neoliberal policies. This is more explicit in the statement’s insistence on fighting corruption described as a “significant barrier to growth, private sector development, investment and poverty reduction”. The reference to “poverty reduction” is a window dressing meant to mask the real objective pursued by those policies.

In the end, the London statement clearly demonstrated that the “creditors” are not yet ready to unconditionally cancel an odious, illegitimate and immoral debt that has been transformed into an instrument of domination, control and plunder of indebted countries’ resources, especially in Africa. Otherwise, one cannot understand why the G 7 countries refuse to cancel a debt which actually has been paid many times over, and which will not cost them a dime, just a few weeks after the same countries had agreed to cancel a significant portion of the Iraqi debt. Once again, the London meeting turned out to be a missed opportunity by the richest nations to write off the debt burden of the poorest nations in the world in the name of justice.

A long list of failed “debt relief” plans

The London statement is likely to be one more item on the already long list of empty promises and failed “debt relief” plans. Indeed, as far as Africa is concerned, the approach to its debt crisis has always followed a pattern of cynicism and broken pledges, including the Heavily Indebted Poor Countries (HIPC) Initiative.

Bilateral Initiatives

In the late 1970s and early 1980s, a large part of African countries’ debt was owed to bilateral creditors. That debt mostly served the economic, political and strategic interests of Western countries, especially during the Cold War period. The early treatment of the bilateral debt crisis was through debt rescheduling within the Paris Club. However, this “debt relief” mechanism contributed to worsening the crisis because it only postponed debt payments while adding to the debt burden with penalties on the rescheduled portion. As a result, the debt of most African countries continued to pile up, with a growing part in the form of accumulated arrears, which averaged 10% of exports in the 1980s and 27% in the 1990s, compared to 1.5% in the 1970s.

These arrears were an illustration of the growing inability of African countries to service their debt. It is that realization, combined with the worsening economic and social crisis brought about by structural adjustment programs, that led bilateral creditors to contemplate some kind of debt write off, beginning with the Toronto Plan, proposed in 1988 during the G 7 Summit in Canada. Ever since, African countries have seen a string of proposals, plans and initiatives, all aimed at “solving” its debt crisis. Indeed, since the Toronto Summit, each G 7 Summit has been punctuated by statements on “debt relief” but they all turned out to be broken promises and failed plans. From Toronto (1998) to the latest London statement by G7 Finance Ministers (February 5, 2005), several other proposals have been put forward by industrialized countries. Among these are the London or “enhanced” Toronto Terms (1991), the Naples Terms (1994), the Lyon Terms (1996) and the Cologne Terms (1999). But none of these Plans provided a real solution to the debt crisis.

The HIPC Initiative.

The failure of the bilateral initiatives to solve the crisis was due in part to their exclusive focus on bilateral debt, up until 1996. The shift began with the Lyon Terms, which brought into the picture multilateral debt. This shift stemmed from the realization that multilateral debt had risen dramatically as a result of the worsening economic and social crisis during the peak of structural adjustment programs, from the mid-1980s onward. During that period, the share of the World Bank in Sub-Saharan Africa’s debt increased from 5% in 1980 to 25% in 1990 and to nearly 40% in 2000. For many countries, especially, the “poorest” ones, which bore the brunt of SAPs, the Bank has become the largest “creditor”. It is in light of this change in the structure of Africa’s debt and in response to growing and intense pressure from debt campaigners in the Jubilee movement that the Heavily Indebted Poor Countries (HIPC) Initiative was launched in September 1996.

After the first three years of implementation, there was a realization that the Initiative was going nowhere. Accordingly, it was “enhanced” in September 1999, by introducing more flexibility in the eligibility criteria, which allowed it to admit more countries. However, a new conditionality was introduced by the IMF and World Bank in the form of the Poverty Reduction Strategy Paper (PRSP), which each country should submit before being accepted. To give an air of seriousness, the IMF’s Enhanced Structural Adjustment Facility (ESAF) was renamed “Poverty Reduction and Growth Facility” (PRGF), but with the same macroeconomic framework that underpinned the notorious structural adjustment policies.

But now, it is widely acknowledged that the Initiative has failed to deliver. The proposals put forward by the United Kingdom and the United States are an implicit recognition of that failure, which stems from the Initiatives major flaws. First, to be eligible, a country has to have a track record of “successful implementation” of IMF/World Bank-sponsored policies. That is, in the same failed and discredited policies responsible for the abject poverty affecting African countries. Second, using debt ratios, which have little to do with indebted countries’ development needs and ability to service their debts, the Bank and Fund have excluded many countries, much deserving of “debt relief”. In Africa, the Nigerian case is the most blatant example, as President Obasanjo himself has repeatedly indicated. For instance, in 2004, Nigeria’s debt service was estimated at $1.4 billion, more than the combined spending on education and health!

Third, the Initiative aims to bring debt to a level deemed “sustainable” by the Fund and the Bank. This “sustainability” is based on future export revenues, themselves depending on the behavior of commodity prices, which constitute the bulk of African countries’ exports. But as it turned out, the Bank’s “debt sustainability analysis” was so flawed that most of its projections fell flat, leading creditors to scramble for additional funding for “Completion Point” countries (topping-up).

Finally, reaching the “Completion Point” is contingent upon implementing structural reforms, such as trade and investment liberalization, deregulation, a further erosion of national sovereignty and privatization of public assets. The difficulty in fulfilling these reforms has often led several countries to fall “off-track”, that is, the suspension of their programs, by the IMF and the World Bank. But even more damaging to these institutions, these reforms tend to aggravate poverty and negate the stated objective of the PRSP: “poverty reduction”. Two examples illustrate this.

In Mali, the Bank forced the government to let producers and the management of the cotton-processing company (CMDT) “freely” negotiate the producer price of cotton. After they had reached an agreement to fix the price at CFA 210, which was below the actual cost of production, the Bank said it was “too high” and that the price had to be renegotiated! It imposed a price in the range of CFA 60-175 for the next three years, to the dismay of producers, who felt let down by their own government. Many producers say that the future of cotton production, which occupies more than three million people, is bleak. How can this contribute to “poverty reduction” in Mali?

The second example is the forced privatization of the Senegalese peanut-processing company SONACOS, last year. This privatization was one of what the Bank calls “completion point triggers”, that is, the conditions to be fulfilled by Senegal before reaching the “Completion Point”. Even the Chairman of the Committee in charge of the privatization admitted during a press conference that the Bank had pressured them to reach a deal with the bidder, at any cost. However, feeling that this is a very controversial and bad deal, the government said that it was a “provisional” deal, which could eventually be reversed if the bidder did not meet some of the conditions it has put forward. In any event, Senegalese peanut producers and SONACOS employees have all stated that the deal was against their interests. In an interview to a local newspaper, on February 15, 2005, Mamadou Cissokho, the leader of the leading peasant organization, CNCR, said that “the privatization of SONACOS is a declaration of war against the interest of the Senegalese peasants.” How can this privatization contribute to “poverty reduction” in Senegal?

Similar examples can be found in other African countries. They belie the objectives of the PRSP, which in reality stands for “public relations strategy paper”, according to many critics! This explains, inter alia, why five years on, the “enhanced” HIPC Initiative has not delivered. The debt crisis lingers on and even keeps worsening. As indicated above, the HIPC Initiative has nothing to do with achieving a lasting solution to the debt crisis, but with extracting as much as possible from indebted countries while increasing the IMF and World Bank meddling in those countries’ affairs via the crippling economic, financial and now political conditionalities, known as “good governance”.

For instance, according to UNCTAD, between 1997 and 2001, several African countries that had programs with the Fund and the Bank had each been imposed an average of 114 conditionalities, 75% of which were “good governance”-related! The new crusade at the World Bank seems to be the fight against “corruption” as if it had just “discovered” corruption. The fact of the matter is that the emphasis on “good governance” and especially on “corruption” tends to mislead world public opinion and put the responsibility for the failure of structural adjustment programs and their disastrous effects on the shoulders of “corrupt”, “inefficient”, “predatory” States. This is consistent with their attempts to mask their overwhelming responsibility in the abject poverty affecting most of the developing world, in particular the so-called “HIPCs”. In conclusion, the HIPC Initiative will never solve the debt crisis, nor will the PRSPs “reduce” poverty.

African civil society analysis of the debt issue

The reason lies in the fact that the Initiative, like all previous or current initiatives from “creditors, does not address the root causes of the debt crisis and the power imbalance between indebted countries and “creditors”. Long ago, African civil society organizations, engaged in the debt campaign, have said time and again that to find a just and lasting solution to the debt crisis, it is indispensable to examine its historical origins and analyze the structural factors behind its worsening.

It is a truism to say that debt is a legacy of colonization and imperialist domination. As an instrument of domination and plunder, debt has been used to promote Western countries’ economic, financial, political and strategic interests. This was done in many ways, in particular by using pro-Western dictatorial and corrupt regimes during the Cold War period, in the name of anti-communism. The loans given to these regimes were used for their own purposes and interests and for the repression and even murder of their own citizens, with the complicity of bilateral and multilateral creditors. Moreover, a greater part of that debt was looted by these dictators and kept in Western banks.

That debt is odious and illegitimate. This is the case of the overwhelming part of Africa’s debt, as well as of other Southern countries’ debt. Accordingly, the African people don’t owe that debt and so-called “creditors” have no right to claim it.

On the other hand, what Africa really “owed” has been paid many times over. This is best illustrated by the Nigerian example. President Obsanjo was recently quoted as saying:

“Nigeria’s original debt stock of about $10 billion had been paid twice over if one included the penalty for not paying and…penalty for the penalty. This is ridiculous…the debt that is being held against us [Nigeria] is unpayable and unsustainable if we really want to have an equitable world.”

How about the rest of Africa? According to the UNCTAD study, between 1970 and 2002, Africa as a whole had transferred $550 billion to pay back loans estimated at $540 billion. Yet, it continues to “owe” nearly 300 billion. Sub-Saharan Africa, for its part, had reimbursed $268 billion for loans estimated at $294 billion, but remains saddled with a debt of $210 billion. The authors of the study observed that “discounting interest and interest on arrears, further payment of outstanding debt would represent a reverse transfer of resources.” (page 9).

It is Western countries, their financial institutions, their multinational corporations and multilateral institutions that owe an immeasurable debt for the crimes of slavery, genocide, ecological destruction, colonization and structural adjustment. Therefore, it is the West that must pay reparations, even though no amount of money will ever pay for these crimes.

The way forward

From the above analysis, our fundamental demand is outright and unconditional cancellation of all Africa’s debt and reparations for its peoples. To achieve this fundamental objective, we propose the following measures:

1) Immediate and unconditional cancellation of HIPCs’ Debt

There is now a general consensus that the debt of the poorest countries must be canceled. And the sooner, the better. In light of this, we reiterate our call for the immediate and unconditional cancellation of all multilateral debts owed to the IMF and World Bank. Since the HIPC Initiative is not an adequate mechanism, we recommend that this cancellation by financed by these institutions’ own resources, which are more than enough to cover all costs associated with debt cancellation. If Western countries and multilateral institutions are serious about “debt relief” and “poverty reduction”, they have a golden opportunity to prove it by accepting this cancellation, which should release funds that will contribute to achieving at least some of the Millennium Development Goals.

2) Moratorium on debt service

On the other hand, these countries and institutions should accept a moratorium on debt payments for all African non-HIPCs, as they did for the tsunami-stricken countries. This will be the second step in the right direction. It goes without saying that the moratorium is without arrears, that is, during that period, indebted countries will use all the savings to their benefit.

3) World Commission on Debt

Once the moratorium is under way, the United Nations should set up an independent World Commission on Debt. This body, composed of eminent persons, trusted by both Western and indebted countries, should have as its mission to assess the development needs of indebted countries and whether these needs are compatible with further debt payments. Based on the conclusions and recommendations of that Commission, a determination will be made on whether to resume debt payments, at what conditions, or to cancel the debt altogether. The other task of the Commission should be to propose new lending mechanisms in order to avoid future debt crises.

4) Take example on the 1953 London Agreement on West German debt

The fourth step in the right direction is to take example on the West German example, more than 50 years ago. In February 1953, the then West Germany and its main creditors reached an agreement in London, whereby:

1) West Germany’s debt was reduced by half
2) The balance was rescheduled on a long-term basis and at fixed interest rates
3) The debt service was limited at 3.5% of annual export earnings
4) Debt service was levied only in case of a trade surplus

With that deal, the debt service was down to about 2% of export revenues three years later and by the early 1960s, West Germany had virtually paid back all of its debts. So, why not propose a similar deal to African non-HIPCs?

5) End all IMF and World Bank conditionalities

Another step in the right direction would be to end all IMF and World Bank conditionalities. As is widely acknowledged now, these policies have worsened Africa’s economic and social crisis and contributed to the debt overhang. Unless they are eliminated, they will more than offset any gains coming from the moratorium. The removal of these conditionalities is a prerequisite for effective poverty eradication through genuine people-centered development strategies.

6) Stop the EPAs

The Economic Partnership Agreements (EPAs) that the European Union (EU) wants to impose on African countries will be as devastating as the first generation of the now discredited and failed structural adjustment programs. Therefore, a lasting solution to Africa’s debt requires postponing indefinitely negotiations on the EPAs and their rejection by African countries. A further trade liberalization as contemplated by the EPAs will wipe out any remaining industrial infrastructure, worsen capital flight and aggravate capital shortage by spiriting away Africa’s own savings.

7) Cooperation in the repatriation of stolen wealth

Tony Blair and his counterparts can do a great service to the African people by sincerely cooperating with African governments and civil society organizations who are calling for the speedy repatriation of the stolen wealth kept in Western banks and the punishment of all those who collaborated in this loot. This operation, if successfully conducted, could provide hundreds of billions of dollars to be invested in Africa’s human development, thus greatly reducing the need for African governments to engage in a “race to the bottom” in order to “attract” foreign direct investments.

Conclusion

If Tony Blair and the other G 7 leaders are really serious about a “Marshall Plan for Africa” or want to “make poverty history” they need not look far: they should follow the above steps. Africa does not need charity and handouts, but justice and fairness. If the above measures were to be implemented, Africa would be able to finance its own development. African leaders should not have any illusions about Tony Blair’s “Marshall Plan” or about any other Plan concocted by other G7 leaders. No country or institution will ever “develop” Africa. If development has to come, it will not be from external forces, however well-intentioned, but from the African people.

* Demba Moussa Dembele is with the African Forum on Alternatives, Dakar, Senegal. ([email protected]; [email][email protected])

* Please send comments to [email protected]

This year marks the 60th anniversary of the International Monetary Fund and the World Bank. Through their propaganda machines, both institutions will attempt to highlight their "assistance" to Africa. But in reality, since the 1970s, these institutions have gradually become the chief architects of policies, known as "the Washington Consensus," which are responsible for the worst inequalities and the explosion of poverty in the world, especially in Africa.

Yet, when they began to intervene on that continent in the late 1970s and early 1980s, their stated goal was to "accelerate development", according to a World Bank document, familiarly known as the "Berg Report", published in 1981. But as the following editorial will show, the actual record is just disastrous.

The main pretext for their intervention was to "help solve" the debt crisis that hit African countries in the late 1970s, following the combination of internal and external shocks, notably sharp fluctuations in commodity prices and skyrocketing interest rates. The remedy they proposed, known as stabilization and structural adjustment programs (SAPs), achieved the opposite, and contributed to worsening the external debt and exacerbating the overall economic and social crisis.

In 1980, at the onset of their intervention, the ratios of debt to gross domestic product (GDP) and exports of goods and services were respectively 23.4% and 65.2%. Ten years later, in 1990, they had deteriorated to respectively 63.0% and 210.0%! In 2000, the debt to GDP ratio stood at 71.0% while the ratio of debt to exports of goods and services had "improved" somewhat, at 80.2%, according to the World Bank's Global Development Finance.

The deterioration in debt ratios is reflected in the inability of many African countries to service their external debt. As a result, accumulated arrears on principal and interests have become a growing share of outstanding debt. In 1999, those arrears accounted for 30% of the continent's debt, compared with 15% in the 1990s and 5.0% for all developing countries. To compound the crisis, African countries are getting very little, in terms of new loans, except to pay back old debts. As a result, since 1988, the part of accumulated arrears in "new" debt is estimated at more than 65%.

Between 1980 and 2000, Sub-Saharan African countries had paid more than $240 billion as debt service, that is, about four times the amount of their debt in 1980. Yet, despite this financial hemorrhage, SSA still owes almost four times what its owed more than twenty years ago! One of the most striking illustrations of this apparent paradox is the case of the Nigerian debt. In 1978, the country had borrowed $5 billion. By 2000, it had reimbursed $16 billion, but still owed $31 billion, according to President Obasanjo.

The Nigerian case is a good example of the structural nature of Africa's debt crisis and of the power imbalance that characterizes world economic and financial relationships. It is this general context that allowed the IMF and World Bank to increase their influence in African countries. One good illustration of this has been the rapid rise in the share of the World Bank and its affiliate, the International Development Association (IDA), in SSA's debt. The combined share of both, which was barely 5.1% of SSA's total debt in 1980, had jumped to 25.0% in 1990 and to more than 37% in 2000, according to the World Bank. In other words, the World Bank group has become the principal "creditor" of many Sub-Saharan countries, which explains the enormous sway it holds over these countries' policies.

One way they exercise this influence is through the imposition of stiff conditionalities on African countries in exchange for loans and credits. Financial liberalization, aimed at attracting more foreign investments to compensate for shortfalls in export revenues, instead fostered more instability, due to the volatility of exchange rates resulting from speculative short-term capital flows. This, combined with higher interest rates, "crowded" out both public and private investments. For instance, investments as a percentage of gross domestic production (GDP) fell from an annual average of 23% between 1975 and 1979 to an average of 18% between 1980 and 1984 and 16% between 1985 and 1989. They recovered somewhat in the 1990s, but averaged only 18.2% between 1990 and 1997, according to UNCTAD. These statistics are consistent with those given by the World Bank, which show that the annual investment ratio averaged 18.6% and 17.2% in 1981-1990 and 1991-2000, respectively.

These low investment ratios resulted in a contraction of output. Real GDP growth, which averaged 3.5 % in the 1970s, fell to 1.7%, between 1981 and 1990, according to the World Bank. However, this masks the sharp declines recorded in the 1980s, dubbed "the lost decade" for Africa. This is better illustrated by the negative growth rates of both GDP and consumption per capita. They fell respectively by 1.2% and 0.9% a year between 1981 and 1990. It is estimated that in 1981-1989, the cumulative loss of per capita income for the continent as a whole was equivalent to more than 21% of real GDP.

In a report released in September 2001, UNCTAD indicated that the average income per capita in SSA was 10% lower in 2000 than its 1980 level. In monetary terms, average income per capita fell from $522 in 1981 to $323 in 1997, a loss of nearly $200. The same report said that rural areas experienced an even greater decline in income. These statistics were confirmed by the World Bank, which says that income per capita in Sub Saharan Africa contracted by a cumulative 13% between 1981 and 2001.

The 2004 edition of the World Development Indicators says that SSA is the only region in the world where poverty has continued to rise since the early 1980s, that is at the onset of IFIs' intervention. According to that document, in 1981, an estimated 160 million people lived on less than $1 a day. In 2001, the number had risen to 314 million, almost double its 1981 level. This means that approximately 50% of Africa's population lives in poverty. When the threshold is $2 a day, the numbers rise from 288 million to 518 million, during the same period.

The costs of trade liberalization

According to the IMF and World Bank, one of the sources of Africa's crisis is its inward-looking trade system, characterized by the protection of domestic markets, subsidies, overvalued exchange rates and other "market distortions" that made African exports less "competitive" in world markets. In place of this system, they propose an open and liberal trading system in which tariff and non tariff barriers are kept to a minimum or even eliminated. Such a system, combined with an export-led growth strategy, would put Africa on a solid path to economic recovery, according to both institutions.

The costs associated with trade liberalization have largely offset any potential "benefits" African countries were supposed to derive from that liberalization. First of all, trade liberalization has translated into substantial fiscal losses, since many countries depend on import taxation as their main source of fiscal revenues. Therefore, the elimination of, or reduction in, import tariffs has led to lower government revenues.

But one of the most negative impacts of trade liberalization has been the collapse of many domestic industries, unable to sustain competition from powerful and subsidized competitors from industrialized countries. In fact, Africa's industrial sector has been among the biggest victims of structural adjustment.

From Senegal to Zambia, from Mali to Tanzania, from Cote d'Ivoire to Uganda, entire sectors of the domestic industry have been wiped out, with devastating consequences. Not only has the industrial sector contribution to domestic product continued to fall, but also the industrial workforce has continued to shrink dramatically. In Senegal, more than one third of industrial workers lost their jobs in the 1980s. The trend was accentuated in the 1990s, following sweeping trade liberalization policies and privatization imposed by the IMF and the World Bank, especially after the 50% devaluation of the CFA Franc, in 1994. In Ghana, the industrial workforce declined from 78,700 in 1987 to 28,000 in 1993. In Zambia, in the textile sector alone, more than 75% of workers lost their jobs in less than a decade, as a result of the complete dismantling of that sector by the Chiluba presidency. In other countries, such as Cote d'Ivoire, Burkina Faso, Mali, Togo, Zambia, Tanzania, etc. similar trends can be observed.

In several annual and special reports, the International Labor Organization (ILO) has documented the devastating impact of SAPs on employment and wages. The African Union seems to have come to grips with that devastation. It organized a special Summit on Employment and Poverty, in the capital of Burkina Faso, September 9 and 10, 2004. It was revealed during that Summit that only 25% of the African workforce is employed in the formal sector. The rest, 75%, is either in the subsistence agriculture or in the informal sector. In light of this reality, the Summit issued a Plan of Action aimed at exploring strategies to foster job creation. But such a Plan will only be credible if African countries are ready to move away from IMF and World Bank recipes, which were harshly criticized during the Summit.

UNCTAD has reported that more than 70% of Africa's exports are still composed of primary products, more than 62% of which are non processed products. This helps justify the need for more liberalization and deregulation to make African exports more "competitive". The second objective is to help justify the need for more liberalization and deregulation to make African economies more "competitive" and "attractive" to foreign direct investments. This also explains the push for more privatization.

In the name of "comparative advantage", the export-led growth strategy forces African countries to compete fiercely for market shares, leading them to flood the same markets with more of their commodities. As a result, trade liberalization has accentuated the volatility of African commodities, whose prices experienced twice the volatility of East Asian commodity prices and nearly four times the volatility that industrial countries experienced in the 1970s, 1980s and 1990s. This has contributed to worsening Africa's terms of trade.

According to UNCTAD, if Africa's terms of trade had remained at their 1980 level:

- Africa's share in world trade would have been twice its current level
- the investment ratio would have been raised by 6.0% per annum in non-oil exporting countries
- it would have added to annual growth 1.4% per annum
- it would have raised GDP per capita by at least 50% to $478 in 1997 compared with the actual figure of $323 during that year.

The costs of financial liberalization

One of the main objectives of financial liberalization is to make African countries "attractive" to foreign direct investments. But as the experience of development shows, foreign direct investments follow development, not the other way around. In addition, despite all "the right financial policies", foreign investments continue to elude Africa, with less than 2% of flows to developing countries, despite having among the highest rates of return on investments in the world. And these flows are concentrated in a few oil-producing and mineral-rich countries, according to UNCTAD and the World Bank.

In reality, financial liberalization has yielded little gains. For most African countries, it has been associated with huge costs. First, it entails higher levels of foreign exchange reserves to protect domestic currencies against attacks resulting from speculative short-term capital outflows. Second, financial liberalization has increased the likelihood of capital flight, in part as a result of a greater volatility of domestic currencies. The high costs of trade and financial liberalization further weakened African economies and opened the way to the privatization of the continent.

The privatization of Africa

Privatization, like financial liberalization, is seen by the IMF and World Bank as an instrument to promote private sector development, which has been elevated to the status of "engine of growth". The privatization of State-owned enterprises (SOEs), including water and power utilities, has been one of the core conditionalities imposed by the two institutions, even in the context of "poverty reduction".

Most of the foreign direct investments registered by African countries in the 1990s came as a response to privatization of SOEs. No sector was spared, even those considered as "strategic" in the 1980s, such as telecommunications, energy, water and the extractive industries. In 1994, the World Bank published a report assessing the process of privatization in SSA. After complaining about the slow pace of privatization throughout the region, it issued a warning to African governments to accelerate the dismantling of their public sector, accused of being "at the heart of Africa's economic crisis". The process of privatization peaked in the late 1990s and ever since has leveled off, despite more deregulation, liberalization and all kinds of incentives offered to would be investors.

To date, it is estimated that more than 40,000 SOEs have been sold off in Africa. However, the "gains" from privatization, projected by the World Bank and the IMF, have been elusive. In fact, many privatization schemes have failed and contributed to worsening economic and social conditions. Almost everywhere, privatization has been associated with massive job losses and higher prices of goods and services that put them out of reach of most citizens.

Building a neoliberal State

The concept of "good governance" was promoted by the IMF and World Bank to explain the failure of SAPs. It tends to convey the idea that SAPs have failed, in large part, because African States are "corrupt", "wasteful" and "rent-seeking" and because of the "poor implementation" of policies. In other words, SAPs were basically "sound", it is the combination of "rampant corruption" and lack of qualified personnel that led to the failure of these policies. Thus, "good governance" means nothing else than the need to build a neoliberal State, subservient to the IFIs, able to effectively implement, "sound policies" and to protect the interests of foreign investors.

Indeed, one of the main goals of the IMF and World Bank has been to discredit State-led development strategies in favor of market-led strategies. This is why one of the main targets of these institutions has been the role of the African State in economic and social development. To discredit that role, a two-track strategy was adopted. The first track was to attack the credibility of the African State as an agent of development. To achieve that goal, an abundant literature has been published by the two institutions, highlighting the "corrupt", "predatory", "wasteful" and "rent-seeking" nature of the African State. To justify these epithets, the IFIs pointed to the "mismanagement" of the public sector, accused of being an obstacle to economic growth and development. These attacks helped make the case for the sweeping restructure of the public sector, which, in many cases, led to its dismantling in favor of the private sector.

The second track in weakening the role of the State in development was to deprive it of financial resources. Trade and financial liberalization achieved in part that goal. As already indicated, trade liberalization not only led to a greater loss of fiscal revenues, following lower tariff barriers, but it also led to huge trade losses. This was compounded by financial liberalization which entailed further fiscal losses resulting from tax holidays and low income tax rates. To make up for these losses, the African State had to resort to more and more multilateral and bilateral loans and credits, which further alienated its sovereignty.

As a result, many African States have been stripped of all but a handful of their economic and social functions. Cuts in spending mostly fell on social sectors. State retrenchment primarily aimed at eliminating subsidies for the poor, removing social protection, and abandoning its role in fighting for social justice through income redistribution and other social transfers to the most disadvantaged segments of society. This explains, among other things, the degradation of many basic social services and the explosion of poverty in Africa, since 1981, as the World Bank itself has acknowledged.

While dismantling or weakening the economic and social roles of the State, the IMF and World Bank have sought to build or strengthen the functions most useful to the implementation of neoliberal policies and the promotion of private sector development. This explains the insistence on "capacity building" or on "institution building", heard over the last few years. However, the institutions that the IMF and World Bank talk about are not for development, but for markets. In other words, they propose building institutions supportive of neoliberal policies and in the service of the private sector, especially foreign investors.

Thus, the "institution building" agenda promoted by the IMF and the World Bank has nothing to do with promoting democracy and protecting human rights. In fact, the neoliberal conception of governance undermines both since it deprives representative institutions of their role in formulating public policies following open and democratic debates. They are reduced to implementing what the IMF and World Bank and their G 8 masters decide for African countries and their people.

From structural adjustment to poverty "reduction"

After producing poverty and deprivation on a massive scale in Africa and elsewhere, the IFIs' focus on "poverty reduction" since 1999 could not be more suspect. But to make this shift a bit more credible, the IMF's Enhanced Structural Adjustment Facility (ESAF) was renamed "Poverty Reduction and Growth Facility" (PRGF) and the World Bank has set up a "Poverty Reduction Support Credit" (PRSC).

There is no doubt that the shift in the rhetoric of the IFIs amounts to an admission of failure of past policies, which put too much emphasis on correcting macroeconomic imbalances and "market distortions" at the expense of economic growth and social progress. The disastrous record of SAPs and the continued deterioration in the economic and social situation of countries subjected to IMF and World Bank programs put into question the credibility and even the legitimacy of these institutions. Their crisis of legitimacy was exacerbated by stepped up attacks by the Global Justice Movement and growing criticism from mainstream economists, especially from Joseph E. Stiglitz, former World Bank Chief Economist.

The nature of Poverty Reduction Strategy Papers (PRSPs)

The PRSPs are supposed to provide more freedom to developing countries in formulating their policies. This is what the Bank and the Fund call "national ownership." Representatives from the government, the private sector, civil society organizations - and even the poor - are supposed to "participate" in drafting the PRSP of each country to decide on how to use the proceeds released by "debt relief" to achieve "poverty reduction".

In reality, the macroeconomic framework that underpins the PRSPs is the same as that which underpinned the now discredited SAPs. That framework is non negotiable and includes fiscal austerity, trade and financial liberalization, privatization, deregulation and State retrenchment, etc. In essence, despite the disastrous outcome of their past policies, the IMF and the World Bank still believe that those policies are in the "interests of the poor". In particular, they think that trade liberalization and openness are the best - if not the only - road to growth, which they see as a "prerequisite" for poverty reduction. Hence the export-led growth strategy advocated by the two institutions, but which has been a big failure in African and other developing countries.

A survey of 27 African PRSPs by UNCTAD in 2002 has demonstrated that all of them, without exception, contain the policies outlined above. Policies which are at odds with both the wishes and the interests of the poor, observes the document. It is this straight jacket that ties up developing countries' hands and prevents them from achieving any substantial gain in poverty "reduction". Most of the time, countries have failed to implement these conditions, leading to the suspension of their programs.

In fact, the IFIs' conception of poverty views it as an isolated aspect of overall economic and social development that should be dealt with by short-term measures. Hence, the emphasis in the PRSPs on more spending for primary education and health, among others. Thus, PRSPs contain some short-term measures aimed at mitigating the negative impact of macroeconomic policies and structural reforms on the most vulnerable groups, notably the poor. However, the tools the World Bank and the IMF have proposed to achieve this goal are the same as those already tested in the past and that have aggravated poverty and deprivation in much of Africa.

In reality, PRSPs are SAPs with more conditionalities and less resources. As already indicated, a new "generation" of conditionalities have been added to old conditionalities, with the concept of "good governance", analyzed above. UNCTAD (2002) has revealed that between 1999 and 2000, 13 African countries had signed programs containing an average of 114 conditionalities, 75% of which are governance-related conditionalities. One can imagine the enormous human and financial resources needed to deal with such a number of conditionalities. For this reason, the degree of compliance with IMF and World Bank-sponsored programs has significantly declined since the mid-1990s. For instance, the rate of compliance was estimated at about 28% of the 41 agreements signed between 1993 and 1997, according to UNCTAD.

With the PRSPs, the IMF and the World Bank pursue three objectives. First, mislead world public opinion, especially in Northern countries, in making believe that they are really serious about "reducing poverty". And the World Bank alone counts on a huge and sophisticated propaganda machine to achieve this. With the more than 300 staff of its External Relations Department - Propaganda Department, one should say - the Bank has all the means it needs to "explain" effectively its policies. It has achieved some success, since some big Northern NGOs, once very critical of SAPs, see the PRSPs as a "positive shift" in the IFIs' policies.

The second objective of the PRSPs is to enlist a broad support within each country to help rehabilitate discredited and failed policies. This is what "national ownership" and "participation" of civil society organizations are supposed to achieve. While insisting on the "participation" of civil society organizations, their most vocal critics, the IMF and World Bank tend to sideline representative institutions, like National Assemblies. This is another illustration of these institutions' contempt for the democratic process in Africa. Finally, with PRSPs, the IMF and the World Bank seek to shift the blame to African countries and citizens for the inevitable failure of these "new" policies.

Conclusion

The IMF and World Bank have utterly failed in "reducing poverty" and "promoting development". In fact, they are instruments of domination and control in the hands of powerful states whose long-standing objective is to perpetuate the plunder of the resources of the Global South, especially Africa. In other words, the fundamental role of the Bank and Fund in Africa and in the rest of the developing world is to promote and protect the interests of global capitalism.

This is why they have never been interesting in "reducing" poverty, much less in fostering "development". As institutions, their ultimate objective is to make themselves "indispensable" in order to strengthen and expand their power and influence. They will never relinquish easily that power and influence. This explains why they have perfected the art of duplicity, deception and manipulation. In the face of accumulated failures and erosion of their credibility and legitimacy, they have often changed their rhetoric, but never their fundamental goals and policies.

This is why they cannot be trusted to bring about "development" in Africa. If the experience of the last quarter of a century has taught Africa one fundamental lesson it is that the road to genuine recovery and development begins with a total break with the failed and discredited policies imposed by the IMF and the World Bank.

In fairness to both institutions, we must recognize, however, the complicity of African leaders in the disastrous outcome of neoliberal policies. Many governments and senior civil servants have bought into the agenda promoted by the IMF and World Bank. Therefore, they bear a great responsibility in the current state of the continent. Thus, to put an end to the influence of these institutions, African social movements and progressive forces must explore strategies aimed at promoting a new kind of leadership able and willing to challenge these institutions in favor of genuine alternative development policies.

* Demba Moussa Dembele is Director of the Forum for African Alternatives in Dakar, Senegal

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Under pressure from world public opinion, especially from the Jubilee 2000 movement for debt cancellation, the World Bank and International Monetary Fund (IMF) proposed the Heavily Indebted Poor Countries (HIPC) Initiative in 1996. In 1999, the Initiative was revised to include more countries that were left out in its first phase.

But another important characteristic of the “enhanced” Initiative was the addition of a new conditionality, called Poverty Reduction Strategy Papers (PRSPs), which all eligible countries were required to submit in exchange for “debt relief”. The PRSP requirement was an implicit recognition on the part of the two institutions of the utter failure of structural adjustment policies (SAPs), which, for more than two decades, had been imposed on developing countries, in exchange for loans.

The PRSPs, we are told, represent a “major departure” from SAPs, in that they are “nationally-owned” and aim at “reducing poverty”, according to the two institutions. But what is the reality behind the rhetoric?

The myth of “national ownership”

If we are to believe the IMF and the World Bank, the PRSPs are “country-driven” and reflect the priorities of each country in its fight against poverty. Accordingly, the PRSPs are drafted after a large “participatory process”, involving the government, civil society organisations (CSOs) and even the private sector. But in reality, “national ownership” is more theoretical than real.

For one thing, the PRSPs should follow a framework proposed by the International Financial Institutions. That framework, spelled out in a voluminous document called the PRSP Sourcebook published by the IMF (Ames et al., 2001) proposes “sound macroeconomic policies” to HIPC countries in drafting their PRSP. It is consistent with the conditionalities attached to the IMF Poverty Reduction and Growth Facility (PRGF), the new name of the Enhanced Structural Adjustment Facility (ESAF).

The compliance with PRGF conditionalities makes the basic macroeconomic framework non negotiable: fiscal austerity; trade and investment liberalization; deregulation of labour and goods markets; emphasis on export-led growth; privatisation of utilities and State-owned enterprises are at the heart of PRSPs.

So, African governments and civil society organisations (CSOs) are left with only one option: identify areas where safety nets are most needed to “alleviate poverty”. For this reason, African governments tend to put in their PRSPs what the IMF and the World Bank would like to see in those documents, rather than what their development priorities are.

On the other hand, CSOs have been frustrated by the PRSP process. They found out that they were used more as alibi than considered as true partners whose opinions are valued and taken seriously. In several countries, including Uganda, Mauritania, Senegal, Tanzania and Mali, CSOs have found themselves as the “guinea pigs” of the PRSP process.

Moreover, democratically-elected bodies, such as National Parliaments, have been ignored by the Bretton Woods Institutions (BWIs). Finally, we know that the final say belongs to the Boards of the two institutions, which should give their seal of approval to any PRSP before its implementation. Under these circumstances, talking about 'national ownership' is a bit disingenuous, to say the least.

The myth of “pro-poor” policies

It is even more disingenuous on the part of the BWIs to claim that PRSPs contain “pro-poor policies”. As indicated above, the basic macroeconomic framework is the same as the one that underpinned the failed and discredited SAPS. For this reason, there is a big gap between policies that are in the interests of the poor and most of the recommendations contained in the PRSPs. For instance, low-income and poor groups call for cheaper and more affordable prices of staple goods and for free access to basic services. This is in contradiction with the delivery of such services by the market, as recommended by the BWIs.

The privatisation of essential services, like water and electricity and the deterioration or privatisation of public services, such as health and education, have never been in the interests of the poor. For instance, the imposition of user fees on health care or education has led to a sharp drop of hospital attendance and school enrolment from poor or low-income families and increased the gender gap, since girls and women are the main victims of those policies.

In Senegal, where water is privatised, poor and low-income groups in urban areas pay three to four times more than rich groups. Still in Senegal, the liberalization of the groundnut sector, imposed by the IMF and the World Bank against the will of the government, cost at least 400 jobs following the dissolution of one State-owned enterprise and led millions of peasants and their families to the brink of famine. The Government had to draw up an Emergency Relief Plan worth more than $23 million to avoid a national catastrophe.

On the other hand, price deregulation and the elimination of subsidies have led to the collapse of the purchasing power of average citizens, in particular of low-income groups. This explains, inter alia, why in Senegal more than 64 % of people surveyed in the PRSP document said that their situation has worsened between 1995 and 2002, a period of so-called “high growth rates”.

Still in Senegal, the liberalization of the groundnut sector, evoked above, led to a sharp fall in agricultural production in 2002. This, in turn, resulted in a more than 50 percent decline in economic growth, from 5.6 % in 2001 to 2.4 % in 2002, according to early estimates. The difference is an annual income loss of roughly $200 million for a country where two out of three citizens live under the poverty line.

How, in the world, can the IMF and the World Bank claim that such policies aim at “reducing poverty” and are “pro-poor”?

Another example is Zambia, where in less than 10 years, the textile industry was wiped out as a result of sweeping trade liberalization undertaken under the Chiluba regime. The Zambian textile industry fell from 140 units to 8, shedding in the process more than 90 % of the workforce. In several other countries, local industries have been destroyed by cheap imports of poor quality, in the name of “free trade” imposed by the IMF and the World Bank.

But it is widely documented that trade liberalization is one of the main causes of the widespread poverty experienced in the world as well as the widening gap between the rich and the poor. The latest UNICEF Report, the State of the World's Children, indicates that in some developing countries more than 90 percent of children under 5 are in absolute poverty. Trade liberalization, deregulation and privatisation are among the factors behind that catastrophic situation, according to the Report, which was released in October.

Trade liberalization has worsened Africa's terms of trade. A study by the United Nations Conference on Trade and Development (UNCTAD) in 2001 indicates that if Africa's terms of trade had remained at their 1980 level:
- the continent’s share in world trade would have been double its current share;
- average per capita income would have been 50 percent higher;
- annual economic growth would have been 1.4 percent higher than.

In light of this, it is clear that trade liberalization has been costly to Africa. It has led to the collapse of the continent's commodity prices, increased its external dependency and destroyed many local industries. The same UNCTAD study has indicated that Africa's de-industrialization has accelerated since the 1980s.

Still according to that study, capital flight has worsened as a result of financial liberalization. This flight, combined with debt service, has resulted in net financial outflows from Africa to developed countries over the last 20 years. In other words, the poorest continent is financing the richest countries. This is one of the most glaring achievements of the IMF and the World Bank.

Indeed, more trade and investment liberalization, more deregulation, more privatisation and a further weakening of the State are more likely to generate more poverty than promote economic and social well-being. No wonder in Sub-Saharan Africa (SSA) about 500 million live on less than $2 a day, according to the World Bank. This number is projected to rise to more than 600 million in 2015, despite all the fuss about the Millennium Development Goals (MDGs).

Therefore, so long as the PRSPs, like the now discredited and failed SAPs, are within the framework of the neolberal model, they will generate more poverty than “reduce” it. And like SAPs, the PRSPs will ultimately fail.

Conclusion

After spreading poverty at an unprecedented scale in Sub-Saharan Africa and in other developing countries, the IMF and the World Bank are trying to mislead world opinion, especially in the North. They make people believe that they are really committed to “reducing poverty.” But the truth is that this has never been their intention. Their real mission is to promote the interests of global capitalism, by opening Africa's economies to multinational corporations and financial speculators and by transforming them into markets for Northern countries' goods and services.

The true mission of the BWIs in Africa and elsewhere should have been clear to everyone, especially to NGOs familiar with their philosophy and policies. Yet, some African NGOs, which have been among the leading critics of SAPs and in the forefront of the struggle for debt cancellation, have been misled by the BWIs' rhetoric on PRSPs. These NGOs have found some “merits” to the PRSPs and think that with the emphasis on more spending for social sectors, like education, health and nutrition, the PRSPs could help “alleviate poverty”.

This is a big mistake. One cannot trust the BWIs to reduce poverty in Africa or elsewhere. So long as they avoid challenging the unequal power relations that define the unfair rules of the international financial and trading system, these institutions will never be in a position to “help” Africa or other developing countries. In reality, what the IMF and World Bank try to achieve with the PRSPs is to:
- create the illusion of “poverty reduction” while pursuing the same failed and discredited policies, with even more conditionalities;
- promote a superficial “national consensus” on short-term “poverty reduction” programs at the expense of a serious and deep reflection on long-term development policies;
- drive a wedge between “reasonable” and “radical” civil society organisations in Africa;
- shift the blame to HIPC countries' governments and citizens for the inevitable failure of the PRSPs.

* Demba Moussa Dembele is Director of the Forum for African Alternatives. Click on the link below for references to this article.

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