TRADE, DEBT AND DEVELOPMENT IN SUB-SAHARAN
AFRICA: A Muslim Initiative to the Rescue? - 2

[Introduction]    [ Trade & regional Groups ]    [Debt & Dev ]    [Muslim Initiative ]    Trade This link between trade and war appear to be rooted deep in European history, for a Dutch conqueror was reported to have said, in 1614, that "Trade cannot be maintained without war nor war without trade". The Economist of October 1994 appear to be echoing these words when it captioned its cover story, a survey of the global economy, "War of the Worlds". [6] If there is ever going to be a third world war it is more likely to be on trade rather than nationalism. Africa had never enjoyed equitable terms of trade with the West, from the time the Portuguese merchants started exploring its coasts in the 15th century to the this second half of the 20th century when physical presence has been obviated by a more subtle and sophisticated mechanism, of which the IMF and The World Bank may well be the tip of an iceberg. Consequently Africa, with all its population, has barely 3% of world income and its share of world trade is under 5%. [7] Since the last two decades the economic situation had been deteriorating at a frightening rate. By 1991 Africa's share of world trade had dropped to about 2.1% [8] and a worsening per capita income drop. Productivity was receding in the face of a crushing debt burden. "Between 1982 and 1987" observed Okigbo "the per capita income of the 17 most indebted countries fell by one seventh, that of Sub-Saharan Africa by one fourth. Investment per capita in Africa" he added, "was lower in 1987 than in 1964..." [9] By 1991 Africa's total debt was $178.1billion representing 109.6% of its GNP of $162.5 bns or some 339.5% of its export of goods and services. Its total debt service of $10.34bns in 1991 was 19.8% of its exports of goods and services in that year. [10] By last year the terms of trade had already worsened. At the November 95 meeting of the Global Coalition for Africa, "the GCA secretariat’s background paper noted that sub-Saharan Africa, although accounting for 10 per cent of the world population, currently provides just 1.7 of world exports." The paper continued to note that, "due to a protracted decline in Africa’s competitiveness, its small share of world trade has been shrinking over the first few decades." [11] Discussions at the GCA focused at ways African countries could come to grips with "the realities of today’s world market," by developing strategies to enhance their competitiveness and seek out new opportunities to promote exports beyond the primary commodities that the continent today relies. A former Ghana’s finance minister suggested that as labour costs rise in Asia African countries could seize the opportunity to develop their labour-intensive export industries. But A Kenyan finance minister pointed out a problem. "Currently" , he noted, "Kenya’s textile industry is subjected to tariff barriers that limits its ability to export, and thus to further develop. If such tariffs are not lowered, he asked, "how then do we industrialise?" [12] This is only one of many such hurdles. Issues of trade are supposed to be addressed and resolved by forums like UNCTAD, WTO and the Uruguay Round. The latest UNCTAD IX which took place in Midrand, South Africa, ended on the May 11 with a restructuring of UNCTAD, which the secretary general sees as giving the organisation a new lease of life. The Conference’s final document, expectedly, noted that UNCTAD has "a clear comparative advantage in tackling trade related development issues" and should continue "to facilitate the integration of developing countries and countries in transition in the international trading system." [13] But about 100 NGO’s which attended to lobby for better deal for developing countries claimed that UNCTAD IX "did not pay sufficient attention to the crucial issues of debt, aid and commodity policies", arguing that, "global responsibility and international co-operation are declining at this crucial time when the challenges are greater than ever." [14] African groups delegate joined the NGO’s in expressing their disappointment with the conference document. The NGO’s went further to observe that "some poor countries, by opening their economies in accordance with the agreements reached in the Uruguay Round, are being forced to de-industrialise. They quoted UNCTAD studies that found no direct correlation between liberalisation and devaluation on the one hand and growth and diversification of out-put on the other. These reports showed that countries which achieved a significant degree of liberalisation in the 1980’s - such as Burundi, Tanzania, Malawi and Gambia - suffered severe economic dislocation and poor growth rates." [15] Globalisation is only making this situation worse for, contrary to claims of UNCTAD and Uruguay Round, it promise to shut out hundred of millions of the poor, in the words of a Brazilian finance minister, "perhaps for ever - from the promise of prosperity." [16] By it own admission UNCTAD said the marginal improvements of some of the economies of African LDCs, due to the increase in commodity prices, especially in coffee and cotton, seen recently is "likely to be temporary." It added that while the liberalisation through the Uruguay Round agreements "may provide important long term opportunities for growth, in the short term they risk greater marginalisation since few LDCs have internationally competitive industries and many may face higher food import prices and an erosion of existing tariff preferences in their export markets." [17]It was in this light that the director of WTO "proposed that the rich countries apply zero tariffs to the export goods of the LDCs". [18] This he assured the DCs, will pose no danger to them. But will they? It is highly unlikely. Regional Groups There are at least eight prominent political and economic organisation in Africa today. [19] Of these the two most important ones in the sub-Saharan Africa are the ECOWAS (Economic Community of West African States) [20] and PTA (Preferential Trade Area for Eastern and Southern Africa) [21] which became COMESA (Common Market for Eastern and Southern Africa) in December 1994. There are indeed minor grouping around rivers and lakes like the Manor River Union and Lake Chad Basin Development Authority in West Africa and similar grouping around the Nile valley in north and eastern Africa and around the Great Lakes. Though economic issues are often involved, the focus are essentially agricultural or the sharing of water resources. ECOWAS was formed in 1975 amidst funfair and high expectations. It aimed at political and economic co-operation that will eventually lead to total economic integration with a common currency. While five are former British colonies and are therefore English speaking, the rest are mainly former French colonies and therefore French speaking. Language, to be sure, was the least of the problems, the economy of the Francaphone countries, typical of French colonisation, was assimilated into the French imperial economy, with the CFA franc tied to the French franc and economic transactions going through the bank of France. The objective of ECOWAS were thus out to liberate the economy of the Francaphone countries, among others. This could not have gone down well with the French. France did not hide this either, for it often schedule meetings in France at short notices to frustrate some of the ECOWAS Heads of States meetings. It took numerous other steps some too subtle to discern, the latest being the massive devaluation of the CFA franc (50%) at once, which was seen as aimed at making Nigerian goods expensive in the Francaphones and therefore frustrating intra regional trade. [22] France, to be fair, is not the only problem, there is the inertia and indolence of bureaucracy which is known to be good at dragging its feet. Absence of private sector participation was another, for the West Africa Clearing House (WACH) formed also in 1975, had not moved an inch, two decades on. WACH was formed to implement a workable interest payment mechanism preparatory to the formation of a single monetary zone in the region. [23] So two decades after its formation ECOWAS has remained a dream, though it has facilitated the movement of peoples it has not done the same with goods, which was one of the major objectives for which it was established. Goods do manage to move within the region but 90% of these goods are smuggled. [24] A private initiative is coming to the rescue. In September of this year a West African Enterprises Network (WAEN) met in Lagos to consider the practical steps to be taken for the realisation of the ECOWAS dream. WAEN is an NGO made up of 300 business men and women drawn from 12 countries of the sub-region, Both Anglo and Francaphones, with headquarters in Ghana. Some of the steps considered including improving dialogue between the state and the private sector, facilitating the financial restructuring of private enterprises, increase in the competitiveness of West African products and promoting entrepreneurship. During the Lagos meeting the organisation signed a protocol agreement with regional international banks like Citizen International Bank, ECOBANK and CAL Merchant Bank of Senegal. One of the major things the WAEN is looking at is the possibility of "dismantling of tariffs and quotas on intra union trade and establishment of common external tariffs on goods of non member countries." [25] How far WAEN can go, we have to wait and see. PTA was formed in 1981, just a year after the formation of SADC (Southern African Development Community). Much earlier, in 1969, the Southern African Customs Union (SACU), was formed. PTA is a much larger conglomeration with a wider objective of economic integration, it therefore subsumes the objectives of these smaller groups. Until the end of the era of apartheid, the republic of South Africa was not in the PTA. The PTA story is very much like that of ECOWAS. Throughout the 80’s there was hardly any appreciable improvement in intra regional trade. "In 1987, intra-PTA trade accounted for 5.2% of total imports and 7.2% of total exports. Compared to 1980 (5.6% and 7.1% respectively), these shares have remained fairly constant. Moreover, intra-PTA trade in absolute figures also remained constant (1980: US$649 million; 1987: US$644 million)." [26] Some of the reasons for this dismal failure are not far to find. Until the recent entrance of South Africa, the impact of which is yet to be assessed, the PTA lacked a leading economy. Kenya and Zimbabwe were the two stronger partners, but even these belong to the low-income group of the developing countries and have scarcely been able to provide a market of adequate size for regional integration to produce sizeable dynamic gains. Some of the terms were not particularly favourable to the PTA member countries and PTA institutions were never granted the significant legislative or executive power necessary to perform. [27] Three more reasons have been identified by Schweickert: scarcity of foreign exchange which was allocated to "essential imports" mostly coming from OECD countries; the trade policies of the past led to the establishment of other non-tariff barriers such as high cost of transport and communication; and not the least, political rivalry originating from the need to protect funds essential for the ruling elite to survive. [28] It has been hoped that the entrance of post-apartheid South Africa and the formation of COMESA could change all these, but preliminary reports have not been encouraging. [29] On the whole it would appear that sub-Saharan African experiences with regional economic groupings has not been successful as yet. Varying colonial cultures, interference, subtle as these are, of the former imperial powers, weak economies, sluggish bureaucracy, elite avarice and perhaps sheer ineptitude seemed to have conspired to frustrate the efforts so far. Private initiative like the West African Enterprises Network may well provide an alternative, but more creative alternatives could also be developed.