Friday, July 10 2009
A two-day symposium coordinated by the Evian Group at IMD and the German Marshall Fund of the United States with IMANI Center for Policy & Education of Ghana, and Mthente Research of South Africa, warned against neglecting Africa in the wake of the global financial crisis.
A two-day symposium coordinated by the Evian Group at IMD and the German Marshall Fund of the United States with IMANI Center for Policy & Education of Ghana, and Mthente Research of South Africa, warned against neglecting Africa in the wake of the global financial crisis. The world is moving into a new development era, with new technologies, a new geography and new institutions. In this context it is important not to lose sight of the progress made in trade and development in Africa.
The Evian Group at IMD, comprising corporate, government and opinion leaders, promotes a global market economy in a robust multilateral framework. The Group’s founding director, Jean-Pierre Lehmann, chaired the conference and observed that over the coming decades Africa will witness severe demographic pressures calling for exponential job creation.
While foreign investors and multinationals had high hopes for post-independence Africa in the 1970s, major growth took place in Southeast Asia, originally considered a basket case. The reason for Asia’s success is that it opted for pragmatism and economically realistic policies with competent technocrats, while Africa remained marred in post-independence stagnation and conflict. The notable exception is Botswana, whose GDP grew from $210 to $3,800. “The Botswana case,” stated Lehmann, “definitely proves that there is nothing in the African DNA that makes it impossible for African economies to grow at the same rate as the East Asian tigers.”
The symposium underscored the fact that Africa has the potential to better manage its vast agricultural and energy resources, but that depends on improving governance and integrating its trade practices at a regional level.
"This is an essentially Global Crisis, and we cannot devise effective strategies in any context of national isolation," remarked Franklin Cudjoe, Executive Director of IMANI, the Ghanaian thinktank. "There comes a time when we have to ask: what is Africa’s contribution to the thought leadership that will shape the relative post-crisis positions of the various economic regions of the globe," he added.
The aid debate
Although Africa now receives roughly half the world’s overseas development aid, much of this aid is donor driven and motivated by geopolitical interests, often missing the key issues that drive development. Even that aid is likely to decrease as developed countries cope with their bulging fiscal deficits. Robert C. Fisher, Managing Director of Hills & Company, pointed out that US aid contributions to Africa are on track to double by 2010, but warned, “The question is what happens after that?”
“The challenge we face is how to mobilize the catalytic effect of aid,” said Talaat Abdel Malek, Economic Advisor to Egypt’s Ministry of International Cooperation. An increasing reliance on private sector investment and trade liberalization is clearly necessary, but as the current financial crisis demonstrates, government oversight is needed to set the parameters to ensure that the investment benefits are distributed productively.
Looking into the immediate future, robust and equal partnership models will have to be mainstreamed. “We must get serious about institutionalizing collaboration so that future generations of management and government are professional cooperators,” observed Richard Golding, Partner, Price WaterhouseCoopers, SA, Switzerland.
The China effect
China has become a game changer on the continent. The recent surge in investment by China has led to a renaissance of interest in Africa’s potential. “While the west sees Africa as a risk,” said Dr. Mills Soko, Founding Director of South Africa’s Mthente Research and Consulting Services, “China sees Africa as an opportunity.” However, Bright Simons, Research Director at Ghana’s IMANI Centre for Policy & Education, cautioned that China’s approach to development in Africa has focused primarily on infrastructure, and involves little technology transfer. “They are repeating the development policies of 30 years ago,” Simons added.
International and regional trade
Simply liberalizing trade is not a guarantee for development. Agricultural subsidies in Europe and the US, for instance have undercut African farmers, making it cheaper to import food than to grow it locally. Internal trade barriers that often make trade between Africans more expensive than imports from the west are partly responsible for poor regional integration. Many European and US companies are reluctant to enter the African market because it is so fractured that it is difficult to reach enough consumers to make the investment worthwhile. One recommendation is that Africans focus on developing regional integration and on developing their internal national and regional markets, rather than limiting their strategies to global export-based models.
Despite the challenges, Africa continues to offer enormous promise as it moves forward to deal with governance, trade and development issues. “Africa may end up being the last region in the world that truly believes in global capitalism,” observed Mills Soko. “Africa is open for business.”
The event was held at IMD in Lausanne, Switzerland.