The Challenge for Africa (13 page)

In his critique of Africa's development policies since independence, the Ethiopian economist Fantu Cheru examines why Africa has failed to capitalize successfully on the natural resources that have always been so evident to the rich world. He points a finger at a number of problems: lack of political will, weak institutions, a shortage of skills, too many ties to former colonial powers, and inadequate infrastructure, transport, and communication networks. Moreover, African economies have had an overreliance on commodities
²⁴
—raw materials, usually from agriculture or mining, the prices for which are set in the world market and that are qualitatively undifferentiated (that is, oil is oil, copper is copper, and sugarcane is sugarcane, no matter where they originate). Cheru and the Ghanaian economist George Ayittey argue that the continent's growth has been stymied because African governments have failed to diversify their economies. They have not strengthened their agricultural sectors, broadened their range of exports, developed mechanisms and industries to add value to the commodities they produce, or supported the entrepreneurial impulses and market heritage of the African people.

At the same time, despite the priority placed on fair trade for Africa and other developing regions by international civil society, considerable obstacles remain. The African peoples' ability to engage in economic activities and creative initiatives that generate wealth are inhibited by mass-produced, imported consumer goods. These are often sold at prices cheaper than those of local goods, marginalizing homegrown businesses that cannot compete with giant transnational corporations and large sums of foreign capital. What also has been missing is access to, and the ability to capitalize on, information and knowledge;
both of these problems stem from a lack of education and, in combination, constrain creativity.

Africa is still overwhelmingly a producer of commodities such as petroleum, minerals, and metals. In 1960, nine commodities—including coffee, cocoa, cotton, and sugar—made up 70 percent of sub-Saharan Africa's agricultural exports. By the 1980s, they constituted almost the same amount—76 percent—even as countries in other regions expanded their range of exports and their share of other markets.

Today, much of Africa's economic activity still rests on an unstable mix of aid, tourism, the export of natural resources, and the sale of cash crops—such as coffee, tea, sugarcane, nuts, and other foodstuffs—which has characterized the continent since independence and, in some cases, as far back as the colonial period. Newly independent African countries were encouraged by international financial institutions, some donor governments, and some development agencies to expand their economies by focusing on cash crops, which could be sold in the global market, with the proceeds used to grow other essential products. As a consequence, peasant farmers (who are largely uninformed) in much of Africa have become almost completely dependent on income from producing these cash crops to meet all the household's needs, such as food to eat, clothes, school fees, and transportation.

In the late 1970s and '80s, prices for commodities collapsed, further impoverishing many African nations. Africa's share of developing-country exports went from 12 percent in 1961 to just under 6 percent in 1980. The dramatic lowering of commodity prices cost Africa $50 billion in lost earnings between 1986 and 1990, more than twice the amount the region received in aid during the same time. There were several reasons for this steep decline: stiffer competition appeared from emerging Asian economies along with new markets in synthetic or alternate materials; the collapse of the Soviet
Union closed off one avenue for some African countries' products; and, as prices fell, Africans also overproduced, which in turn depressed prices further. Between 1970 and 2005, sub-Saharan Africa's share of global trade fell from 4 to 2 percent.
²⁵

Like most Africans, Kenyans are producers of raw materials, for which little is paid, and excellent consumers of imported products—clothing, food, and other essentials—for which we have paid quite a lot. Our hairpins and plastic combs come from China, and the oil to produce goods both comes from the Middle East; our soap, toothpaste, and shampoo are imported from England; our body creams are from Germany; and our clothes and shoes, both old and new, are brought in from outside Kenya. Even the buttons that we sew on with Chinese needles threading Indian cotton are foreign. When I was young, we used to go to shops where you would literally place your foot on a piece of paper and the cobbler would make you shoes, from local leather. Or a local tailor would take your measurements and make you a dress. There were no secondhand clothes or plastic shoes. We used to sew socks by hand; now they too are imported from China. While life has been made easier, it has also become very expensive and heavily dependent on imported goods.

Our food might be produced in Kenya—either chickens or rice, as well as some greens—but the income received from it generally flows in one direction: out. Consequently, the money brought to rural areas through the sale of commodities such as cash crops is then siphoned back to the towns where the consumer goods are transported from, and eventually repatriated to the countries that produce them. Even most of the industries that are located in Kenya—tourism, and the growing of flowers, coffee, and tea—are largely owned by foreign companies.

Because commodities depend on availability as much as demand, they are subject to sometimes volatile price variations. In recent years, the world price of oil and certain minerals has
gone up, which has meant that some of Africa's economies have been prospering. According to the United Nations Economic Report on Africa for 2008, Africa's GDP has increased from just under 4 percent annually in 2001 to just over 6 percent in 2008. Inflation is down over the same period, from just over 10 percent to 5 percent.
²⁶

While this news is welcome for those countries that have large deposits of desirable commodities, their economies are still overly dependent on too few industries for them to ride the inevitable ups and downs of the market. At the same time, not enough African countries have diversified their economic base, nor made progress toward self-sufficiency in essential sectors such as food production. For instance, between 2002 and 2005, Zambia's total exports more than doubled, from just under a billion dollars to nearly $2.1 billion; however, this increase was mainly because of a rise in the price of copper, which amounted to 50 percent of total exports in 2005.
²⁷
Ever since its independence from Britain, Nigeria's economy has been almost wholly reliant on oil, accounting for over 95 percent of total exports since the mid-1980s.
²⁸
The International Monetary Fund anticipates further divergence in growth rates between oil-exporting and oil-importing nations in sub-Saharan Africa.
²⁹

The overreliance on a natural resource to the detriment of creating other industries and diversifying a country's economy is called by development specialists the “resource curse.”
³⁰
It is especially problematic when the country does not have the technological know-how to use those resources, and is instead dependent on others to exploit and share the end products. One of the challenges for Africa's newly growing, oil-exporting nations will be to overcome the continent's dispiriting pattern of the citizens of resource-rich states remaining mired in poverty, even as a small elite and the international speculators and multinational corporations reap huge benefits. To that end, former World Bank economist Paul Collier has proposed an internationally
agreed-upon charter for natural resource revenues that would ensure transparency in awarding contracts and payments to exploit resources; assure some stability in prices (avoiding cycles of boom and bust); make visible public expenditures; and better manage public spending when resource revenues aren't consistent from year to year. Civil society, particularly within countries dealing with the “resource curse,” would be central to getting such a charter adopted.
³¹

The economic dominance of one natural resource, however, need not always be a curse. Norway, for instance, has half of Europe's oil and gas reserves and in 2004 became the third-largest exporter of oil in the world.
³²
In the nineteenth and early twentieth centuries, Norway was so poor that 15 percent of its population emigrated, in search of more opportunities and better lives. However, by 2007, it had the third-highest GDP per capita in the world, average life expectancy at birth was eighty years, and it ranked second in the United Nations' Human Development Index.
³³
Norway maintains high rates of taxation, and costs of living are also high, which together mean that disparities in wealth are relatively small and within the society an egalitarian ethos predominates.

Since 1990, Norway has been saving some of the money it receives from its oil exports in a sovereign wealth fund. As of June 2007, this fund was worth $300 billion, or $62,000 for every Norwegian citizen. The oil industry is largely controlled by the Norwegian government, a fact that suggests that a state-run enterprise need be neither inefficient nor a locus of corruption. The Norwegian economy's low inflation rate and the government's emphasis on research and development in non-oil sectors demonstrate its recognition that today's vast oil income should not be squandered. It also shows that Norway is preparing for when its oil runs out and so avoiding the “trap” that many African states that are heavily dependent on natural resources have fallen into.
³⁴

The rulers of the United Arab Emirates—seven small city-states that have integrated economically and politically, thus raising their international profiles—are using their oil and natural gas reserves to diversify their economies through service industries and leisure resorts. When I visited in 2007, I was impressed by how much the UAE has invested in higher education, particularly to develop a generation of men and women able to capitalize on future innovations in science and information technology. UAE ministers made it clear to me that they were preparing for a time without oil. The governance structures of Norway and the UAE could not be more different, yet leaders in both countries recognize that the long-term stability and sustainability of their economies depend on sound management of their resources.

Nigeria, on the other hand, offers a classic example of how poor leadership can facilitate the exploitation of a commodity, in this case oil, at the expense of the vast majority of a country's people. Partly because of the competition for oil revenues within a small elite, Nigeria has experienced political violence, social unrest, long periods of military rule, massive corruption, a continuing lack of basic services, and extreme poverty. Disparities between rich and poor are still vast, and decent basic infrastructure and health and education remain, in the eyes of most Nigerians, beyond reach. By some accounts, Nigeria has earned $400 billion in oil revenues since independence, of which perhaps $380 billion has been mismanaged.
³⁵
In 1998, Nigeria returned to a system of democratic governance; however, it is reported that many Nigerians are losing their conviction that democracy will lead to development, greater equality and equity, and a more farsighted use of Nigeria's oil income.

An additional, crucial element in the difficulties Africa has had in accessing the benefits of the global economy has been the policies of the World Bank, the IMF, and developed-country governments. In the 1980s, the Common Agricultural Policy of
the European Union restricted access to Africa's agricultural products, while the World Bank and IMF's structural adjustment policies emphasized commodity development over diversification. One of the conditionalities imposed through structural adjustment programs and, more recently, debt relief initiatives is that poor countries further open their markets to goods from the developed world, as a way to bring in foreign currency and stimulate foreign investment.

But this call for open markets has not been reciprocated. The European Union, the United States, and some East Asian countries still protect their own producers of cotton, wheat, sugar, and other products either by subsidizing their industries or by placing tariffs on such products and others from outside. The unwillingness of the industrialized nations to remove these subsidies, coupled with developing countries' growing concerns about food security in the wake of high prices for oil and staple grains, led to the collapse of global trade talks in 2008.

Sometimes what seems like a breakthrough in trade is actually a further impediment in disguise. For instance, the 2000 African Growth and Opportunity Act, passed by the U.S. Congress, gave Kenya and other African nations a chance to manufacture cotton products and sell them into the American market. One of the catches, however, was that Kenyans had to use American yarn, even though Kenya also grows cotton. This means that Kenya was, in effect, subsidizing U.S. cotton growers and cutting off a market for its own producers. In this way, less powerful states can be flattered by the international community or individual nations to feel they're more important than they are, or they can be bullied into providing advantageous trade terms to wealthier countries.

Despite this difficult environment, it would not be in Africa's best interests to shut up shop; Africa cannot avoid the fact of globalization. Indeed, the exponential growth in the telecommunications industry in such countries as Kenya,
South Africa, Ghana, Namibia, and even war-torn Somalia is just one example of the enormous potential of emerging markets in sub-Saharan Africa.
³⁶
These present Africans with opportunities to increase their standard of living, expand intra- and inter-African trade, and develop their economies beyond the extraction of natural resources and the export of commodities. Indeed, Africa has an opportunity to add value to those commodities by generating finished products. The cocoa of West Africa could be turned into chocolates in that part of the world rather than in Belgium; the coltan of Congo could be added to capacitors in the same country it is mined from; or the abundant sunshine of many parts of Africa could be harvested by solar panels built on the continent.