Do Reforms Inhibit or Support African Development?

THE AFRICAN GOVERNANCE CRISIS (4/4)

After the analysis of decades  of public sector reform in Africa with special focus on Ghana, one can draw the conclusion that the  external support during the 1980ies has been  vital,  but  to  some  degree  harmful  due  to  a  “faulty  diagnosis  and  prognosis” (1). The African public sector during that time cannot be described as too big, but as expanding. This growth was a direct result from the new-won independence and was therefore a necessary step of taking control.

In order to overcome the economic decline in the 1980ies African states were dependent on foreign investments. While the IMF, the World Bank and individual donors did provide the money, they also set unfitting goals and an unrealistic time schedules. Instead of strengthening the existing system of public administration, Western NPM methods of downsizing, retrenchment and cost cutting were introduced. As has been stated in the above, African states did not have an oversupply of qualified civil servants, but a demand for the latter. Instead of ensuring their loyalty and providing a better education for them, many positions were cut and the crucial increase of salaries was implemented with reluctance (2).

The results of these reforms of the public administration of the 1980ies in Ghana and other countries were modest to say the least. From a different point of view, one could even assert that they were modest from a short-term perspective, but fatal in a long-term perspective, because they focused on technicalities in order to save money – that actually weakened the civil service (1) and ignored the core aspects of successful public sectors. While it might make great sense to concentrate on cost-cutting and downsizing of the public administration in Western countries like the UK or  Germany – where  a  certain ethic belief may  be  attributed  to  the  public officials because of centuries of institutionalized rules and norms – African bureaucracies were nowhere near this point of development. If one observes the economic progress of Asian tiger states whose economies greatly strengthened during the past decades, one is also able to attribute this success to strong systems of public administration (3).

As there is no such history in African public management, it seems obvious that an emphasis has to be laid on the establishment of civil service ethics and accountability. One could conclude, that the reforms of the 1980ies in Africa skipped one step, because they  aimed  at  shrinking  something  that  wasn’t  even  stable  to  begin  with.  Only technicalities were at focus. Therefore, one is drawn to argue that reforms from this time period inhibited the development of committed reformers in Africa.

Of course, this statement must be handled with care, as one does not have the possibility of comparison with an African country that did not follow the NPM reforms at all. However, cutting costs at the wrong places led to the “unfolding challenges” (4) African countries encountered during the 1990ies and even in the new millennium. While techniques for more ethical behavior and accountability are decided on, their implementation must be coordinated among the African states. Instead of relying on external help, the more successful countries have to set an example and support  the weak links.

Dealing with these problems, the UN concludes:

“For poor, resource-constrained countries, the reform challenges are daunting, not because the countries do not know what to do, but because they lack the resources to initiate and sustain a comprehensive programme of change.” (4)

Financial aid is thus still vital today. But instead of forcing these different systems to adapt Western ideals of public administration reforms, the support should be engaged on the  education  of  civil  servants,  hence  human  capacity  building  and  training.  In combination with a rise of public official salaries, the two core weaknesses identified in this work would be tackled. While the downsizing of the public sector has already taken place, one could attempt to stabilize this system now. Therefore, the current trend of African civil service reform can no longer in any way be attributed with an inhibition of the countries’ development.

On the whole, it has been clear that the reforms of the NPM-wave during the 1980ies did   little   to   promote   sustainable   development   in   African   public   sectors   and consequently in the countries’ economies (1) (2). Despite these negative experiences and the sentiment of wasted money, external support is a sine qua non in Africa now. The necessary strategies can only be implemented after the application of sophisticated analyses and diagnoses and with the involvement of all stakeholders, especially the civil servants in regard to more ethical behavior (2).

Only by doing so, policies – such as the liberalization of markets, vital for a more successful participation in global trade – can be implemented.

In order to highlight the difficulties encountered by Ghana and other African states in establishing an efficient and sustainable civil service resulting in a stronger economic development, this paper concentrated on the introduced governance crisis (2). However, there are of course great interdependencies between the public administration and the central government of a country. The best governance system would only get so far without a stable, organized and constitutional government (4). It would be interesting to analyze these realities for African states, as it seems logical that weak governments are another trigger for underdevelopment.

On the whole, one can conclude that reforms of the 1980ies were not customized for African   developing countries and most probably inhibited a quicker economic development. The second  wave of reforms however, is much more focused on the involvement and training of civil servants, which is – as seen in the cases of Developed Countries and Tiger States – crucial for a stable public  administration and economic growth. If provided with the necessary financial aid, reform-committed African states like Ghana could indeed face an overcome of economic underdevelopment.

Related posts:
· The African Governance Crisis (1/4) · A sift inventory of Africa’s development problems
· The African Governance Crisis (2/4) · The Consequences of Reforms on the African Civil Service
· The African Governance Crisis (3/4) · Rehabilitating the African Civil Service
· Millennium Development Goals: Fragile states claim summit outcome off-target

______________

(1) Olowu, B. (1999). Redesigning African Civil Service Reforms. In: The Journal of Modern African Studies 37, 1 (1999). Cambridge University Press.
(2) Adamolekun, L. (2005). Re-Orienting Public Management in Africa: Selected Issues and Some Country Experiences. In: African Development Bank – Economic Research Paper Series No. 81.
(3) Evans, P. (1995). The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change. In: Politics and Society.
(4) United Nations. (2005). Public Administration and Development – Report of the Secretary General.

Rehabilitating the African Civil Service

THE AFRICAN GOVERNANCE CRISIS (3/4)

The customary  problems  of  public  sector  ineffectiveness  due  to  erroneous  reform movements – leading to a reduction instead of a reinforcement of the system – and the ongoing  danger  of  corrupt  public  officials,  give  reason  to  speculate  about  more successful policies for the reinvention of the African public administration. In order to do so, public service ministers came together in Stellenbosch, South Africa in 2003 to respond to “unfolding challenges” in African public administration (1).

In accordance with some reform approaches of the late 1990ies, the aim of new reforms is to switch to home-grown and demand driven methods directed at specific problems and challenges instead of the donor-pressured goals of broad downsizing and cost- cutting (1). While the UN observes that contemporary reform methods do still aim to improve business and customer satisfaction techniques –“a  carry-over from the early days  of  New  Public  Management”  (1),  intangible  reform  topics   such   as  the implementation of norms and values as well as public service ethics and accountability play a vital role.

Since African countries like Ghana do not possess the financial assets necessary for a much needed rise of public servant salaries, it seems crucial to at least stabilize the employees feeling of normative obligations. Despite negative experiences citizens have encountered with corrupt public officials so far, the latter must still be expected to have a  special  awareness  for  accountability  since  they  belong  to  the  directly  elected government of the country (2). Von Maravic argues that ethics in public management influence the quality of decisions made in public administration as well as the trust the citizen has in the system. (3). Hence, if one could ensure the ethical comportment of public officials, African (and more precisely Ghanaian public administration) could highly improve.

However, at this point another problem must be faced: the lack of resources. In this way, the UN states:

“In many countries, public administration remains weak largely owing to a shortage of human resources and to deficiencies in staff training and motivation.“ (4).

When speaking about the amelioration of African public services, one must be cautious not to attempt to apply the same public sector reform logic to all African countries. The differentiation of Adamolekun provides a possible classification of African states that has been mentioned before when referring to Ghana as a reform-committed country.

The above  table  or  a  similar  one  could  be  used  in  order  to  ensure  a  sustainable improvement  of  African  public  administration  systems.  In regard to this, the UN highlights the necessity of information sharing among reforming African states (4). Implementing the homegrown, but still NPM influenced methods of public sector reform in combination with the support of ethical and accountable changes in countries of the “virtuous circle” could be a first step (5). While the public service ministers all attempt to work on similar criteria they must accept countries like Botswana, Namibia or South Africa as a ‘primus inter pares’and a focal point of orientation. Moreover, it is obvious that foreign investments are still necessary; however one must not repeat the mistakes of the 1980ies and let donor schedules pressure the implementation of reforms.

Related posts:
· The African Governance Crisis (1/4) · A sift inventory of Africa’s development problems
· The African Governance Crisis (2/4) · The Consequences of Reforms on the African Civil Service
· Millennium Development Goals: Fragile states claim summit outcome off-target

______________

(1) African Press Organization. (2008). 6th Conference of African Ministers of Public Service Opening Remarks.
(2) Solinski, H.M. (1993). Ethic-conscious outlook behavior in public administration in Switzerland. Considerations and suggestions for the introduction of an ethics understanding based on the American experience. Reports and contributions of the Institute for Business Ethics at the University of St. Gallen.
(3) Von Maravic, P. (2009). Ethical challenges in administrative action. 5/4/2009.
(4) United Nations. (2005). Public Administration and Development – Report of the Secretary General.
(5) Adamolekun, L. (2005). Re-Orienting Public Management in Africa: Selected Issues and Some Country Experiences. In: African Development Bank – Economic Research Paper Series No. 81.

The Horn of Africa, a recurring scenario of drought and famine

Refugees from Somalia have to walk for days to reach Dadaab camp

The Dadaab refugee camps in Kenya are grappling with the arrival of thousands of people fleeing drought and fighting in neighboring Somalia. Many, especially children, fail to survive the long journey.

Some 2,000 people have been arriving every day in Kenya’s Dadaab refugee camps from Somalia, Ethiopia and drought-stricken areas in Kenya. Many walk for weeks to get there. Young children, in particular, often don’t survive the long journey or succumb to exhaustion and severe malnutrition even after reaching the camps. The Dadaab camps are currently home to some 350,000 people.

Crop failure, droughts and floods are not the only causes of hunger. Corruption, mismanagement and bad governance are mainly to blame for catastrophes such as the current famine in the Horn of Africa.

Every day, between 1,000 and 2,000 refugees from Somalia come to the Dadaab refugee camps in northern Kenya. They are fleeing from hunger – and from a nation which isn’t a country at all. The situation is so chaotic in southern Somalia, that it’s even dangerous for aid workers to go there. Rebel groups are spreading fear and terror among the population, blocking desperately needed food aid and making any possible help from the outside world impossible.

Add to this the extreme drought. The result is that many who are already living at the poverty level and below are robbed of their last chance to survive. The food scarcity is causing prices to soar. Whoever can’t pay them starves. Millet is a very important foodstuff in Somalia and is twice as expensive as it was just a short time ago. The people don’t have any choices anymore.

Democracy can battle hunger

But there’s no government to blame for the catastrophe in Somalia. The country is a classic example of a failed state. There is neither a government nor an administration. In these cases, hunger crises are practically inevitable.

The Indian economist and Nobel Prize laureate Amartya Sen proved that acute famine hardly occurs anymore in democracies. However, chronic hunger can prevail under democratically elected governments, as well. This means many people remain undernourished, but they don’t die in large numbers as a result.

Over a billion people worldwide are starving. This leads to a high level of childhood mortality, physical and mental handicaps and hopeless poverty.

Ethiopia can’t battle the problem

The catastrophe currently raging in the Horn of Africa is not daily hunger, though, but rather a famine of biblical dimensions. There are people starving to death during their flight, children who often don’t survive the weeks-long march to the Kenyan refugee camps in Dadaab, or who die shortly after arriving because they are already too weakened to survive.

They come from Somalia or Ethiopia, where the government is also in a desperate battle against hunger.

Ethiopia has invested enormously in the agrarian sector in the past 10 years. Every year, the number of starving has sunk by one to one-and-a-half percent, but beginning at a very high level.

However, the measures aren’t enough. Ethiopia belongs to the poorest countries in the world. The rapid growth in population makes it difficult to expand the agricultural sector sufficiently and ensure food security. A devastating drought like the one right now cannot be thwarted by investments in rural development. Those people who have lost their land or animals due to the drought can only resort to fleeing.

Promises need to be fulfilled

In the long-term, consistent investments in agriculture and poverty reduction is the only thing which could prevent hunger catastrophes like this one. And these need to be investments that are transparent and sustainable – without the funds seeping away through corruption and nepotism. All that, without leaving Africa back in the hands of agribusiness or predatory countries that acquire African land for monocultures and speculation on cereals (China, South Korea); by facilitating and promoting the capitalization of small-scale agricultural projects, local and traditional (encouraging microfinance at all possible levels to generate self-sustaining economies that will fuel food self-sufficiency) — instead of capital investments seeking a return on investment in the short-term.

African Union’s so-called Maputo agreement is welcomed for sure. In 2003, African countries pledged to invest 10 percent of their entire budget into agriculture. Unfortunately, Kenya for example, where the drought is threatening hundreds of thousands of people, has not kept this promise. Additional funds or food reserves need to be put aside for acute crises like this one. Or the international donor community has to be asked for help. But this additional aid by the international community has flowed fairly sparsely – despite all the promises. And it is by far not enough to battle a catastrophe of this degree. UN agencies have a mandate by the governments to help these people, but not the necessary funds.

Many aid organizations are already warning of the next famine: in South Sudan, which has just become independent. The UN’s youngest member nation is marked by a shortage of funds, lacking government competence and growing corruption. The downward spiral continues to turn.

Related Posts: The Horn of Africa – An everlasting battleground

The Consequences of Reforms on the African Civil Service

THE AFRICAN GOVERNANCE CRISIS (2/4)

 “Since the late 1980s, many African countries have been reforming their civil services (…) Unfortunately, these reforms have not been very successful because of faulty diagnosis and prognosis. They have failed to tackle the major problems confronting African civil services.” (1)

Before the analysis of African public administration reforms can be undertaken, one must remember that the landscape of Africa’s civil service was not build from scratch. With its independence from British colonial rule, countries like Ghana inherited a system of public management that fulfilled tasks of “assuring the continuity of the state and maintaining law and order” (2). However, the civil service was doomed to re-orientate after independence in order to follow national interests instead of the ones of former colonial rulers. The African Development Bank thus asserts  that  an  enormous  expansion  of  the  civil  service took  place  until  the  grave economic decline at the  end of the 1970ies leading to a full-scale development crisis (2). This is when reforms of the civil services this paper aims to concentrate on were launched. Ghana shall be utilized as a hands-on example in this work, because it may be identified as a reform-committed country (2) that demonstrates strong efforts to rehabilitate its public service despite tremendous economic shortfalls. Therefore, a lack of commitment can be dismissed as a possible inhibiting factor to a successful development of Ghanaian public administration.

The goal of the following chapter is thus to properly understand why policies from the 1980ies aiming at the economic stabilization and development of African states such as Ghana have shown little success (1). One of these policies is the liberalization African markets (3). Taking this as the initial point of  this  work’s  analysis,  one  is  more  likely  to  comprehend  the  nature  of  reforms launched  during  the  1980ies.  The question whether the latter actually inhibited or actually reversed Ghanaian administrative, hence ultimately economic progress shall now be at focus.

NPM-Waves in Africa

Influenced by donor countries providing the necessary financial support for reforms (4), the ideal of New Public Management began gaining ground as a leitmotif for reforms in Ghana and other SSA countries. In general one can follow Bamidele Olowu in asserting that “African civil services [were] originally modeled on their metropolitan precursors.” (1). Although New  Public Management does not  translate  into  the  same  dogmatically  closed  catalogue  of  instruments  in  every country, in this work NPM shall be understood as a business interpretation of administrative action, hence a trend toward micro economic behavior in public management.

According to Peter Evans, this phase of reforms in developing countries may be seen as market-centered (5). After decades of viewing the state as the ultimate instrument of development, reforms in the 1980ies were initiated under the sentiment of negative experiences with the central government, hence a thrive for a reduction of the state.

As mentioned before, Ghana like many other African countries experienced a great expansion of the civil service sector after the 1960ies (1). After the global oil crisis, African economic decline and the ideal of a business-oriented reform wave  of  the  public  administration,   this   growth  of  the  state  was  to  be  ended (2). Donor countries provided African states with the necessary financial aid for the cutback of civil services (4). To make this more accessible, one must look at some exact data, in this case from Ghana.

The shrinking of the Ghanaian public administration was tackled through a myriad of reforms steps. The most important ones for the analysis in this paper are as follows. A grand movement of organizational restructuring led to a reorganization of government ministries eliminating four agencies during the reform efforts. Hence, seemingly unnecessary agencies were cut.  Another method, which was very well received by donor countries, was Ghanaian retrenchment. The core goal of this policy may be seen in the cutback of unneeded civil servants in order to shrink the countries’ public administration system. Therefore, Ghana reduced its civil servants from 131 089 in 1990 to 80 000 in 1995 (1).

Despite the reduction of civil servants, the payment of the latter was to be increased. Therefore Ghana foresaw decompressing wages and providing higher salaries for public managers. While information on the actual increase varies depending on the source, it is safe to say that actual salaries in Ghana did not rise significantly. Although still higher than for many African countries, the increase during the reforms in Ghana was modest (2).

These three aspects of Ghanaian public sector reform are sufficient for the following line of argumentation. However it shall be noted that Ghana was also at the forefront in regard to privatization and decentralization of public services (1). Due to its British past and organizational influence, reforms like the latter were faster implemented than in other African countries (1).

Evaluation of the NPM Reforms in Africa

The crucial part now lies in the evaluation of the New Public Management reforms and their effect on policy-making capabilities of the African civil service.

As mentioned above, the size of the Ghanaian public administration was decreased in regard to the number of agencies as well as the number of employees. Donor countries favored this approach due to  the conviction that a smaller public sector would work more  efficiently  as  for  instance  experienced  in  the  UK  (3). Moreover, the state’s involvement was seen as one of the core problems in developing countries after the 1970ies (5), thus the idea of a roll back of the state was widely popular (6).

However, the African civil service was never abnormally big in comparison to other regions (1).

      Figure 1: Government Employment as a Percentage of Population (various recent years)

Source: Olowu, 1999, p. 9.

As visible in the above chart, the central as well as the local government in sub-Saharan Africa is much smaller than the OECD average. While the observation that there was an enormous growth of the latter may very well be correct, this must be viewed as a post- colonial necessity. It seems rather logical that a growing economy must increase its public administration capacities. In regard to the number of public employees, the UN states that the African public administration “is significantly understaffed in professional and managerial areas, and perhaps overstaffed in semi-skilled and unskilled areas.” (4).

Therefore, one must conclude that a reduction of Ghana’s civil service at all levels was contra-intuitive and defeating the purpose of a more effective public administration.

The retrenchment in the civil service in general has proven to be more costly than expected in the beginning. More precisely, the research on the proper identification of cost saving possibilities mostly exceeded the actual ex-post cost saving (1).

Ghana is once again a perfect example for this miscalculation as the country actually encountered cumulative losses as a result from downsizing in the 1980ies. Although  Ghana  has  been  classified  as  a  committed  reformer,  the  former  head  of Ghanaian civil service, Robert Dodoo asserted his dissatisfaction in regard to the reform movement. According to him, the reason for the lack of improvement of the country’s development lay in the “donor time-tables, agendas and conditionalities” (7). While external support was necessary and vital for an improvement of the African  civil  service  the  provision  of  money  came  with  unreasonably  short-term expectancies.  It  does  not  seem  surprising  that  a country in  danger  of  loosing  all monetary  support  decides  to   hustle  through  a  reform  and  risk  less  successful implementation instead of the loss of crucial financial aid.

There are two core weaknesses to be identified after this ex-post evaluation of the first part of African civil service reforms: (1) the way reform was embarked upon, along with (2) the goal of the reform.

The first point has been made quite clear with the previous statements of Robert Dodoo. The pressure for success coming from donor countries was in no way beneficial for the improvement of the Ghanaian civil service. As one of many, Ghana had agreed to reduce the cost of the public sector and implement questionable structural adjustment programs: “This was an explicit condition for financial support from the International Monetary Fund and the World Bank.” (2). Although the size of the civil service was reduced, the results in cost saving were modest.

But why reduce the African public administration at all? As demonstrated with the graph, the African civil service was in no way bigger than ones from many other states. While it was indeed expanding after the colonial rulers granted independence, this was a vital step toward a functioning economy and a sustainable development of countries like Ghana. State and market building are mutually dependent; hence a strong state in combination with a functioning market could be seen as the more adequate policy for Africa at this delicate time (3).

The World Bank itself states that

‘An effective  state  is  vital  for the  provision  of the  goods and  services  – and  the  rules  and institutions – that allow markets to flourish and people to lead healthier, happier lives. Without sustainable development, both economic and social is impossible.’ (8)

The problem  of  the  1980ies  believe  that  effectiveness  would  be  achieved  through downsizing is  made clear in the above. However, it now becomes tangible that the effects of the 1980ies reforms may very well have resulted in lacking capabilities to implement crucial policies for the countries’ development, i.e. the liberalization of markets. If there are too few agencies and employees to oversee the realization of liberalization, this process is doomed to fail.

The third reform step that shall be evaluated here is the alteration of salaries in the civil service. While there was indeed some increase in the salaries of civil servants in Ghana, they are still stunningly low (1).  When being confronted with unattractive   employment   opportunities, the reaction of workers is universally comparable. High-qualified human capital either leaves the country in order to find better-paid jobs or the employee opens him – or herself to corruption. A report by the IMF shows a strong correlation between wages in public administration relative to wages in manufacturing: “It is estimated that government wages needed to be 2×8 (…) times higher to make corruption negligible.” (The Economist 1997, Reasons to be venal).

Corruption is another major weakness of African public administration and must be seen as another NPM-influenced repercussion (1). Peter Evans asserts in this regard that methods of personalism and plundering at the top levels of African civil service destroy all possibilities of rule-governed behavior in the lower levels of public administration (5). More precisely, in order to make a living less qualified officials go along the example set at the top.

Another fatal repercussion of corruption for these countries is not only the waste of financial  resources,  but  also  the  cancelation  of  international  aid  programs  as  a punishment (5). Weak public administration with corrupt officials therefore results in a vicious circle for the whole country.

After evaluating the three vital reforms in Ghana, the downsizing of the public sector as well as an insufficient rise of civil servant salaries, in the following, this paper aims at observing some of the latest reform movements. By doing so, the goal is to make a recommendation as to where the development of the Ghanaian and African civil service should be headed in order to guarantee more capable ways of implementing policies for an improvement of the countries’ development.

Related posts:
· The African Governance Crisis (1/4) · A sift inventory of Africa’s development problems
· The African Governance Crisis (3/4) · Rehabilitating the African Civil Service
· Millennium Development Goals: Fragile states claim summit outcome off-target

______________

(1) Olowu, B. (1999). Redesigning African Civil Service Reforms. In: The Journal of Modern African Studies 37, 1 (1999). Cambridge University Press.
(2) Adamolekun, L. (2005). Re-Orienting Public Management in Africa: Selected Issues and Some Country Experiences. In: African Development Bank – Economic Research Paper Series No. 81.
(3) Chaudhry, K. A. (1993). Myths of the Market and the Common History of Late Developers.
(4) United Nations. (2005). Public Administration and Development – Report of the
Secretary General, Sixtieth Session.
(5) Evans, P. (1995). The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change. In: Politics and Society.
(6) Goldsmith, M. J. & Page, E. C. (1998). Farewell to the British State? In: Public Sector Reform by Jan-Erik Lane. London: SAGE Publications.
(7) Dodoo, R. (1996). The Core Elements of Civil Service Reforms. In: African Journal of Public Administration and Management
(8) World Bank. (1997). World Development Report. New York: Oxford University Press

A sift inventory of Africa’s development problems

THE AFRICAN GOVERNANCE CRISIS (1/4)

Index of African Governance Human Development © European Statistical Laboratory

The underdevelopment of developing countries and the attempted overcome of the latter are at heart of international debates ever since development politics began gaining ground in world politics in the 1960ies. Today, African states receive special attention in regard to possibilities of an amelioration of their economic status quo.

Core problems  of  these  so-called  Least  Developed  Countries  (LDCs)  are  a  highly restricted  access  to  basic  human  needs  such  as  food,  water,  energy  resources  or medicine.  Moreover “social services and infrastructure have largely collapsed  owing  to  a  lack  of  resources  for  their  upkeep.”  (1). Although the Millennium Development Goal aiming at a worldwide reduction of extreme poverty by 50% is expected to be reached until 2015, this data must be considered with caution in regard to Africa. While countries such as India or China, who are also targeted by the UN agenda  do  indeed  face  an  incredible  improvement  of  public  wealth,  sub-Saharan countries are at risk of being left behind permanently. More precisely, the UN today expects goals such as the reduction of extreme poverty to be reached in Africa no sooner than in 150 years (1).  This vicious circle of underdevelopment is well highlighted in the Human Development Index. From the 1980ies until the end of the millennium 13 of 22 countries that suffered large setbacks were African (1). Among a great number of possible explanations for this economic disaster, one of the most plausible ones is the conviction that “governance and public administration  weaknesses,  [and]  the  failure  to  reflect  poverty  concerns  in  budget allocations…” (1) generate economic gaps. This analysis thus aims to demonstrate that so far weak governance institutions are one of the main causes for the above-depicted underdevelopment of some African countries.

But how exactly does the public administration system of sub-Saharan LDCs affect their (economic) development?

Many theories regarding the economic improvement of these poorest countries have been launched and abolished. Sub-Saharan Africa (SSA) has been at the receiving end of a myriad of developmental experiments ranging from modernization concepts to self-help and good governance approaches. The core train of thought driving these, mostly Western models of development, has been the ideal of market liberalization (2) as  a  motor  for development.  But  what  is  often  forgotten  when  dealing  with  the  approach  of  free markets is the vitality of  strong governance institutions. Kiren Chaudhry and Peter Evans acknowledge that market building and state building must go hand in hand (2)(3). More precisely, they hereby avert from the idea of a simple roll back of the state of New Public Management (NPM) reforms launched during the 1980ies (4).  The UN General Assembly corroborates: “With challenges of poverty and growing inequality (…) organized and constitutional Government becomes the only guarantee of personal and collective security.”  (1).

Although development aid or development strategies in general may have fallen into some disgrace during the last decades due to little trickle down effect and images of corrupt African leaders wasting  Western money for their personal pleasure,  increased  financial  aid  might  be a sine qua non at this crucial time of development of African governance institutions. A lack of financial resources leads to dramatic human capital flight in the African public administration (1). Further, NPM-like cuts in administrative resources in order to minimize the size of African public management could have led to a setback and to less development in the target countries.

The reforms of the civil sector in Africa so far have been mainly concerned with technicalities, such as the reduction of the size and the cost of the public sector (5).

However, this approach fails – as I shall argue later in more detail – to comprehend the crucial task of building lasting human and institutional aptitudes.

This contribution therefore aims to concentrate on the civil service sector of underdeveloped sub-Saharan countries. Questions such as: ‘What kind of reforms were implemented?’ must be answered before diving into the complex task of evaluating the latter and discussing a different approach to possible improvement in the civil service, hence in the countries’ development. Thus, in a first step, this paper will focus on some major reforms in reform-committed African countries such as Ghana and underline the weakness of the attempts to change the system of public management (6).

A second step will then be dedicated to suggestions of a new direction for the handling of the African public administration.

In a last step, this paper then aims to draw a conclusion and answer the initial question whether public sector reforms in Africa so far actually inhibit or support development.

Related posts:
· The African Governance Crisis (2/4) · The Consequences of Reforms on the African Civil Service
· The African Governance Crisis (3/4) · Rehabilitating the African Civil Service
· Millennium Development Goals: Fragile states claim summit outcome off-target

______________

(1) United Nations. (2005). Public Administration and Development – Report of the Secretary General. Sixtieth Session.
(2) Chaudhry, K. A. (1993). Myths of the Market and the Common History of Late Developers.
(3) Evans, P. (1995). The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change. In: Politics and Society.
(4) Goldsmith, M. J. & Page, E. C. (1998). Farewell to the British State? In: Public Sector Reform by Jan-Erik Lane. London: SAGE Publications.
(5) Olowu, B. (1999). Redesigning African Civil Service Reforms. In: The Journal of Modern African Studies 37, 1 (1999). Cambridge University Press.
(6) Adamolekun, L. (2005). Re-Orienting Public Management in Africa: Selected Issues and Some Country Experiences. In: African Development Bank – Economic Research Paper Series No. 81.

Revolts put focus on Arab civil society

Youth revolts in Tunisia and Egypt could spread throughout the Maghreb and the Arab World as the discontented masses take to the streets.

Street clamor is not exactly the same in Egypt as in Tunisia

In Tunisia, a popular insurrection knocked down a dictator for the first time in Arab history. In the meantime, the largest protests in decades have broken out in Egypt. Could Morocco and Algeria be next?

Tunisia’s revolution generated tremors not just in Egypt. Throughout the Maghreb, authoritarian regimes like those in Morocco and Algeria have a difficult time addressing the frustration and despair of their young populations. Could the revolutionary example set in Tunisia take root among its neighbors?

The revolution arose on mid December when a desperate, unemployed computer scientist named Mohamed Bouazizi set himself on fire in the small town of Sidi Bouzid. Bouazizi’s death symbolized the despair of a generation, triggering a series of general protests that ultimately swept longtime dictator President Ben Ali from power.

“We have 13 percent unemployment but the figures in the interior of the country are significantly higher, sometimes upwards of 70 percent,” said Adelwahab El Hani, a Tunisian human rights lawyer from Sidi Bouzid. “80,000 Tunisians have just finished up with their studies and they need jobs. That’s an enormous challenge for the government.”

Extreme imbalances and poor human rights records
One Tunisian student said it was like the top cover had shot off of a pressure cooker. He wasn’t just alluding to his homeland, but to the entire Maghreb. In Morocco, half the population is under 25 years old and 40 percent of them do not have a steady job. Young graduates are especially hard hit. The grumbling from the streets has become audible. Sure, there are limited political freedoms, woman’s rights, a parliament and a government – but no genuine open democracy. The military and secret police are omnipresent. The social imbalances are extreme.

“Motives for these kinds of revolts are all over the Maghreb,” said Francis Ghiles, from the Center for International Studies in Barcelona. “The elites in Morocco live the high life, but that doesn’t guarantee social stability. The pie can’t just belong to the rich. When there’s no redistribution of wealth, when the upper class parades around arrogantly, then there will be revolt someday.”

In Algeria it has already reached that point. This massive land is a social barrel of gunpowder. In January there were wounded during protests against high grocery prices. In many Algerian cities, the young expressed their rage in a flurry of stones, tear gas grenades and Molotov cocktails.

Algeria’s government promised to take decisive action, but the country is politically stagnant. Longtime President Abdelaziz Bouteflika is supported by a corrupt clique of military officers and secret police. Three-fourths of Algerians are under 30. Most of them do not have jobs, lodging or perspective. All this despite the fact that the state strongboxes are full with money from oil and gas exports.

Algeria “has accumulated 150 billion euros in foreign exchange,” Ghiles said. “The problem is not a lack of money, but a clientele economy. It’s a casino. There’s no order, no plan, no perspective. And on top of that the government is autistic. Those in power just don’t listen, they don’t see the problems of their people, or they simply just don’t want to see.”

But now they have to see. A growing number of desperate, well-educated young people are extinguishing themselves in gasoline and lighting themselves on fire: In Egypt, in Yemen, in Mauretania and also in Algeria. Just like Mohamed Bouazizi in Tunisia, whose final act of self-determination set a whole country in flames.

Domino effect
Ghiles believes that the so called “Jasmine Revolution” in Tunisia is a historic event that has shaken the entire Maghreb. However, he does not believe that it will set off a domino effect which collapses other authoritarian regimes throughout the region. The Moroccan King Mohammed VI has a broad power base and his role as the highest religious leader of the Moroccan people lends him additional legitimacy.

In Algeria the middle class, which played a critical role in Tunisia, has largely disappeared. There has been social turmoil for years, but the regime has never been seriously threatened. The military and secret police are so tightly connected with the halls of power and the oil and natural gas industries that they have too much to lose in a revolution.

In glaring contrast to Tunisia, the Algerian army would gun down demonstrators. And nobody wants a new civil war in Algeria – the last one cost 200,000 lives. Even if the states of the Maghreb do not fall like dominoes, Tunisia serves as a warning. When these kinds of events repeat themselves, like recently in Algeria or a few years ago in Morocco, or even in Tunisia or Egypt, then governments have to draw some conclusions. If they don’t do that, then the pressure cook will explode – just somewhat later.
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Francis Ghiles, The Maghreb refuses to share, Le Monde Diplomatique, Feb. 2010; El Coste del No-Maghreb, IEMed and ToledoPax, Madrid, May 2006 and Barcelona, Nov. 2007.

Slavery still exists in our globalized world

Discrimination is a pivotal part of slavery practices because it allows people to disengage their humanity and justify or tolerate the violation of other people’s human rights.

Despite living in an age capable of achieving great technological dreams, the same old slavery (the buying and abduction of persons for private use) remains unchanged in some countries. While the most prestigious organization fighting against this evil scourge, Anti-Slavery International, was born at the time of ancient slavery, when the boats were traveling packed with human flesh. The NGO goes on fighting … The latest news could not be more pessimistic. One of the greatest abolitionist fighters, the Mauritanian Biram Dah Ould Abeid, is being tried along with five other activists from the organization he’s heading, the Initiative de Résurgence du Mouvement Abolitionniste en Mauritanie.

Prosecution inquires for a million ouguiya (2,700 euros, in a country where 25% of the population lives with less than one euro a day) and three years in prison, on grounds of a demonstration where he allegedly assaulted a police officer. At the time of arrest demonstrators were engaged against slavery of two Haratin girls, ethnicity that has suffered for centuries. In fact, slavery in Mauritania is hereditary (100% of actual slaves come from former slaves) and although it is prohibited since 2007, activists put it at over 20% of the population. Fatimata Mbaye lawyer, human rights icon, president of the Association Mauritanienne des Droits de l’Homme and three times imprisoned, speaks of systematic practice. And this is how this friendly Islamic Republic, theoretical ground of the struggle against jihadist phenomenon operating in the area, allows its white castes continue enslaving black Africans, as they have done for centuries. In this regard, the trial of Biram is highly significant. Biram’s public message is clear: the Government is more interested in prosecuting the anti-slavery than suing those pro-slavery.

But Mauritania is not the only case and Anti-Slavery is blunt: there are millions of slaves in the world. Sudan takes the cake, along with Emirates, Pakistan, Haiti and Mauritania itself – but in the form of unpaid work— the practice extends to many other countries.

Consequently, Biram’s trial is a tragedy. However, I express my frustration. Who cares in our well-off countries? Mauritania is so far from our mental map that it does not awaken  any inner gloom. Yet, these harsh facts should really break us if we were citizens of this world, and not just residents in our small inner planet.

The Horn of Africa – An everlasting battleground

Haga clic aquí para la versión en Castellano

An exciting but ruined region.
Ethiopia always surrounded by conflict neighboring or at least unstable; landlocked since Eritrea’s independence back in 1993. The situation is worse in the periphery: Somalia is today a state that has collapsed, we can even speak of “three Somalias” having witnessed several foreign military interventions, among which a recent American-Ethiopian. The young Eritrea has managed to generate disagreements and disputes of any kind with almost all its neighbors – a severe armed conflict with Ethiopia in the late 90′s. Kenya has been the scene of violent riots. Uganda is involved in local and ethnic instability. As for Sudan, if the date of the referendum on the secession of southern Sudan remains to January 2011, the way out each day looks like a new civil conflict – in the opinion of most analysts, including Mrs. Clinton glimpse the possibility that a war occurs according to a US-Sudan agreement in 2005.

The impression is that this is a real battleground.
Relations have always been uptight between Ethiopia and Eritrea: despite the recognition of the independence of Eritrea by Ethiopia in 1993, there were clashes from 1998 to 2000, not to mention a proxy war in Somalia. However, the risk of confrontation or open conflict between the two countries appears small, the main risk is the collapse of the Eritrean regime to a scenario of separation between government and the population – and a loss of support of the military at first.

The role of Ethiopia in Somalia: Ethiopian forces tried to crush the Islamic courts between 2006 and 2009 and found a situation evolving for over 20 years. The balance of such intervention leads to finding a complete admission of failure because ultimately the intervention has strengthened the extremist militia of al-Chebab –  the most radical Islamists, fanatical enemies of the Somali transitional government. The withdrawal of Ethiopian troops allowed the installation of the AMISOM international force – African Union Mission in Somalia, a regional peacekeeping mission operated by the African Union – but not allowed to settle peace, unlike since the AMISOM is parked in a few districts of the capital Mogadishu and is both a conflict hostage. Two countries participate in the AU mission, Uganda (3,500 men) and Burundi (2,500). In July 2010, when attacks in Kampala, two other countries that committed to the mission, Nigeria and Malawi, preferred not to interfere.

Three Somalias: one of which is Somaliland (former British colony), which proclaimed its independence in May 1991. This is a mono-ethnic country whose sole ethnic group overflows in neighboring countries such as Djibouti and Ethiopia. Oddly, ethnic reasons are not the root of its collapse as state. While the collapse has regional implications: the radical Islamist militia al-Chebab of Somaliland, who claimed responsibility for the attacks in Kampala, shows the willingness to go beyond the borders of Somalia. This is a scene of violence with regional deleterious interactions that will increase if nothing impeaches the chaos going forward in Somalia.

The partition of Sudan: an agreement between the parties on the partition of the Sudanese state was signed under the auspices of the U.S. in 2005 – referendum for January 2011. Today we are witnessing a backdrop of fratricidal confrontation and a more than likely disaster… by all indications, the secession of South Sudan is beyond doubt; and  on the other hand Khartoum takes time, it does not attempt to simplify the referendum organization, and on the contrary it spurs Southern authorities hoping they make the mistake of declaring independence unilaterally thus giving rise to military intervention. The conflict with the south has also evident regional and international implications (1): the stage is located in the valley of the Nile, Khartoum, the capital, is located at the confluence of the White Nile and Blue Nile, there are much coveted oil fields; the area is the Egypt’s “backyard”, Sudan and the Darfur conflict is not far and spills all over central Africa, especially Chad … just look at the map lines and pin down the points of conflict to be horrifyed by such a Battle field in the Horn of Africa.

Related Posts:   The Horn of Africa, a recurring scenario of drought and famine

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(1) i.e. China would negotiate –  if not already done so – with the authorities of South Sudan to export oil from the region without having to go through the north of Sudan – a pipeline that would lead to the ports of the Red Sea.

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Africa Underrepresented

Beyond Africa, Developing World should have more say in key forums. African officials dismayed not to have a bigger voice in key global economic forums.

When world leaders meet to tackle the global financial crisis, Africa is represented only by South Africa. African officials argue that the continent need better representation, given the effects that the turmoil is having in Africa as well as the continent’s growing financial importance. The complaint could apply equally to other developing countries.

The global crisis has come just as many African economies were turning a corner, carrying on  improvements in governance, technological change, debt relief, higher prices for their exports as well as inflows of funds from Asia and from Western investors seeking higher yields. Many African countries have spent decades gearing economic policies to attract more private capital and chase away a reputation as unreliable investment destinations.

But turmoil on world markets has cut the supply of money as the world’s biggest banks shift funds from new projects to shoring up balance sheets, leaving African governments wondering how their infrastructure will get built.

But should Africa be better represented?
Compared to its own recent history, African economies have been doing extremely well, but they are still small in global terms. As Africa’s biggest economy, South Africa will be attending, together with representatives of the main developed and developing countries. Is that enough? What advantage might Africa gain from having a bigger voice at the key summits? What about the world’s other poorer regions? Should they have more say too?

Current Crisis,  Cure or Croak

The real economic situation is constantly in a state of fluctuation and the ready made solutions in the classical or neoclassical patterns avoid an enduring and secure solution to the current crisis. Over the years the very concept of ‘economy’ has undergone a sea change. The models that concentrate on national economies of olden years have become redundant and they don’t go beyond a transitory solution suppressing the real economic forces, side tracking the long term perspectives. The durable solution needs a fresh debate among the political economists to come out with an integrated co-operative model, keeping in mind the linkages of the so called developed and the developing economies, in which the monetary and the fiscal policies play a incidental role.

Simon Kuznets was a far sighted development economist who could foresee more than half a century ago that “poverty anywhere is a threat to development everywhere”. The ‘national economy’ is a misconception today and an attempt to resolve the existing depression at the national levels will always contradict the expectations, specially of the developed countries, and they are likely to slip from devil to the deep sea.

I look at the present crisis as a consequence of too much monetarism of the developed countries for maintaining their growth rates overlooking the potential development of South Asia, Africa, Latin America and the Middle East. This might lead to persistent speculative tendencies, playing down the primary role of money and ultimate crash down of core economies of the world creating a worldwide economic chaos.

The retrieval from it might take a century.

Financial Crisis is Delaying African Development Goals

Education needs to be made available to more African children

Many development analysts assumed in relation to the last G20 summit in Pittsburgh that it might not forget about Africa in its talks on the financial crisis. Developing nations on the continent are being especially hard hit at a time when things were starting to look up.

Africa’s developing countries are suffering even more from the financial crisis: not only are they having to make do with less development aid funding, but the amount of money that emigrants are able to send back to support their families at home is much smaller.

The economic crisis will make it harder to reach development aid goals

The crisis is threatening the hard-won progress made in Africa’s developing countries at a time when the situation was starting to improve. African national economies were showing an average growth of 5 to 6 percent in recent years. Kenya, for example, has seen the development of a middle class that invests in its own economy. Outside money, including from newly industrialized countries such as China, Brazil and India, had considerably upped the level of foreign investment. The International Monetary Fund (IMF) estimates that foreign investment and credit for Africa increased to $53 billion (40 billion Euros) – five times the amount in 2000. But Donald Kaberuka, president of the African Development Bank, warns that the crisis could unravel this progress.

“We have to distinguish between the financial crisis and the economic crisis,” Kaberuka said. “Until now, (the financial crisis) has not hit a single African bank, but it has affected national economies. For 2009, we’re expecting an average maximum economic growth rate of 4 to 4.5 percent, no more. And it could well turn out to be smaller. We have to mobilize inner-African capital. We have very rich and very poor countries in Africa. On the regional level, the African Development Bank has already managed to mobilize capital, but not for the continent as a whole.”

Fears of a setback

Ad Melkert is a UN under secretary-general and an associate administrator of the UN Development Program (UNDP). He also fears that Africa will suffer a setback.

“This is all happening after a considerable number of African countries have, over the past few years, experienced significant economic growth and an increase in jobs and investment,” Melkert said. “Now, there’s a reversal. That means when the international community – the G20 – meets in April in London for its financial summit, they have to work out an international agenda there. They have to ensure that they factor in Africa, because this is an international financial crisis that is having effects worldwide.”

Growth rate of 3.4 % expected for sub-Saharan Africa

International institutions such as the Organization for Economic Cooperation and Development (OECD) are calling for multilateral risk management for the financial markets. In Davos, some major actors called for the creation of global economic council. The inclusion of developing countries in such bodies will be decisive, says Melkert. The UNDP representative is hoping for a clear statement from the G20, as otherwise, the UN’s development goals will be in danger of failure.

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“The crisis has created a totally new starting position,” he said. “It really does mean a setback, even for really successful countries like China, for example. We’ll have to really go the extra mile now if we’re to reach our development goals.”

Despite the crisis, some industrialized countries as Spain and Germany have committed themselves to raising development aid bit by bit to reach 0.7 percent of their gross domestic product. Melkert advises other wealthy nations to also maintain their development aid goals.

“There’s no alternative to investing in development goals,” he said. “I hope that the G20 summit will help, I hope that the new American administration under Obama will support the Millennium goals even more. I hope that the Europeans keep their promises and invest more in development policies each year. And I hope that the growing middle classes in Africa, Brazil or in India pay their taxes and use this tax money to fight poverty.”

Poverty remains a major challenge

Although the global fight against poverty has made progress, the percentage of poor people in Africa hasn’t gone down at all, due to the continent’s fast-growing population. With a poverty rate of around 50 percent, the share of extreme poverty in the total population hasn’t changed, and Melkert fears it could even get worse.

“We have to be really ambitious here and take the problem of poverty really seriously,” he said. “With this financial crisis, more people will be forced into poverty than in years past.”

There are worries that more Africans will slip into poverty

The IMF has revised its growth projection downwards and has forecast an economic growth rate of just 3.4 percent for sub-Saharan Africa. But all African governments have to take political responsibility, says Melkert. He points to examples from Latin America, saying Africa should learn to also create effective social security systems and incentives for development.

“Good systems have been established in Latin America,” he says. “There, families get money if they send their children to school or get them vaccinated. Africa should follow this example. The World Bank, the UN or bilateral donors could financially support such a system. That would help the poorest people to have a minimal income to buy food, send their children to school or care for their health.”

He advises the international community to be patient and take a long-term view when it comes to supporting development goals – despite the global financial crisis.

“You don’t make development progress from one year to the next – it’s a question of 10 or 20 years,” Melkert said.

NGOs and Microfinance in Africa: the Awakening Experience of ‘Rwanda Works’

Interesting interview that Josh Ruxin–founder of the new NGO Rwanda Works, Professor at Columbia University, and Director of the Millennium Global Village Project in Rwanda, just had with BigThink.

In the interview, Ruxin describes his current work in Rwanda helping to promote access to healthcare and sustainability, as well as his profound insights into the policies that actually work to advance international development. Among the many current practices that Ruxin explains are simply not working, include the widely-praised spread of microfinance loans, which Ruxin believes are not nearly the “panacea” many believe them to be, and are not actually creating any significant progress in much of the developing world–particularly not sub-Saharan Africa: http://bigthink.com/joshruxin/the-case-against-microfinance-loans

Ruxin also discusses the urgency of developing sustainable agriculture in the developing world as a way to solve an array of problems, and describes some of the creative new approaches to affordably promoting sustainability in Rwanda and surrounding countries that currently being refined to meet these challenges: http://bigthink.com/joshruxin/the-key-to-developing-rwanda

Ruxin also examines how an increase in women’s reproductive rights is one of the key issues in international development and why government officials investing in foreign aid should provide far more funding for family planning: http://bigthink.com/joshruxin/the-link-between-womens-rights-and-economic-success

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Spanish version here below:

ONGs y microfinanzas en Africa: la experiencia reveladora de ‘Rwanda Works’

Interesante entrevista (en inglés) que Josh Ruxin ha concedido a BigThink.  Josh Ruxin es el fundador de la nueva ONG Rwanda Works, Profesor de la Universidad de Columbia, y director del Proyecto de la Aldea Global del Milenio, en Rwanda.

En la entrevista, Ruxin describe su trabajo actual en Rwanda para ayudar a promover el acceso a la asistencia sanitaria y la sostenibilidad, así como sus reflexiones lúcidas sobre las políticas que funcionan realmente para promover el desarrollo internacional. Entre las muchas prácticas actuales que Ruxin considera simplemente inoperantes, incluye la propagación del muy encumbrado sistema de microcréditos. Ruxin los juzga de tal forma que cree que no son ni la “panacea” que muchos quisieran, y no son, puesto que no representan en realidad un avance significativo en la mayor parte de el mundo en desarrollo – en particular, para África subsahariana: http://bigthink.com/joshruxin/the-case-against-microfinance-loans

Ruxin también razona sobre la urgencia en desarrollar la agricultura sostenible en el mundo en desarrollo como una manera de resolver una serie de problemas, y describe algunos de los enfoques nuevos y creativos para promover la sostenibilidad asequible en Rwanda y países vecinos que actualmente se está perfeccionando para enfrentar estos desafíos: http://bigthink.com/joshruxin/the-key-to-developing-rwanda

Asimismo Ruxin examina cómo un aumento en los derechos reproductivos de las mujeres es una de las cuestiones clave en el desarrollo internacional y por qué los funcionarios de la administración que desean invertir en ayuda al desarrollo han de proporcionar muchos más fondos para la planificación familiar: http://bigthink.com/joshruxin/the-link-between-womens-rights-and-economic-success

The impact of the global financial crisis on African development (& 2)

The potential recovery from the financial crisis is very limited

In light of the potentially weakening effects, it is crucial both for African and world leaders and policy makers to discuss the possible responses to diminish the impact of crises on the continent.

One way of responding successfully to the crisis is to give priority to building African markets. In particular, policies to strengthen the African markets and institutions necessary to promote growth and ensure that African economies are more resistant to external shocks. There is also a need for tighter regulation of African financial markets. Moreover, creating a more conducive business environment to reduce costs and limitations associated with doing business in African economies to raise their profile as a business destination less expensive, less risky and more profitable, helping to attract more Foreign capital flows and investment in the context of a capital market has become considerably more risk averse following the onset of the financial crisis. The reforms that encourage foreign direct investment and portfolio flows and the measures that raise the level of confidence in financial systems in Africa can have an equally positive impact.

Sub-Saharan Africa is dropping behind in infrastructure

Source: Preliminary results AICD 2008. African Perspectives and Recommendations to the G20. Committee of African Finance Ministers and Central Bank Governors. 21/03/09

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The expansion of trade with other developing countries represents another potential means to ease the severity of the negative effects of the crisis on African economies. Global trade statistics suggest that trade between developing countries as percentage of total world trade, and therefore world trade has been increasing for quite some time. In fact, trade in goods among developing countries grew at an average annual rate of 13 % between 1995 and 2007 and in 2007, represented a fifth of total world trade flows. It is vital for Africa to increase their share of this link between South-South trade to offset some effects of the anticipated decline in demand for their commodity exports. Along with this is the need to increase intra-regional trade flows and trade in Africa in order to reduce the dependence of African economies in overseas markets. [3]

Similarly, measures to improve South-South economic cooperation, particularly in terms of investment, financial flows and joint efforts to stabilize foreign exchange rates and debt, should be investigated. In particular, South-South several measures to address potentially available for African countries to tackle the worst effects of the global financial crisis. First, the increased funding of regional development banks could offset the anticipated slowdown in international aid and donor funding for African economies. Secondly, regional stimulus packages could be implemented to help sustain the market and sustain economic growth. Similarly, regional agreements could be used that are specifically designed to mitigate the impact of financial shocks through, for example, the provision of international financial liquidity through swaps. Finally, African countries burdened by high debt levels, measures to diversify foreign exchange reserves could be adopted whereby the purchase of other developing countries “that debt.

Globally, according to the World Trade Organization Director General Pascal Lamy said reaching a global trade deal that represent a relatively simple way to alleviate the effects of the crisis. The promise of such a comprehensive agreement “is particularly attractive to African economies, which are perhaps amongst the most threatened by the prospect of increased protectionism arising from the crisis. Specifically, the new national protectionist measures, mainly in the form benign appearance, the political crisis linked to the encouragement of the government and relief campaigns, the exchange rate devaluations, antidumping and countervailing duties and ‘buy local policies that discriminate against foreign firms and workers can suppress the export sectors in Africa even more. It is therefore essential for African politicians to push for a global agreement that keeps opening up markets and prevent a flood of new crisis linked to protectionist measures.

Furthermore, following the emergence of the global financial crisis, it is clear that there is an urgent need to reform the multilateral financial architecture, particularly in terms of ensuring greater representation of African countries in international financial institutions. Despite the financial crisis that originated in Africa, the continent has been excessively exposed to its effects. This has led to strident calls for a more inclusive multilateral governance that provides a greater voice “to African countries in international financial institutions. Countries is important for developing countries, and Africa in particular, to play a role most important of these institutions and the economic crisis management.

Domestic fiscal and monetary policy responses should also be explored by African countries with the capacity to implement them. For example, in African countries with relatively large foreign exchange reserves may be possible to use these reserves to cushion the worst effects of crisis and decline to fund any capital flows. Alternatively, African countries that operate under systems of fixed exchange rate may have some leeway to adopt more flexible exchange rate regimes in order to “allow the nominal exchange rate to absorb some of the impact of external shock and reduce the actual effects in the national economy. “In terms of fiscal stimulus options, the expansionary fiscal policies such as reducing taxes or increasing government spending may help boost demand and employment in African economies. The usual argument against the expansionary fiscal policy – that it crowds out private sector investment – is unlikely to apply, given the climate of reduced appetite for credit and a drastically reduced risk among investors.

Finally, while Africa is certainly feeling the effects of the global economic slowdown, the impact of what is likely to deteriorate further, the credit crunch in the world’s most advanced economies may actually create opportunities in terms movement of capital into emerging economies. For example, sovereign wealth funds before investing in the financial systems of the United States and Europe are now increasingly looking to the developing world to possible locations for investment. However, for this to happen in Africa, the continent’s countries have to implement measures to improve its ratings on investment risk.

Africa is facing a large and growing economic gap

The fact that many African countries are relatively detached from the global financial system has softened the continent from some of the consequences of the global financial crisis. However, the initial view proposed by many commentators that Africa would be “spared” from the effects of the financial crisis that originated in several advanced economies in the world has proven to be unfounded. Prices and demand for African exports of commodities have dropped significantly amid a sharp decline in world industrial output. Moreover, the climate of declining credit arising from the crisis is likely to lead to a substantial decrease in international financial flows to African countries in the form of private investment and capital flows, trade credit, financing donors and remittances from Africans in the diaspora. These factors have led to predictions of sharp fall in growth in sub-Saharan Africa.

It is evident that African countries and their leaders should try to take initiative and economic policy measures and reforms to mitigate the effects of the crisis on African economies. These should include interventions to strengthen the African markets and institutions, expand “South-South trade and economic cooperation, including increase or intra-regional trade to reduce dependence on overseas markets, and implement expansionary monetary and fiscal policies to boost demand and employment. In addition, globally, African leaders must push for reform of global financial architecture to include greater representation of African interests in the forum of the international financial institutions. Furthermore, it is extremely important that the continent supports efforts to conclude a global trade deal that maintains the openness of markets and the safeguards against the proliferation of new crises linked to protectionist measures.

Related Posts: The impact of the financial crisis on African development (Part 1)

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[1] South-South  trade  could  soften  impact  of financial crisis for vulnerable economies. UNCTAD.  2009.

[2] Impact of the crisis on African Economies. Sustaining growth and poverty reduction, African Perspectives and Recommendations to the G20, by The Committee of African Finance Ministers and Central Bank Governors. 21 March 2009

[3] World Bank to Help Mitigate Impact of Global Financial Crisis on Africa’s Development.  19 November 2008

[4] International Monetary Fund. 2009. What the Global Financial Crisis Means for Sub-Saharan Africa. Speech by Takatoshi Kato, Deputy Managing Director, IMF, 12th AU Summt, Addis Ababa, Ethiopia, 3 February 2009.

The impact of the financial crisis on African development (1)

Because of the existing overall crisis, the projected growth for 2009 should move down to the lowest rate of decrease in 60 years. In 2008, the drop in demand resulting from the financial crisis together with synchronized crashes in manufacturing and industrial production, credit problems in traffic finance and consumer reliance caused a fall by 4 % in the growth of global trade.

Initially, many analysts believed that the world’s emerging economies, mainly those in Africa, would rather be protected from the effects of the crisis that came from the advanced industrialized countries. However, in the developing world the impact of financial instability and uncertainty in industrialized countries are beginning to take hold. Access to emerging markets for trade and investment is unlikely to diminish. In fact, UNCTAD estimates that exports of developing countries could decline by 9.2 % in 2009 [1]. The fall in commodity prices that went along with the downturn is particularly troublesome to African economies, many of which are greatly dependent on fresh commodities and raw material exports as the main source of export income. Moreover, the market for trade finance has seriously declined over the past six months; the crisis has aggravated the lack of liquidity to finance trade credit. Emerging economies are also expected to experience ongoing financial contamination, particularly in the form of capital flight and capital flows.

Even though these potentially weakening effects, the G20 predictions suggest that over 80 % of potential world economic growth depends on emerging market countries. In the same way, while the International Monetary Fund (IMF) has predicted that developing countries will increase by 3.3 % in 2009, it is expected that advanced economies will decline by 2 % roughly [2].

GDP Growth by Country Group

In this context, measuring the impact of the crisis on African economies and the accessibility and adequacy of measures to alleviate the effects of crises on the continent, are decisively imperative considerations for prospect growth scenario in Africa.

The Impact

The impact of the global financial crisis is expected to differ among African countries in line with their exposure to international financial system, its production and export structure and its aptitude to employ policy instruments to lessen the adverse effects. Overall, the short term in many African countries can be mitigated by the fact that most countries on the continent are relatively detached from the global financial system. Moreover, emerging banking systems in many African countries are generally characterized by simple structure, conservatism, the rules of prudent financial management, foreign exchange controls and a very limited exposure to subprime loans and the Credit default swaps, has protected the continent’s financial structures of all the effects of the crisis. In fact, Benedicte Christensen, deputy director of IMF’s Africa Department, went so far as to state in late 2008 that “there is no systemic risk that we see in any African country in terms of banking.” [4]

This does not mean that Africa is immune to the effects of the crisis. It is in the medium and long term effects of the crisis on African economies will be realized. The slowdown in global growth linked to the crisis could drive millions of Africans in the line of poverty. This possibility was highlighted in the report of the IMF, World Economic Outlook April 2008, which stated that a fall in world growth of just one % could result in a decrease of 0.5 percentage points of gross domestic product of Africa. Already, the IMF predicts that growth in sub-Saharan Africa will be reduced from about 5.25 % in 2008 to about 3.25 % in 2009. [4]

The slowdown in global growth, together with a sharp drop in world industrial production, has reduced the demand for African exports, reflected especially in the downward spiral of prices and demand for commodity exports. This is alarming given the fact that exports of commodities represent the main source of export earnings of most African countries. Moreover, the fall in export earnings is likely to have negative repercussions in terms of reduced government revenues, thus. Worsening already precarious budgetary situation in many African countries.

Prices of commodities for sub-Saharan Africa

The global credit crunch following the crisis has also caused a huge reduction in the flow of private investment and bank financing, thereby reducing capital inflows and a restriction on the availability of trade finance. This is likely to be reflected in a substantial decrease in international financial flows to African countries, most prominently in the form of reduced foreign direct investment, portfolio flows and remittances from the Diaspora living in the developed world. Regarding the latter, a long-term reduction of remittances from Africans living abroad is likely to be particularly difficult to feel, as these funding streams currently contribute an estimated $ 10 billion annually across the continent .

The effects of reduced foreign investment in Africa to countries that are funding large current account deficits could be especially devastating. For example, South Africa depends to a large extent, at least in the short term, on private capital flows to finance its large current account deficit – equivalent to about 8 % of the country’s total GDP. The projected reduction in capital flows means that South Africa will be responsible for their substantial current account deficit. Other African countries operated relatively large current account deficits, such as Uganda and Tanzania are likely to be similarly affected. These problems may be compounded by the prospect of expanding the deficit caused by the crisis itself. In fact, the IMF has forecast the current account deficit of the entire sub-Saharan African region will expand by more than 4 % of GDP to reach 6.75 % of GDP in 2009.

Saharan Africa: the current versus pre-crisis growth forecasts, 2009

The projected decline in private capital flows can also have a long-term impact on investment in infrastructure projects in African states, many of whom may face funding shortfalls. Since many African capital markets are small, even the relatively limited withdrawal of foreign investment can have a significant potential impact.

Furthermore, African countries may face increased pressure for debt repayment as international institutions and Western banks, not only to strengthen their lending policies, but try to shore up its reserves. Along with this there is the possibility that the global financial crisis will result in a slowdown of foreign aid and development funding to African countries due to the global credit crunch.

Spanish version over here.

Related Posts: The impact of the global financial crisis on African development (Part 2)

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[1] South-South  trade  could  soften  impact  of financial crisis for vulnerable economies. UNCTAD.  2009.

[2] Impact of the crisis on African Economies. Sustaining growth and poverty reduction, African Perspectives and Recommendations to the G20, by The Committee of African Finance Ministers and Central Bank Governors. 21 March 2009

[3] World Bank to Help Mitigate Impact of Global Financial Crisis on Africa’s Development.  19 November 2008

[4] International Monetary Fund. 2009. What the Global Financial Crisis Means for Sub-Saharan Africa. Speech by Takatoshi Kato, Deputy Managing Director, IMF, 12th AU Summt, Addis Ababa, Ethiopia, 3 February 2009.

Africa’s Economy at the Crisis Crossroads

The United Nations Conference on Trade and Development (UNCTAD) published on June 25 the “Economic Development in Africa 2009” [1]. It is focused on the promotion of economic integration in the region, which should become a key factor for boosting and diversifying economic growth, expand markets and attract more foreign investment, especially in the context of current global financial crisis.

Regarding the effects of the financial crisis in the African region, it was noted that the main channels are through the fall in exports, reduction of investment flows and lower revenue collected by governments. In this regard, according to the projections of the African Economic Outlook (AEO) in May, it is pointed that the region could grow 2.8% in 2009, much less than the growth rates of 5.1% in 2008 and 6% in 2007.

The impact of the global financial crisis would already be reflected in exports and reduction in prices of raw materials. A study of the organization ActionAid, says that the financial crisis will cause African economies lose up to 49 billion dollars during 2009 due to the drop in international aid since the fall of exports, among others. The report said that countries that liberalized their markets and that were large enough to attract significant investments will be most affected by the financial crisis, starting with South Africa that could see a drop around 20%. However, they also state that Africa is now better prepared to face the crisis than it was 10 years ago.

[1] Economic Development in Africa 2009. Strengthening Regional Economic Integration for Africa’s Development. UN. June 2009.

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[1] Economic Development in Africa 2009. Strengthening Regional Economic Integration for Africa’s Development. UN. June 2009.

Bongo Kicks the Bucket: Calm, Luxury and Consternation

President Omar Bongo of Gabon died  on Monday in a  a hospital in Barcelona, Spain, where he was reportedly being treated for cancer. He was 73.

The man was endowed with a prodigious memory, a real political intelligence and cynicism enough to ensure him the necessary longevity to become a true dictator. He has hold forty-one years.

With Bongo, Gabon turned into a strategic oil emirate for France and a stalwart heavyweight pillar of the “Franceafrique“. So, when crude prices quadrupled in 1973, Omar Bongo converted to both Islam and finance.
Money flowed like water. He had therefore the intelligence to protect the money of unhealthy lusts  by diversifying his investments. That is, putting the money aside, I mean at HIS side.

In 1975, he founded three banks:
* The Bank of Gabon and Luxembourg (BGL) in Libreville
* The International Bank (Siba) in Luxembourg
* The French Intercontinental Bank (Fiba) in Paris, the largest one.

The latter will be THE Bongo’s bank and will be chaired by one of his trusted men, Pierre Houdray, until 2000.

Let us continue…

The Head of State had a personal account and a sub-account in which his stepfather, Congolese President Denis Sassou Nguesso, had a proxy. Those accounts were fueled by (partly public) ELF French oil company by at least $40 million per year. FIBA served as a nest egg to the clan of Libreville: family, relatives, counselors and so.

This opulence is reflected in the Bongo’s real estate assets. For several years, NGOs Sherpa and Transparency International lead a court battle against the money diversion by African heads of state.They had inventoried these dictators’ “ill-gotten gains”, including their real estate in Ile-de-France (Paris region). The President of Gabon and his family figure prominently.

But the Fiba is also the tank which Omar Bongo draws from to “help” his french political friends. The ritual is immutable: when he stops in Paris, at the  Hotel Meurice, it is compulsoty to seek an audience and get the approval from the boss. A phone call to Pierre Houdray and the case is resolved.

Afterwards, one just need to report to headquarters, (avenue Georges-V in Paris) to take delivery of the grant, in cash. Bongo has actively supported Gircard d’Estaign and Jacques Chirac in the 70s, but François Mitterrand’s election in 1981, as well.

According to the men of Elf, including Andre Tarallo, the “Mr. Africa” of ELF Group, all political parties have benefited from this assistance (you know… France & Gabon, brothers in arms), with the exception of the far right National Front.

During the 90s, the proliferation of laws on the financing of political life, the system becomes more complex. More opaque too, using the resources of many tax havens (Liechtenstein, the Caribbean, Bank of New York …) which earned him the wrath of money laundering committee  from the US Congress.

The engineers of power will also be advised to take care of the ethnic balance within the country. For the time being, his family, including his children Ali and Pascaline (candidates for the succession), stand ready to defend the heritage (there’s a big money involved), even at the cost of a war of succession.

Concerns, as in old families plenty of secrets, are left to heirs. Hence, Pascaline’s Missi Dominici would be better-advised to turn into philosophers. (Ali, Pascaline, you must also be aware of the harassment and intimidation that threaten those Gabonese who dare to oppose the corrupt practices encountered there. You know of course that the massive misappropriations of state revenues contribute towards impoverishing the citizens of Gabon and prevent the emergence of normal democratic institutions.)

And Mr Sarkozy would also be well advised not to forget that “the worries of Gabon are also those of France.” Same old stuff…