Africa

by Guy Arnold

  In 1985 the protracted economic stagnation in Ethiopia, Madagascar, Tanzania, Uganda, Zaïre and Zambia caused the per capita income in those countries to fall below levels reached in 1970. The terms of trade for the East African region fell by 6 per cent and were 30 per cent below the levels for 1978–80. The primary cause of this collapse was the second oil price rise and by 1985 per capita incomes on average were 4.6 per cent below the average for 1982–84. The inflow of foreign resources also declined in 1985 and disbursement of concessional and non-concessional medium- and long-term loans (net of amortization) dropped for the fifth year in succession to reach only 40 per cent of the peak volume achieved in 1980. The problem of servicing foreign debt intensified for several countries and hampered their efforts at stabilization and adjustment while Madagascar, Somalia, Sudan, Tanzania, Zaïre and Zambia accumulated substantial arrears and each of these countries except Tanzania had to renegotiate its debt at the Paris or London Club at least once during the first half of the 1980s.

  Stabilization and adjustment, the two most familiar jargon words used by World Bank officials, meant adopting policies such as ending subsidies for basic foods, which made repayment of debts easier but life for the ordinary people harder. A total of 19 structural adjustment efforts under World Bank supervision were approved between 1980 and 1986 in Burundi, Kenya, Madagascar, Malawi, Mauritius, Sudan, Tanzania, Uganda, Zaïre, Zambia and Zimbabwe. The World Bank noted encouraging progress on several fronts, though ‘the implementation of some difficult reforms was interrupted by the continuing fall in export prices, political uncertainties, and declining net inflows of aid and loans’. By this time, it appeared, African development and World Bank instructions as to how it should be achieved had become inseparable. Debt moved to the top of the agenda. It had a significant impact upon almost all African countries but in different ways. Some countries, such as Kenya and Mauritius, managed their debt well and so continued to have access to new credit on conventional terms while others such as Malawi and Zimbabwe had serious debt-servicing problems but restored a measure of credit worthiness by undertaking economic reforms. But a third group of countries was not able to meet its scheduled debt-servicing obligations and for 1986–90 30 per cent of the group’s debt-servicing would be owed to multilateral institutions with the IMF accounting for 61 per cent. These countries included Madagascar, Somalia, Sudan, Tanzania, Zaïre and Zambia. As the World Bank commented: ‘Since multilateral debt-service payments cannot be rescheduled, those high ratios will increase the difficulties to be faced by this group of countries in coping with its debt burdens.’12 Of 21 West African countries, which were all borrowers over 1984–86, Cameroon had a per capita income of US$1,800, Nigeria US$730, Côte d’Ivoire US$610, Liberia US$470 and Mauritania US$450 while the rest ranged from US$380 for Senegal to a low of US$140 for Mali (no figures were available for troubled Chad which was devastated by civil war throughout the decade). Despite all the interventions and prescriptions offered by the World Bank and the IMF the problems did not change: adverse terms of trade for commodity exports, diminishing inflows of capital, increasing indebtedness.

  The World Development Report 1986 summarizes the state of sub-Saharan Africa halfway through the decade. First it deals with debt. The total long- and short-term liabilities had increased from US$38.5 billion in 1978 to approximately US$80,000 billion in 1984, an increase from 30 per cent to 50 per cent of the region’s combined GNP. Total debt service, which was US$6.4 billion in 1983, had risen to US$7.9 billion in 1984 while the debt-service ratio at 21.6 per cent in 1984 had risen to 33.2 per cent in 1985 for the continent as a whole. Although debt repayments were not the fundamental cause of Africa’s low growth, the report argued, the debt problem had become increasingly acute for three reasons: the proportion of debt payments not eligible for rescheduling (that is, loans from multilateral organizations) was rising rapidly; rescheduling in any case was costly; and net financial flows to sub-Saharan Africa had fallen substantially. Ten countries rescheduled debt at the Paris Club in 1983, 1984 and 1985 so that rescheduling had become a continuous process. Worse than that, several countries did not reschedule at the Paris Club primarily because they were unable to reach agreement with their creditors on adjustment programmes and most of these countries were additionally hampered by their arrears to the IMF, which technically prohibits rescheduling negotiations. So the report posed the question: can African countries grow fast enough to meet existing debt obligations and maintain adequate domestic investment? The prospects seemed poor. In order to reverse Africa’s decline concessional lending would have to go hand in hand with policy reforms and recipient governments should clearly outline the programmes of adjustment they intended to follow.

  The report was especially concerned with agriculture. The neglect of agriculture was general in much of Africa. One reason was the high level of taxes imposed by African governments on export crops: thus, in Togo the farm price for coffee was a third of the border price; in Mali cotton and groundnut farmers received half the border prices, in Cameroon and Ghana cocoa producers received less than half. In many African countries marketing boards, a leftover of colonial times, acted as taxation agencies for governments and the money was used to industrialize or for other purposes rather than being put back into the agricultural sector. One result of this high taxation was the emergence of parallel markets as peasant farmers ensured that a proportion of their crops evaded the system. The main losers in such a situation were the governments, which lost taxes when farmers sold export crops unofficially. They would have done better to impose lower taxes. Once farmers engage regularly in smuggling commodity crops across borders to avoid high taxes, the government both foregoes revenues and begins to lose control of the farming sector.

  Africa’s food problems were often ascribed to an over-emphasis on non-food crops. However, data from 1960–70 and 1970–82 gave a different picture to show that countries that experienced satisfactory growth of one type of crop also experienced satisfactory growth of the other. In 25 of 38 African countries, the rate of growth of both food and non-food production fell in 1970–82 compared with the 1960s. In six countries both growth rates increased. In only five did the rate of growth of food production increase while that of non-food fell. In two countries – Kenya and Malawi (which were self-sufficient in food) – the food production rate slowed down while non-food production increased.13 When farming becomes unprofitable farmers lose the incentive to care for their land; taxes, therefore, should be moderate and agriculture, like any other industry, needs nurturing. The table rating the standing of countries in the development league showed that of the 36 low-income economies listed in the 1986 report, 23 were in Africa while of the 40 lower-middle-income countries 14 were in Africa.

  Deteriorating political and economic conditions in South Africa during 1986 and 1987 and Pretoria’s escalating pressures on its SADCC neighbours damaged their economies, which were always highly dependent upon South Africa for trade. South Africa was the major supplier of food, oil, spare parts, motor vehicles, machinery and other manufactured goods for the region. It owned or controlled up to 40 per cent of manufacturing activities in neighbouring states while approximately one million migrants from the SADCC countries worked in South Africa. About 85 per cent of SADCC’s foreign trade passed through South Africa. Zimbabwe, at this time, was producing an exportable surplus of one million tons of grain and with the help of the Food and Agriculture Organization of the UN (FAO) had overcome the threat of locusts. In May 1987 Zambia abandoned its IMF recovery programme, whose draconian impact was causing political unrest, and imposed a price freeze and price controls. Most countries of the region were experiencing an erosion of their standard of living. Some governments were paying greater attention to the problem of population explosion and the need to control growth and relate increased productivity to increased wellbeing. Educational levels remained below those of other regions in the developing world and the shortage of skilled manpower acted as
a further impediment to development. Both Zaïre and Zambia faced domestic political problems as a result of implementing, or trying to implement, reforms and both countries questioned the adequacy of the aid they were receiving. Debt remained the primary problem and in the case of four countries – Mozambique, Sudan, Tanzania and Zambia – arrears in repayments exceeded US$500 million.

  The FAO focused its attention upon Africa in 1986 in an attempt to reverse the prevalent neglect of agriculture. In January the FAO launched a crash programme to provide urgently needed farm inputs in the Sahel and other regions. The Agricultural Rehabilitation Programme for Africa (ARPA) helped channel a total of US$175 million to 25 countries: ARPA included supplying farmers with seed and fertilizer, repairing irrigation systems and rebuilding cattle herds. At the same time the FAO prepared an Africa-wide programme to eradicate the cattle disease rinderpest. The continent was constantly subject to natural disasters and diseases such as drought, flood, rinderpest, grasshopper and locust plagues. At that time only 6.5 per cent of Africa’s farmland was irrigated and the FAO provided help for a new era of irrigation development. The Fourteenth FAO Regional Conference for Africa was held in Yamoussoukro, Côte d’Ivoire, in September 1986 and a broad consensus on the causes of the African food crisis and ways to resolve it was reached. The FAO Director-General told the conference that Africa could meet almost all of its food requirements but for that to happen new development policies, new international trade relationships and, most of all, new financial and material resources would be needed. Africa was then recovering from the drought and famine during 1983–85. The return of good rainfall undoubtedly helped but the bumper harvests of 1986 were also due to a concerted effort by the FAO to restore crop, livestock and fisheries production. At the FAO’s Fifteenth Regional Conference for Africa, held in Mauritius in April 1988, many African countries were in crisis. The Director-General told the conference: ‘There is no question that the new locust plague which has swooped down on the continent is exceptionally vast. International and regional action is more essential now than ever before.’14 He may have been right to say so but it was a familiar refrain that Africans constantly heard from a range of development institutions.

  In 1986 the World Bank produced a major report on Africa, Financing Adjustment with Growth in Sub-Saharan Africa, 1986–90 whose theme – that Africa’s attempts to help itself would fail without additional resources in the form of new aid and debt relief – was probably more acceptable to Africa than the accompanying remedies. ‘Many African governments are now making significant progress in structural adjustment. But they still have much to do to correct the accumulated policy distortions of the past.’ Such statements, smug and all-knowing, must sometimes have annoyed those on the receiving end of them as much as did the Bank’s and IMF’s prescriptions for adjustment. The analysis and policy suggestions that follow all too often ignore the political realities on the ground.

  Governments were commended for having started to reduce the overvaluation of their currencies – one way in which agriculture had been penalized. They had increased agricultural prices and lowered real urban wages. They had reduced public spending, with its bias toward expanding employment in urban areas. These moves may have made sense in theory; it is doubtful whether their authors really understood the political pressures exercised by Africa’s rapidly growing town populations upon fragile governments. Declining imports and investment threaten to undermine structural adjustment in low-income Africa, the report says, and then adds that to continue its progress toward economic adjustment, low-income Africa will need at least US$11 billion a year of concessional flows during 1986–90 but allowing for known and expected aid commitments, a gap of US$2.5 billion remains. The report points out that one general rule should be observed: no donor country should be a net recipient of resource flows from any African country undertaking credible economic reforms. That advice to the donors certainly made sense; the report does not specify how donors are to be persuaded to follow such a rule of thumb. A sign of the developing multilateral approach that would characterize the 1990s was the emphasis upon donors working together. Donors, we are told, must act more in concert with each other and with recipients. The report suggests six ways to improve co-ordination:

  First, donors must be willing to work within adjustment programmes designed by African governments. Second, they should better harmonize decisions on aid and debt relief together. Third, the major participants should discuss the elements of the required financial package in advance of full-scale aid co-ordination meetings. Fourth, to provide effective support for medium-term adjustment, donors should be more willing to give medium-term indications of aid. Fifth, instruments should be established to monitor progress toward economic reform and toward implementing governments’ and donors’ agreements, Sixth, the multilateral agencies must assume a larger role in orchestrating donor assistance – both in designing adjustment programmes and in financing them. The World Bank and the IMF, in particular, must work together with African governments, first to develop adjustment and investment programmes aimed at restoring growth, and second to assess the requirements for, and sources of, external aid.15

  This set of principles is clearly a blueprint for control of the entire aid process.

  For the first time since World War II, a whole region had suffered regression over a generation. The fall in the investment rate during the 1980s reflected both a decline in domestic and foreign savings. Domestic savings averaged about 15 per cent of GDP until the mid-1970s. By 1984, however, the rate had fallen to a low of 6 per cent. This was the result of a fall in per capita incomes and an increase in public sector deficits due to unchecked budget deficits and losses from state-owned enterprises. Fourteen countries rescheduled debts over 1984–85 and in some cases the new arrangements were just the latest in a series. Over the same period several countries fell deeper into arrears with their repayments. The report argued that if Africa’s decline was to be reversed, action was needed on three fronts. ‘First, the region needs more resources for investment… both foreign and domestic. Second, it must use new and existing resources more efficiently. Third, it must curb its growth in population.’16 Restraints imposed on budgets by adjustment programmes can best be seen in the deterioration of public services such as road building and repairs, education and health. Fewer resources mean less efficiency. Although health conditions in sub-Saharan Africa had improved over the previous few decades, they remained among the worst in the world and in most African countries access to health care is extremely limited. What comes across with increasing clarity over the decade in all the pronouncements and reports emanating from the World Bank is the remoteness of the institution from the problems on the ground that it pontificates about so grandly. It is not that African leaders did not understand the causes of their declining economies but rather that they had to deal with complex political problems on the ground that were rarely understood fully by visiting missions from the multilateral institutions. In 1982 President Nimeiri of Sudan explained how the IMF had insisted that before it could provide assistance he had to cut subsidies on sugar, petrol and bread. He explained that if he did so he would have riots in Khartoum, Port Sudan and Atbara. The IMF insisted. He cut the subsidies on sugar and petrol. Severe riots duly followed. The IMF said: what about bread? So he evaded cutting the price by resorting to a stratagem and decreed that the size of all loaves had to be reduced. The IMF then let him off the hook and provided some assistance. It is a revealing story: the IMF demanding actions that produce riots; the head of state being forced to resort to tricks. It is little wonder that the IMF is generally loathed throughout Africa.

  The year 1988 is a good one for taking stock of Africa’s economic plight after the best part of what can only be described as a disastrous development decade. According to the UN International Fund for Agricultural Development (IFAD), African states still reported in 1988 that ‘both economic and quality of life indicators have either remained at unac
ceptably low levels or continued their downward spiral in such categories as trade earnings, amount of official development assistance, private capital inflows, incidence of malnutrition and child mortality, as well as levels of food imports, industrial output and under-and unemployment’. The region’s per capita income had declined more than 12 per cent since 1970 and in some cases, for example Chad, by as much as 30 per cent. The poorer countries of Africa were even poorer in 1988 than at independence in the 1960s while Africa had ceased to feed itself in the 1980s: whereas in 1974 it imported 3.9 million tonnes of cereals, by 1985 it was importing 10.2 million tonnes. The principal causes of this poor performance divided between external and internal factors. The major external factors were continuing adverse terms of trade and declines in foreign aid and investment. The principal internal factors were poor soils, harsh climatic conditions, poor human and physical infrastructure, rapid urbanization and population growth and inappropriate public policies. Over 1980–85 there had been no growth in exports but an annual decline of 5 per cent as against a growth rate of 9.8 per cent for the years 1965–89, and despite the benefits offered under the Lomé Conventions for access to the European market, protection and restrictive agricultural practices in the European Community (its CAP policy) and in the United States had resulted in an over-supply of agricultural commodities and a consequent weakened demand for African exports. Between 1980 and 1984 the continent’s debt service payments had increased from 18 per cent of export earnings to 26 per cent while by 1985 sub-Saharan Africa paid over 30 per cent of its export earnings to service its debts.