Robert J. Berg
- I. Patel
- Published Date:
- December 1992
The great political challenge for North-South relations in the years ahead will be to foster mature and balanced political relations in the midst of continuing unequal economic relations. Nowhere will this be more difficult than with Africa, since the disparities are so great. We must build from the present, and the present has political and economic inequality of striking proportions. The political agenda is now thin. The economic agenda dominates relations through structural adjustment and, to a lesser extent, through development dialogues.
The assigned task of this paper is to suggest how Africa and the donors should manage development in the 1990s. There are a wealth of assumptions in this impossible charge, but suggestions are always possible to offer and might be of some small value if at least the lessons of the 1980s are clear.
The last ten years of development and development finance demonstrate some striking lessons that can be drawn from these basic observations:
- • The key aim of the adjustment decade, to restore economies to creditworthiness, has not been achieved. Debt has grown over the decade to the point that it now equals Africa’s gross national product (GNP) at about $147 billion, and payments to private creditors have been virtually suspended by most African countries (World Bank (1991)).
- • Rescheduling exercises have improved in content, but still can fairly be characterized as a stop-gap procedure that has postponed, not solved, the problems of the external sector.
- • Economies have declined over the decade, leading to a deterioration in both the quantity and quality of key public services. Critical declines in the education and health sectors have severe implications for the decades to come.
- • The most severe decade-long phenomenon has been the deterioration in the fundamentals of sub-Saharan Africa’s development, characterized by substantial erosion of the physical environment, deteriorated capital investments, continued high population growth rates, and a consequent further imbalance between the supply and demand of foodstuffs.
- • There have been clear bright spots, particularly renewed emphasis to foster pluralistic forces in societies and the reform of many poor practices of macro-policy, but the impact of these on the human condition is yet to be clearly seen.
These trends have led to the characterization of the 1980s as the “Lost Decade of Development” and, of course, to the questions of who lost it and how—an investigation which, thankfully, is not the topic of this paper, but perhaps of future economic historians.
A clue in this direction can be found in the development for most of the decade of parallel agendas—one for adjustment and one for development.
Adjustment of Economies and Policies
The adjustment agenda aimed at creating a soft landing and at setting up the pre-conditions for growth. The development agenda normally would be aimed at the growth of economic and social well-being—an expansionist agenda. For much of the decade, the donors combined these agendas so that donors normally engaged in long-term development work (e.g., the World Bank and United States Agency for International Development (USAID)) and diverted their efforts to reinforce IMF-type actions. Lately, this unified agenda has begun to move apart.
For much of the decade, one could not look at donor relations with Africa without being led to questions of how aid to Africa was or should be conditioned. There is no such thing as unconditioned aid, but prior to the 1980s aid was generally conditioned on project- and program-specific matters. In the 1980s, the adjustment agenda was incorporated by many aid givers in two respects: a move toward balance of payments assistance and linking assistance to IMF-type conditionality.
The practice of imposing conditions based on structural adjustment by donors of development assistance seems now to have run its course for two reasons: (1) to a large extent macro-policies have been changed, but (2) they have not led to the growth expected from their imposition. This is most clearly seen in the case of investment rates. Rather than kindling a blaze of domestic and international investment in Africa we have seen continued low domestic investment and international disinvestment. This is true even for such well-touted cases as Ghana where the domestic savings and investment rates remain among the lowest in the world. And it means that many components of the structural adjustment cure, for example, privatization of public enterprises, lack the wherewithal of private investment to succeed. Perhaps this is a key reason that the number of public enterprises in Africa has remained steady during much of the 1980s (Swanson and Wolde-Semait (1989)).
Donors are now saying that the conditions of structural adjustment are necessary but not sufficient. Currently, donors are moving to making aid conditional on reforms in the systems of governance. They believe that not since the birth of independent states in Africa has there been such a chance to foster the forces of political pluralism and even, as U.S. Assistant Secretary of State Cohen put it, “Western-style democracy”1 (Bretton Woods Committee (1990)).
One has to ask whether the donors are clearer now about this new wave of conditionality than they were when they instituted conditions relating to structural adjustment. My own view is that they are less clear. Still to be clarified are such basic questions as (1) Is the aim to improve governance or to shift political systems toward democracy, or both? (2) What model(s) of governance and democracy are to be instituted? (3) What Reforms are to be introduced? (4) Who are the best agents to introduce reforms? (5) What is the appropriate time frame for reforms to take place? (6) How is success to be measured?
Democracy is a particularly hard concept to define, far more difficult to define and measure than, say, market pricing. It has no theory to export, has taken many forms, and has used many devices to reach the elusive goal called human freedom; even those forms of democracy in existence today are in a state of flux (Barzun (1986)). In addition, it is by no means clear that the modern political science theorists (i.e., aid officials) have thought through what the relationship is of their new conditionality to the development goals they (and presumably their host countries) wish to pursue. Is it clear that promoting democracy and improved governance will expedite structural adjustment and development agendas? Is it not possible that elites already antagonized by portions of the structural adjustment agenda will have additional reasons to fight donor policies once they can be seen to be at the losing end of political conditionality as well?2
To those who wonder where this kind of conditionality will lead in the 1990s, it can be predicted that conditionality looks like it will branch out into other lines. Some are now holding that political conditionality is necessary, but not sufficient. They think human rights conditionality is also needed (e.g., Waller (1990-91)).
It would seem that the good intentions of donors to foster political freedom via aid conditionality has confused three questions: (1) What are appropriate considerations for a donor in choosing which countries to support? (2) What conditions are appropriate to link to specific aid programs or projects? And, (3) might not a specific “condition” be better pursued as an aid project or program?
In my view, political and human rights conditions are appropriate for donors to have in mind when they decide which countries to aid and what levels to extend to a country. They are inappropriate as conditions of specific aid projects and programs and might better be both more achievable and palatable through specific technical assistance. It is more straightforward to assist a country’s judiciary directly than to condition an aid program on an improved judiciary.
This new conditionality indicates, at least to me, a second departure from Africa’s fundamental development crisis, the first being structural adjustment itself.
In the 1980s, the international community may have lost sight of key issues that may well have more of a bearing on the future well-being of Africans than the current agenda. The largest such issue surely is whether Africa can feed itself. The imbalances of population, natural resources, and agricultural systems are likely to grow in the 1990s. This will imperil millions. To meet the needs of its unusually fast-growing population, Africa must triple its food production during the next 30 years. During this time, it must also find employment opportunities for 300—400 million working age persons and find first-year educational placements for approximately 30 million young persons each year, about triple the absolute number facing the combined nations of the Organization for Economic Cooperation and Development (OECD) (Wheeler (1987)).
Africa must pursue these immense tasks in the midst of considerable civic instability. Civil wars still disrupt numerous economies, setting back the development calendar by uncounted years. The instability of communities and families is shown by the highest rate of external and internal migration of any continent. Sub-Saharan Africa with 10 percent of the world’s population contains 35 million international migrants, nearly half the world’s total, and this may increase as the climate in OECD countries for Third World migrants deteriorates.3 With the lowest proportion of urban residents of any continent, Africa has the highest proportion of landless or near landless families, 63 percent of total households (Leonard (1989)). All of these factors alter adversely the fundamentals of African development.
Africans also face severe issues in the external sector, in addition to its debt crisis, which argue for attention in the 1990s. In assessing Africa’s trade prospects, a considerable amount of attention has been given to the future of its exports. There are major issues of composition and some real issues of access. Unfortunately, less concern is being given to the import side. One must be struck with the results of the World Bank’s 1989 study documenting the huge premium Africa pays for its imports. Analyzing 1986–87 iron and steel exports by certain countries to their former colonies, the study found premiums over what these countries charged developed countries of 31.5 percent for Belgium, 53 percent for the United Kingdom, 66.5 percent for France, and 72.6 percent for Portugal (Yeats (1989)). Valid explanations no doubt can be offered for some of these spreads, but certainly the issue is suggestive, indicating that management of the import side requires far more attention. (Indeed, one can hardly be in Botswana without paying homage to the results of sensible management of imports.)
Realism on the investment side also is required. The prospects for foreign investment in Africa are exceptionally poor, because the competition will be even stiffer in the 1990s than it was in the 1980s. The U.S. governmental debt of $2.9 trillion and its corporate debt of $2.1 trillion will alone cause huge distortions. At the same time, others are seeking tens of billions of dollars of new investment: the U.S.S.R., the new democracies of Eastern Europe, the Latin American nations undertaking major structural reforms, and the dynamic economies of Asia. Several large Latin American nations are hoping between them to attract new capital of $20–25 billion in the next three years through varying privatization plans. Environmental projects will require formidable amounts of capital over the next decade (Hormats (1990)).
Surely the major emphasis will need to be on domestic investment and the return of flight capital. The adjustments and actions necessary for these potential investment flows may well be substantially different than those taken in pursuit of investment from the far less likely source, the international private sector.
Implications for Donors in the 1990s
Should the parallel agendas of Structural adjustment and development continue to be merged in the 1990s? Two answers are being offered. The World Bank is moving away from the structural adjustment agenda but is still linked to it in many ways. At the same time, there is an effort among African leaders to link the two types of agendas but to shift the content of the development agenda to the African Alternative Framework.4
In my own view, both agendas are important, but they should be delinked much further. Perhaps this is best seen in the context of the stakes of not addressing the fundamental development crisis. Survival issues must be addressed whenever politically possible: even if civic conflicts are reduced or eliminated. Programs to increase food production, decrease population growth, and arrest environmental deterioration must be pursued. These must be achieved if Africa is ever to have a hope of self-sufficient. sustainable development. They necessitate long-term investments that cannot be made hostage to short-term policy ups and downs. While it is perfectly reasonable to link funding of endeavors in these sectors to sectoral performance, ways must be found to delink these sectors from the adjustment conditionality of the 1980s and the political conditionality of the 1990s.
This is not to say that the internal and intra-African political and transformational agendas are unimportant: they are crucial. But donors have other ways of assisting these issues through direct technical assistance and peer support.
In any case, the “political” issue that may be hotter in the 1990s than many of the political issues now on the agenda is land tenure and the related issue of water rights. Courageous actions, many of which may benefit from international collaboration, will be needed in a number of countries.
Whether or not the substance of the donor system is changed in the 1990s, the system itself is badly in need of repair. An agenda of donor reform should have at least three items: improved technical assistance, aid coordination, and the quality of personnel.
Technical assistance to Africa, estimated to be about $4 billion a year in direct costs, may well provide needed help, but its distortions are also large. A typical example is found in Tanzania. The annual cost of the 1,000 expatriate experts there is $300 million a year, three times that for Tanzania’s entire civil service. Shifts should be made toward cheaper and less intrusive assistance: hiring short-term rather than long-term consultants and taking the resultant savings to carry out sound ideas recommended by the technical assistants rather than continuing to pay for ever-more-technical assistance and ever-more ideas that cannot be tried out (Jolly (1989)).
Coordination issues are so well-known as to not need amplification. The question is whether the 1990s will bring a better record than the past. Some African states have been skittish about encouraging aid coordination lest they organize the “opposition.” Others have taken steps to corral the system. There is much to be said for co-opting the donors. The issue is how to do it best. Study of countries that are doing well in this matter, for example, Cape Verde, could be instructive. Joseph Wheeler, chairman of the Development Assistance Committee of the OECD, points out that countries ought to try to link aid to long-term problems and that a way to reinforce this is to have aid coordination managed by those involved in a country’s internal long-term planning.
Finally is the question of the quality of staff working on African assistance. This is more a problem in the private sector, particularly in banks, than in the public sector. As Africa faces yet another decade of crisis, donors and those in the private sector working with Africa should pay particular care to assign the best possible staff. Ways to stimulate this should be a matter of dialogue within the donor community.
Management of the debt crisis has already resulted in many special steps benefitting Africa. But, undoubtedly, further steps are needed. (1) The stock of debt needs to be further reduced, including the debt of the multilaterals, as many—for example, A.W. Clausen—have urged. (2) Net flows to Africa from the Bank and Fund should be managed in a way to provide strong positive flows during the 1990s. It might even be useful to establish net positive annual targets for the 1990s. (3) While several bilaterals have reduced official debts considerably, there is still unused authority in a number of bilateral institutions that should be exercised soon. (4) A more fundamental step would be to amend the Toronto Accords to permit their use in combination rather than singly. (5) Finally, some feel that a cadre of very high-level experts in financial negotiations, independent individuals not attached to existing major institutions, should be created to provide states wanting such assistance with authoritative, institutionally unbiased advice.5 Perhaps this last idea could be addressed by the new international effort to build capacities in Africa.
In the years ahead, donors should act more as specialists in proven areas of worth rather than in herding together from trend to trend. In my view, the World Bank should direct more of its efforts toward long-term sectoral issues. Conditionality should be aimed at assuring sector-specific performance. Performance in population planning and environment should be a far greater basis for deciding on programs than structural adjustment criteria. I would also urge the Bank to take a lead in assisting countries to better manage their imports, advising on ways to procure more economically. The Bank should be active at the Paris Club, noting the development impacts of various proposals, and being an active voice for development, but leaving to the IMF its necessary imposition of adjustment policies.
The Bank should also creatively work on issues of land tenure, water rights, and the other basic resource allocation problems that are likely to play such a major future in internal and intra-African relations in the decades ahead. Finally, the Bank and many other donors ought to be looking at employment issues far more closely and creatively in the years ahead. The need is less for strategies—shelvesful abound—than for taking bold actions.
If I were to suggest new work for the IMF in the 1990s, it would be to pay greater attention to fostering an environment conducive to greatly enhanced domestic savings and investment. I would also hope the IMF could play an active role with African countries and Northern bankers in devising ways to attract flight capital for development purposes in Africa. But the most fundamental step the Fund could take would be to make its long-term role in Africa clear. It is all too easy to feel that the Fund may be keeping its arrangements in Africa to the short-term in the hopes that Africa’s problems will clear up soon and then the Fund would be able to delink from Africa. The IMF must make clear its long-term view of relationships with African finance.
The bilaterals should delink fully from structural adjustment programs. They should stop being all things to all people and work more conscientiously to specialize where proven performance is demonstrated. Among the tasks bilaterals could take on that would have major impact on the future of African development would be to take far more active roles in helping to settle civil conflict in Africa. A sad example from my home country is the failure of the United States to forcefully act to settle the civil conflict in Liberia. The bailout will be far more expensive than any conceivable political solution that would have involved the United States. Bilateral donors also should examine their own trade regimes to institute reforms aimed at helping promote African exports.
There may well be specific steps that donors can take to foster pluralism in Africa by working on the specific aspects of pluralism: encouraging decentralization, fostering the private sector, helping give women a more equal chance in societies, and strengthening nongovernmental development institutions.
Northern nongovernmental organizations care deeply about Africa’s future. Over time more of them will heed the call of African nongovernmental organizations to be less active as direct agents of development and more active as peer promoters of the internal mobilization of skills and institutions fostered by their African counterparts.
Pursuing donor-African relationships in the 1990s will be difficult. Crafting politically more equal relations in the midst of dramatically different levels of economic happenstance calls for mature creativity on both sides. Relations will focus on economic issues and uppermost will be whether the structural adjustment and the development agendas should remain as merged in the 1990s as they were in the 1980s.
In my view, the agendas need to be further delinked. There is a need for IMF-like actions, but the main development challenge is not reform of the external sector, pricing, and the public sector, valid as these issues are, but of survival. The development agenda, focused strongly on the nexus of population, environment, and food production, needs to take center stage among the donors. Surely political development is also worth concern, but more as a target of peer concern than as a condition for assistance. And surely, too, there is plenty of room for reform on both sides.
Some years ago I came up with the idea of a “compact” for African development. The idea was to have the donors offer major new resources in exchange for which Africa would offer major economic reform. The idea found favor with the United Nations Economic Commission for Africa (UNECA) and the UN Special Session on Sub-Saharan Africa. Major new resources did not materialize for Africa, but the requirement of major new reform did.
Now I do not speak of a compact involving major new resources for Africa, as substantial new aid flows are even less likely in the 1990s than they were in the 1980s. Instead, I would hope a new compact could be based at a political level on mutual commitments for improved performance. The new compact would have industrial countries offer significant reform of their assistance systems in ways indicated, including the need for targeted positive flows by the multilaterals throughout the 1990s. For the African states, it would call for commitments on the fundamentals for survival without which the development prospects for the next century are dim.
How can a package of mutual reform be put together? Clearly, it will need political impetus for which African unity and the mobilization of Africa’s friends in the West will be necessary. The lesson of the 1986 Special Session should be clear: hard political homework is necessary on both sides before final deals are proposed. Intricate politics will be necessary, as will deft handling of public relations.
It would be liberating to be able to see a reduction of aid relationships in Africa, as one can in much of Latin America and with a number of countries in Asia. But that day is far off. The 1990s will be a very rough decade, and Africa will need all the constructive help it can find. If the financial and development history of the 1990s is to be better than that of the 1980s, there is much work to do. No one doubts the dedication shown on all sides during the 1980s. But the human stakes have gone up and so will the cost of delayed change by the donors and by Africa itself.
Barzun, Jacques,“Is Democratic Theory for Export?” (New York: Carnegie Council on Ethics and International Affairs, 1986).
Bretton Woods Committee, “Africa’s Finance and Development Crisis,”a conference held April 25, 1990 (Washington, forthcoming).
Hormats, Robert D.,“The Contest of the ’90s—for Capital,”Economic Insights (November/December, 1990).
Jolly, Richard,“A Future for UN Aid and Technical Assistance?”paper presented to the North South Roundtable, Uppsala, 1989 (unpublished).
Lancaster, Carol,“Governance in Africa: Should Foreign Aid be Linked to Political Reform?”in African Governance in the 1990s, Working Papers from the Second Annual Seminar of the African Governance Program (Atlanta: Carter Center, Emory University, 1990).
Leonard, H. Jeffrey,“Environment and the Poor: Development Strategies for a Common Agenda,”in Environment and the Poor (New Brunswick, New Jersey: Transaction Books, 1989).
Russell, Sharon Stanton,KarenJacobsen, andWilliam DeaneStanley,International Migration and Development in Sub-Saharan Africa, World Bank Discussion Paper, No. 101, Vol. 1 (Washington: World Bank, 1990).
Swanson, Daniel S. andTeferraWolde-Semait,Africa’s Public Enterprise Sector and Evidence of Reforms, World Bank Technical Paper, No. 95 (Washington: World Bank, 1989).
Waller, Peter P.,Berlin: German Development Institute. Personal communications, 1990-91.
Wheeler, Joseph C,“Sub-Saharan Africa and the International Community,” presented to the UNECA conference on “Africa: The Challenge of Economic Recovery and Accelerated Development,”held in Abuja, Nigeria inJune1987.
World Bank, World Debt Tables, 1990-91 (Washington, 1991).
Yeats, Alexander J.,Do African Countries Pay More for Imports? Yes, World Bank Policy, Planning and Research Working Paper, No. 265 (Washington: World Bank, 1989).
Subsequently, U.S. policymakers have conceptualized their efforts as aimed at fostering pluralism.
As occurred at the meeting of African LDC ministers of economy and planning, Tripoli, May 14-15, 1990.
Drawn from the Bretton Woods Committee discussions, April 25, 1990.