AFRICA AND THE POST CRISIS WORLD
Efe Paul Azino
February 26, 2009
Each year world leaders gather at the annual World Economic Forum to propose re-tooling strategies for a fluctuating world. This year, all minds headed for Davos, Switzerland with heavy hearts, stooped by the problems presented by the global recession and suggested solutions. I particularly liked the theme for this year´s Forum: Shaping the Post-Crisis World. I found it forward looking. How much the forum was and will be able to live up to its grand theme is an altogether different issue. Nevertheless, the Forum did have some interesting enough highlights. Most memorable was the dramatic session between Turkish Prime Minister Recep Tayyip Erdogan and Israeli President, Shimon Peres over the Gaza conflict which left about 1, 300 Palestinians dead. Prime Minister Erdogan stunned Business and Political leaders when he walked off stage, leaving Peres and headed back to Turkey to a heroes welcome. The Forum steam-rolled ahead with Former Vice President Al Gore, CNN senior correspondent Christine Amanpour, Japanese Prime Minister Taro Aso and British Prime Minster Gordon Brown amongst others, bringing very enlightening issues to the fore, suggesting policies to forge structures that could stem the crisis and produce a firmer post-crisis world. But my main concern was how Africa featured in the talks and if it had a role to play in shaping the post-crisis world.
Africa´s foremost diplomat, Former U.N Secretary General, Koffi Anan was one who caught my attention. Koffi Anan led talks on how to make global reduction on emissions deal fairer to poor countries and was reportedly scheduled to meet several African Heads of States to discuss how to ensure the crisis-challenged rich world keeps its promises on aid to Africa. So as the rest of the world prepares to meet the Post-Crisis World, Africa is remembered as the begging continent left behind, a non partaker in the glories and challenges of a moving-on world. Meeting it from an intellectual stand-point I am prone to disgust. I tend toward anger as I consider Anan´s proposed meeting with African Heads of State, for the purpose of ensuring the rich developed world do not forget their promised hand-outs to their depraved if not irritable distant neighbour. The crumbs that fall from the master´s table indeed. My anger can be justified by my sense of pride as an African, but the reality of Africa´s relation to the rest of the world tempers my annoyance somewhat.
Writing this I cannot help but remember a 2007 editorial article of Businessday Newspapers. It was the month of June and the G8 summit had just held in Heidelberger, Germany. And thus the article was a fall-out of the summit. It was titled "G8 and Africa´s economic needs" and a section of it read: "the continent with the deepest colonial scar remains planet earth´s soft underbelly, proving to be incapable of helping itself." This assertion clearly reflects the mindset of a wide section of African leaders and their wandering followers. This posture amongst other variables has attracted the ´sympathy´ of the developed world, a ´sympathy´ which has found expression in foreign aids. Renowned economist, Jeffrey Sachs in his book The End of Poverty argued that African nations are stuck in a "poverty trap" from which they can extricate themselves only with outside help. This was the thinking that birthed the so-called Monterrey Consensus, that governments should give "official development assistance" equivalent to 0.7 percent of GNP—meaning 70 cents for each $100 of national income. The very notion that the African continent is "incapable of helping itself" or "can extricate themselves only with outside help" gives a very sickening sense of hopelessness I find very discomforting. I find these assertions very misleading, not because Africa as a continent can make do completely on its own, but because they create a certain sense of helplessness which directly contrasts the vast amount of potential within the continent. Forums like Davos, where the world gathers to discuss the gains and challenges of globalization make it more apparent that Africa is yet to be integrated into the global economy. Nothing brought this to light as much as the ongoing crisis did.
Up until the current economic crisis, Africa´s non-integration into the global economy has been debatable. But let us consider two critical factors that have created and also sustain the global economy. One is technology, the other is trade. The inventions of the personal computer and the internet have been key enablers of globalization. The personal computer enabled digital formation of word, picture, music and video files while the internet enabled its transfer from one end to the other, mocking borders and geographical boundaries. Smart nations and companies have been able to take advantage of technology ---which is by no way limited to the PC and Internet--- to increase productivity and create high-end products and services. Technology-based and enabled products and services have been exported and insourced by countries and companies who have seized the opportunities presented. I wouldn´t want to bore you with statistics and analysis of nations and companies who have used technology to create and benefit from the global economy. My question is: is Africa a part of the global economy? What is the revenue of our technology based exports and how much have we insourced? Where are our technology based companies and what is their export capacity and track record? How large is our base of knowledge workers and innovators and how much leverage do domestic policies give them to play global? I don´t need to conjure up statistics, looking around; we can each do the math.
What about trade? Liberalization of global trade has been another key feature of the global economy. Some have accused it of being partial and empowering the rich against the poor, this predominantly because the poor have less negotiating power. Africa thus far has been a weak player, trading in the global economy. Part of the challenge is, the continent primarily exports primary commodities and imports manufactured goods. More so, Africa´s share of world exports declined from over 4.1 percent in 1980 to about 1.6 percent in 2000, while its share of world imports declined from over 3.2 percent to 1.3 percent over the same period. It is also distressing to know that its share in trade in commodities, which it majors in, also declined significantly from about 8 percent in 1980 to about 4.4 percent in 2000. How integrated then, are we in the global economy?
Africa took great pride in the fact that it was not directly hit by the global financial crisis. The CBN Governor told Nigerians, proudly, that the economy had nothing to fear. The banks were well capitalized and fit to weather the storm. I don´t know if we are supposed to be glad about this. The American banks got reckless and greedy. But what we saw in the extreme was an economy where credit was accessible. What we have here, in the extreme, is an economy where credit is simply paid lip service. We had a credit crunch before the global credit crunch began. Our entrepreneurs do not have access to funds as much as their counterparts in our global world do, so their ideas rot in their bosom. The banks recapitalized but credit was still scarce and interest rate was still fixed at a ridiculous 18%. Currently private sector credit is only 14% of GDP. African banks are more adept at investing in government debt, liquid assets and lending to corporate elites. It may shock you to know that less than 20% of African households own a bank account or have access to financial services and more than 70% of the population do not have access to formal finance. The world is torn at the seam because too many people had access to easy finance. Africa, to certain extents, is torn at the seams because too little people have access to little available credit.
The global economy couldn´t have been without credit. Most likely, the leaks would be fixed. An effective system will evolve to regulate global finance and then the world will move on. Without Africa? That would depend on us. Globalization will definitely get stronger after the crisis blows over. And the rest of the world will dictate to us because whilst developed and developing nations collaborated to steady the global economy, Africa remained on the sidelines, receiving aid. I suggest we take the necessary steps to get us ready to play in the global economy. What is to do, we already know. The governments will have to make frantic efforts to wean its economies, away from primary commodities to manufactured goods and high-end products and serves. This will require that massive investments be made in educating its citizens to equip them to make the shift; it will require freeing up credit to support high-risk start ups. What is most needed however is the political will, public awareness, individual as well as collective sacrifice. That involves you and me, squaring up to play whatever role we can to turn the tide.
The World Economic Forum will hold its annual regional Summit in Cape Town South Africa from the 10th- 12th of June. Discussions will focus on the impact of the crisis on Africa´s traditional drivers of growth including foreign investment, demand for oil and commodities, and infrastructure development. Let´s see what more the experts would have to say.
Africa´s foremost diplomat, Former U.N Secretary General, Koffi Anan was one who caught my attention. Koffi Anan led talks on how to make global reduction on emissions deal fairer to poor countries and was reportedly scheduled to meet several African Heads of States to discuss how to ensure the crisis-challenged rich world keeps its promises on aid to Africa. So as the rest of the world prepares to meet the Post-Crisis World, Africa is remembered as the begging continent left behind, a non partaker in the glories and challenges of a moving-on world. Meeting it from an intellectual stand-point I am prone to disgust. I tend toward anger as I consider Anan´s proposed meeting with African Heads of State, for the purpose of ensuring the rich developed world do not forget their promised hand-outs to their depraved if not irritable distant neighbour. The crumbs that fall from the master´s table indeed. My anger can be justified by my sense of pride as an African, but the reality of Africa´s relation to the rest of the world tempers my annoyance somewhat.
Writing this I cannot help but remember a 2007 editorial article of Businessday Newspapers. It was the month of June and the G8 summit had just held in Heidelberger, Germany. And thus the article was a fall-out of the summit. It was titled "G8 and Africa´s economic needs" and a section of it read: "the continent with the deepest colonial scar remains planet earth´s soft underbelly, proving to be incapable of helping itself." This assertion clearly reflects the mindset of a wide section of African leaders and their wandering followers. This posture amongst other variables has attracted the ´sympathy´ of the developed world, a ´sympathy´ which has found expression in foreign aids. Renowned economist, Jeffrey Sachs in his book The End of Poverty argued that African nations are stuck in a "poverty trap" from which they can extricate themselves only with outside help. This was the thinking that birthed the so-called Monterrey Consensus, that governments should give "official development assistance" equivalent to 0.7 percent of GNP—meaning 70 cents for each $100 of national income. The very notion that the African continent is "incapable of helping itself" or "can extricate themselves only with outside help" gives a very sickening sense of hopelessness I find very discomforting. I find these assertions very misleading, not because Africa as a continent can make do completely on its own, but because they create a certain sense of helplessness which directly contrasts the vast amount of potential within the continent. Forums like Davos, where the world gathers to discuss the gains and challenges of globalization make it more apparent that Africa is yet to be integrated into the global economy. Nothing brought this to light as much as the ongoing crisis did.
Up until the current economic crisis, Africa´s non-integration into the global economy has been debatable. But let us consider two critical factors that have created and also sustain the global economy. One is technology, the other is trade. The inventions of the personal computer and the internet have been key enablers of globalization. The personal computer enabled digital formation of word, picture, music and video files while the internet enabled its transfer from one end to the other, mocking borders and geographical boundaries. Smart nations and companies have been able to take advantage of technology ---which is by no way limited to the PC and Internet--- to increase productivity and create high-end products and services. Technology-based and enabled products and services have been exported and insourced by countries and companies who have seized the opportunities presented. I wouldn´t want to bore you with statistics and analysis of nations and companies who have used technology to create and benefit from the global economy. My question is: is Africa a part of the global economy? What is the revenue of our technology based exports and how much have we insourced? Where are our technology based companies and what is their export capacity and track record? How large is our base of knowledge workers and innovators and how much leverage do domestic policies give them to play global? I don´t need to conjure up statistics, looking around; we can each do the math.
What about trade? Liberalization of global trade has been another key feature of the global economy. Some have accused it of being partial and empowering the rich against the poor, this predominantly because the poor have less negotiating power. Africa thus far has been a weak player, trading in the global economy. Part of the challenge is, the continent primarily exports primary commodities and imports manufactured goods. More so, Africa´s share of world exports declined from over 4.1 percent in 1980 to about 1.6 percent in 2000, while its share of world imports declined from over 3.2 percent to 1.3 percent over the same period. It is also distressing to know that its share in trade in commodities, which it majors in, also declined significantly from about 8 percent in 1980 to about 4.4 percent in 2000. How integrated then, are we in the global economy?
Africa took great pride in the fact that it was not directly hit by the global financial crisis. The CBN Governor told Nigerians, proudly, that the economy had nothing to fear. The banks were well capitalized and fit to weather the storm. I don´t know if we are supposed to be glad about this. The American banks got reckless and greedy. But what we saw in the extreme was an economy where credit was accessible. What we have here, in the extreme, is an economy where credit is simply paid lip service. We had a credit crunch before the global credit crunch began. Our entrepreneurs do not have access to funds as much as their counterparts in our global world do, so their ideas rot in their bosom. The banks recapitalized but credit was still scarce and interest rate was still fixed at a ridiculous 18%. Currently private sector credit is only 14% of GDP. African banks are more adept at investing in government debt, liquid assets and lending to corporate elites. It may shock you to know that less than 20% of African households own a bank account or have access to financial services and more than 70% of the population do not have access to formal finance. The world is torn at the seam because too many people had access to easy finance. Africa, to certain extents, is torn at the seams because too little people have access to little available credit.
The global economy couldn´t have been without credit. Most likely, the leaks would be fixed. An effective system will evolve to regulate global finance and then the world will move on. Without Africa? That would depend on us. Globalization will definitely get stronger after the crisis blows over. And the rest of the world will dictate to us because whilst developed and developing nations collaborated to steady the global economy, Africa remained on the sidelines, receiving aid. I suggest we take the necessary steps to get us ready to play in the global economy. What is to do, we already know. The governments will have to make frantic efforts to wean its economies, away from primary commodities to manufactured goods and high-end products and serves. This will require that massive investments be made in educating its citizens to equip them to make the shift; it will require freeing up credit to support high-risk start ups. What is most needed however is the political will, public awareness, individual as well as collective sacrifice. That involves you and me, squaring up to play whatever role we can to turn the tide.
The World Economic Forum will hold its annual regional Summit in Cape Town South Africa from the 10th- 12th of June. Discussions will focus on the impact of the crisis on Africa´s traditional drivers of growth including foreign investment, demand for oil and commodities, and infrastructure development. Let´s see what more the experts would have to say.
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