United States Treasury Secretary Paul O’Neill and rock singer Bono, also known as Paul Hewson, this week arrived in Addis Ababa on the last leg of their 11-day tour of four sub-Saharan African countries. They had already seen some of the best and worst of the continent, including computer and flower factories, vibrant markets, self-help and micro-finance programmes, slums and new housing projects, under-resourced schools and hospitals.
Aside from the international PR and domestic political advantages of the trip, the broad intention of both individuals is to put Africa on the global economic map and to undermine the popular cliche of it being a continent without hope.
Bono and O’Neill know the economic crisis is worsening. The United Nations says nearly half of sub-Saharan Africa’s 600-million people live on less than $1 a day; life expectancy is declining; and improvements in health and education have been minimal in the past decade. Despite high growth rates, Ghana’s average wage of about $400 a year is the same as 40 years ago.
More than one-third of all sub-Saharan African children are now malnourished, 40% have no access to primary education and school enrolment rates are falling. Water is scarce and, for the very poor, ruinously expensive. The World Bank and the British Department for International Development have acknowledged that the benefits of globalisation are barely being passed on to sub-Saharan Africa and may have actually exacerbated many of its problems.
Wherever O’Neill and Bono have gone they have met upbeat, optimistic people who have strong ideas on how to improve the situation. They have been told many times by presidents as much as slum-dwellers that Africa does not want handouts, but a helping hand, that there must be a new economic relationship between the rich and poor and that investment from outside is vital.
In recent years rich countries have significantly decreased the level of aid to Africa. Between 1990 and 1999 this fell by 40% and per capita aid to sub-Saharan countries fell from $34 to $20. The US, in particular, has come under criticism for contributing so little in official development assistance. Although it is by far the world’s largest donor, contributing almost $11-billion a year, the world’s richest economy contributes less than 0,1% of its gross domestic product to helping the world’s poor, well short of the Organisation for Economic Cooperation and Development countries’ average.
US President George W Bush, following a lead given by Britain, Canada and Japan, has now said he intends to increase the US aid budget by almost 50%, and a tranche of this can be expected to go to sub-Saharan Africa. Aside from the extra $5-billion a year that Bush has allocated for his Millennium Challenge foreign aid initiative, the US has also increased by 18% its funding for the African Development Bank, and its funding of the World Bank’s lending programme for the world’s poorest countries by a similar amount.
On top of debt reduction, worth up to $1-billion eventually in Africa, this enhanced aid package is expected to have demonstrable results; but it is still widely considered to be nowhere near large enough to achieve minimum UN targets for improving health, education, water provision or Aids reduction.
The reality, say NGOs like Isodec in Ghana and British charities such as Oxfam and Christian Aid, is that unless the trading relationship between North and South is significantly improved, all the benefits of official aid and debt relief may be worth little. Trade, they argue, is the key to development and is worth 20 times as much as aid.
At the moment, they say, the rules are tilted strongly against Africa, and its percentage of world trade has dropped sharply in the past 20 years. In real terms, says Oxfam, if sub-Saharan Africa had maintained its exports at the same level as 1980, its economy would be worth an extra $280-billion a year.
Official aid is increasingly being used to drive African countries towards trade liberalisation. As O’Neill said last week, the US package will be directed only to those countries who show good governance and also who ”encourage economic freedom”. This means they must show that they are opening their markets, reducing subsidies and privatising industries; and this is already being achieved through a variety of mechanisms such as International Monetary Fund/World Bank loan conditions, regional and bilateral trade agreements, and general policy advice.
The paradox, however, is that the US and European Union are not implementing at home the policies they insist that African countries take. This was starkly seen last month when the US announced its new farm Bill, which will increase US farm subsidies by $35-billion, or more than $20 000 to each farmer.
European subsidies are only slightly lower, but the effect is that rich countries can continue to flood African markets with artificially cheap food and products and that African producers find it ever harder to export. The Ghanaian rice industry has collapsed in recent years as heavily subsidised US (and Thai) imports have flooded in. From being an exporter, Ghana now imports $100-million of rice a year.
Historically, African trade tariffs have been high but they have been falling rapidly in recent years. According to the IMF’s Trade Restrictiveness Index, some countries in Africa are now as economically open as the EU and the US. Countries like Mali, Mozambique and Zambia are considerably more open than the EU and the US.
Bono and O’Neill both said that they went to Africa to learn about the potential of the continent and neither claimed to have a prescription for how to kick-start so many ailing economies. They may find the answers as much in Washington and Brussels as in Africa itself.