By Demba Moussa Dembele [1]

* Presentation given at International Conference of governments and social movements “Regional Integration: an opportunity to face the crises” (21 and 22 July 2009, Asunción del Paraguay)

THE IMPACT OF THE CRISES ON AFRICA

The financial crisis and its transmission to the real economy are having devastating effects on Africa. According to the African Development Bank (AfDB), the average growth of the continent will be cut in half this year, from 5.9% to 2.8%, as a result of falling international demand and falling commodity prices. One illustration of that is the decline of exports projected to fall by 40% in 2009. The shortfall in exports will be compounded by the decrease in official development assistance (ODA) and remittances by African migrant workers. In 2007, these remittances were estimated at 28 billion US dollars, accounting for about 3% of the continent’s GDP. In several countries, these remittances are much higher than ODA. Private investments, in the form of foreign direct investments (FDIs) are also expected to fall sharply.

This bleak picture shows that Africa is paying a heavy price for the crises in which it has no responsibility. This situation in which Africa finds itself is the result of a set of neoliberal policies implemented over nearly three decades at the urging of the International Monetary Fund and the World Bank, joined later by the World Trade Organization (WTO). The food crisis has hit very hard several African countries and led to numerous food riots punctuated with dozens of deaths and hundreds of arrests. The food crisis has increased the external dependence of many countries and given a golden opportunity to the IMF and World Bank to expand their control over African economic policies.

REGIONAL RESPONSES FROM AFRICA
The above bleak picture shows that Africa is paying a heavy price for the crises in which it has no responsibility. Africa has been the main victim of ruthless neoliberal policies imposed by the IMF and World for nearly three decades, with the catastrophic economic, social and political consequences the African people are still witnessing. Therefore, the crises should be used as an opportunity by Africa to free itself from the shackles of neoliberal capitalism and explore new paths to an endogenous development with regional economic integration and cooperation as a key element in that process.

A) Challenge “Free Trade” Model and Theory.
The first step should be to challenge neoliberal models, especially the “free trade” model. In that perspective, African regional communities must challenge “free trade” agreements, such as the African Growth and Opportunity Act (AGOA) with the United
States and the Economic Partnership Agreements (EPAs) with the European Union.
In connection with this challenge, it is the whole ideology of “free trade” that must be challenged and rejected. Indeed, it is that theory that underpins trade liberalization. It was in the name of “free trade” and “comparative advantage” that African countries were forced to accept sweeping trade liberalization that entailed huge economic and social costs, by increasing Africa’s external dependence, destroying domestic industries, accelerating deindustrialization and hampering sub-regional economic integration.

By contrast, none of the “benefits” that were supposed to accrue from trade liberalization, according to the IMF and World Bank, was achieved. Africa’s trade performance did not improve. Assessing the record of trade liberalization in Africa since the early 1980s, UNCTAD[2]  came to the conclusion that the results were far from expectations. Indeed, the outcome of trade liberalization in Africa could hardly be different. While the IFIs and the WTO were extolling the virtues of “free trade”, the staggering subsidies that Western countries were providing to their agricultural exporters and the disguised or open trade barriers they erected to protect their markets have made “free trade” a farce.

B) Reclaim the Debate on Africa’s Development
The collapse of market fundamentalism and the discredit of IFIs provide Africa with a golden opportunity to reclaim the debate on its development. No external force can “develop” Africa. So, Africans should restore their self-confidence, trust African expertise and promote the use of African endogenous knowledge and technology. Since development should be viewed as a multidimensional and complex process of transformation, there can be no genuine development without an active State. Proponents of State intervention have been vindicated by the demise of laisser-faire and the active State intervention in the United States and leading European countries.

However, the State is no longer the only player. It has to contend with civil society organizations which have become key players in the debate on Africa’s development. Therefore, African sub-regional and continental institutions should work with these organizations to explore an alternative development paradigm in Africa.

In the search for that paradigm, a number of key documents should be revisited. They include the Lagos Plan of Action (LPA, 1981); the African Alternative Framework to structural adjustment programs (AAF-SAPs, 1989); the Arusha Declaration on popular participation to development (1990); the Abuja Treaty on economic integration (1991), among others. All these documents were published under the leadership of the Economic Commission for Africa (ECA) and the Organization of African Unity, which was replaced by the African Union in 2001. This shows that African sub-regional and continental institutions had played a leading role in the debate on the continent’s development before the onslaught of the neoliberal ideology. They can play that role again by initiating the update of the above documents and taking into account the contributions made by civil society organizations in the areas of gender equality, trade; debt; food sovereignty, human and social rights and so forth.

C) Accelerate Regional Integration
One of the key issues in reclaiming the debate on Africa’s development is sub-regional and continental integration. It necessary to stress again that integration is one of the keys to Africa’s survival and long-term development. This was reiterated during the Summit of African Heads of State in Sirte (Libya) on July 1-3, 2009 and stressed by UNCTAD in its latest report on Africa[3].   
Despite an experience of sub-regional integration for more than 30 years, Africa is lagging behind other continents in terms of concrete achievements. In 1991, African countries tried to revive the spirit of integration by signing the Abuja Treaty, which projected an African Economic Community (AEC) by 2025. In the pursuit of that objective, the Treaty called for the rationalization of sub-regional economic communities in the continent’s five sub-regions. But years later, this recommendation has yet to be implemented.

1) Integration Trough Development or Market Model?
One of the main causes of the failure or mixed results of economic integration in Africa is the model used in the sub-regional groupings. Sub-regional groupings followed the European model of integration, the market model characterized by trade liberalization aimed at stimulating trade of goods and services. The European model was justified because European countries had mature industries and saturated internal markets. Therefore, the possibility of further growth depended on access to new markets. Hence, the model of trade liberalization aimed at opening up national markets to neighboring countries’ goods and services.

In Africa, the situation was different. These countries were at the early stages of their industrialization and were exporting mainly raw materials and semi-finished goods. Even today, roughly two-thirds of the continent’s exports are composed of raw materials and semi-processed goods, according to UNCTAD[4].  Therefore, following the market model would not lead to integration. This is exactly what happened. After decades of integration, intra-African exports in several sub-regions account for about 10% of their overall exports. Between 2004 and 2006, intra-African exports accounted for 8.7% of the continent’s total exports while intra-African imports were estimated at 9.6% of Africa’s total imports. However, for Sub-Saharan Africa, intra-African exports accounted for 12% of total exports [5]. 
The level of trade is low or negligible even among countries sharing the same currency, the cfa franc, like the West African Economic and Monetary Union (WAEMU) and the Central African Economic and Monetary Community (CAEMC).Yet, the common currency was supposed to be an integrating factor by eliminating exchange rate risks and providing some kind of “economic stability” to these countries! In CAEMC, intra-regional trade is less than 2%. In WAEMU, intra-regional trade is less than 10%. Only the Economic Community of West African States (ECOWAS)[6]  and the Southern African Development Community (SADC) seem to have significant levels of intra-regional trade flows. For instance in 2006, UEMOA exports to ECOWAS and other African countries accounted for respectively 26% and 32%, while UEMOA imports from these groupings were respectively 20% and 23%, according to UNCTAD[7].

Trade should serve production and development, not the other way around. Trade cannot be an end in itself. This is why integration through the market model makes no sense in most sub-regions in Africa since sub-regional economic communities have little to exchange because the bulk of their exports is composed of commodities. By contrast, the production model could provide the economies of scale indispensable to an effective and successful industrialization strategy that would help build industries capable to transform raw materials and commodities to meet people’s basic needs. By adding more value to Africa’s products, the production model may also lay the ground for a viable regional market, which in turn would support a regional demand-led growth strategy as opposed to the export-led growth strategy imposed by the IFIs and the WTO.

2) Create Regional Currencies and New Regional Institutions
One of the obstacles to economic integration in West and Central Africa is the use of a currency inherited from French colonization, the cfa franc. Its use by the WAEMU has hampered efforts to merge that Union into ECOWAS, as recommended by the 1991 Abuja Treaty. Instead of the “benefits” the use of the cfa franc was supposed to bring, the 14 African countries using it are all classified as either “Least Developed Countries” (LDCs) and/or “Heavily Indebted Poor Countries” (HIPCs)! Moreover, while trade flows among these countries account for 10% or less of their overall trade, as already indicated, at the bilateral level, France continues to be the main trading partner of most of these countries. Their trade with the European Union (EU) accounts for more than half of their overall trade. This means that the common currency has reinforced these countries’ external dependence and the outward orientation of their economies.

The experience with the cfa franc has convinced African leaders that development cannot occur without exercising a sovereign control over their monetary policies. And it is now widely accepted that real progress toward economic integration requires abandoning the cfa franc in favor of common currencies in West and Central Africa. But so far discussions on the issue have been slow. One may hope that the current crises may open the eyes of policy makers and make them take the decisive steps toward creating new regional currencies, which can serve not only the process of economic integration but also the wider goal of an endogenous development.

Along with regional currencies, African countries need to move toward new institutions. There is a debate within the African Union Commission on setting up an African Monetary Fund (AMF) and an African Central Bank (ACB). Beyond technical difficulties, however, the main obstacle to achieving these projects is the African leadership. Building a consensus on these issues and on other key objectives depends on the political will and strong commitment of African leaders.

There is no doubt that Western countries and international financial institutions will do what they can to foil these projects and keep Africa under their control. For example, if African countries accept to sign the Economic Partnership Agreements (EPAs), on the terms dictated by the European Union, these projects are likely to be put on hold for the foreseeable future. On the other hand, so long as African countries continue to listen to the IMF and World Bank, they will never reclaim their sovereign right to design their own policies, which is the indispensable step toward exploring an alternative development paradigm.

3) Better Continental Coordination
The acceleration of sub-regional integration should go hand in hand with a greater and more effective coordination at the continental level. In November 2008, the African Union Commission, the Economic Commission for Africa and the African Development Bank organized a meeting of African Finance Ministers and Central Bank Governors to discuss Africa’s position on the responses to the financial crisis before the first G20 Summit in Washington, DC. At that meeting, a Committee, composed of 10 African Finance Ministers and Central and Regional Bank Governors (C10)[8],  was formed with the mission to make recommendations on how Africa should respond to the global crises at the sub-regional and continental level.

So the crises seem to have given a new momentum to coordination of policies and greater cooperation at the continental level. Indeed, since the creation of the African Union (AU) in 2001, there seems to be a new consciousness about African economic integration and cooperation and the need for Africa to speak with one voice. The African Union Commission has taken a number of initiatives to strengthen that consciousness. It was under its sponsorship that African Ministers in charge of Economic Integration and Cooperation met in Burkina Faso in 2008 to assess the state of the integration process.

But once again, the issue of economic integration in Africa is essentially a political issue. Without a strong political commitment and will to move toward economic integration and a united Africa, nothing significant will happen. Therefore, African leaders should learn from the experiences of other regions of the Global South, especially South America. In that region, the Bolivarian Alternatives of the Americas (ALBA) and the South Bank are strengthening the solidarity and cooperation of States and peoples through closer economic, financial and political ties. .

D) Promote Policies of Collective Food Sovereignty
As indicated earlier, in the name of “free market”, structural adjustment programs (SAPs) destroyed agricultural policies put in place after independence, by dismantling parastatals that used to provide services to farmers. The IMF and World Bank compelled African countries to give priority to cash crops for exports in order to repay the external debt. As a result, food production was neglected which led to greater dependence on food imports to feed African citizens. For example, net food imports in Sub-Saharan Africa have increased from 1.3% to 1.9% of GDP between 2000 and 2007 and from 1.4% to 2.0% of GDP in West Africa during the same period[9].
Now the IMF and the World Bank are using the food crisis to make a comeback, while trying to hide their responsibility in the crisis of the agricultural sector in Africa.

What African countries need is to move toward policies of collective self-sufficiency in food production. Africa leaders should listen to their citizens and trust small-scale African farmers and other agricultural producers who need good public policies that would enable them to produce enough to feed the African population. Africa has water aplenty and vast arable lands, most of which are not exploited. In 2003 during an African Summit in Maputo (Mozambique), a recommendation was made to invest each year at least 10% of national budgets in agriculture. Only a few countries followed through this recommendation. The African Union Summit held in Libya (July 1-3, 2009) held a special session on agricultural policies and heads of State reiterated the pledge to invest more in agriculture to achieve “food security”. One may hope that African leaders have learned a good lesson from the food crisis and understood the urgent necessity to reverse current agricultural policies and pursue the objective food sovereignty.

E) Resources for Financing Africa’s Development
In the short run, all financial flows to Africa in response to the financial, food and energy crises should be in the form of grants and concessional financing, not new loans, since Africa has no responsibility, whatsoever, in these crises. From that perspective, any flows to the continent by the IFIs and Western countries in the form of loans will be deemed illegitimate by African civil society organizations and pressure will bear on African governments not to repay these illegitimate loans.

1) Moratorium and Debt Cancellation
On the other hand, in May 2009 the Secretary General of UNCTAD called for a moratorium on the debt of “poor” countries”. African countries should support this proposal. However, African governments and institutions should seize this opportunity and take that proposal a step further by calling for the unconditional cancellation of the continent’s debt. In 2005, the African Union Commission had taken a number of initiatives to build a strong continental consensus on the continent’s external debt and this common position was instrumental in the decision made by G8 leaders at their Summit in Gleneagles in July of that year. The current crises offer an even greater opportunity to the African Union Commission to intensify the call for debt cancellation.

One of the most important lessons to be learned by African leaders from the financial crisis is that Africa cannot count on its so-called “traditional partners”, i.e. Western countries and international financial institutions under their control. It is well known that none of the promises of “aid” to Africa has been completely fulfilled, including the one made at the G8 Summit in Scotland in 2005 to double “aid” to Africa to $50 billion a year beginning in 2010. By contrast, in 2008 and earlier this year, in just a few weeks, the United States and Europe had mobilized trillions of dollars to rescue their banks and industries. The first rescue package for AIG ($152 billion) by the US government was higher than the amount of “aid” promised in 2007 by the United States and European Union to all developing countries, estimated at $91 billion!

Therefore, African leaders should understand once for all that there must be a significant shift in the sources of financing for Africa’s development. Reclaiming its sovereign right to design its own policies goes with vigorous efforts to raise financial resources internally and the necessity to bear a greater part of the burden to finance its development. The African Development Bank (AfDB) rightly claims that “The continent needs to boost domestic resource mobilization – through financial and fiscal instruments- to support growth and investment. Addressing these issues require strategic interventions at various levels”[10].

2) Domestic Resource Mobilization
So, African countries must put a greater emphasis on domestic resource mobilization. In this regard, African countries should adopt new monetary and fiscal policies aimed at increasing domestic savings. And the potential is huge indeed, if African countries give themselves the means to achieve this objective. In a study, Christian Aid indicates that African countries are losing close to $160 billion each year in tax revenues, as a result of tax exemptions and for lack of enforcement of agreements with foreign companies investing in various sectors, especially in the mining industry[11].  Dealing with weak and ineffective States, these companies resort to various means to pay lower taxes or avoid paying taxes at all.

Therefore, to compel foreign companies to fulfill their obligations and expand the tax base, African countries need to reorganize their States into effective States able to enforce agreements and mobilize resources for development. Several international institutions have made this recommendation. UNCTAD devoted one of its reports on Africa to that issue[12].  It argues that it is time to build developmental States and put them at the centre of the development process in order for African countries to recover the policy space lost to neoliberal institutions over the last three decades. The Report says that such States should help African governments improve tax collection; formalize the informal sector; stop capital flight; make more productive use of remittances from African expatriates and adopt effective measures to repatriate resources held abroad.

Coordination of financial and monetary policies at the sub-regional level would put African countries in a stronger position to achieve this goal. Therefore, sub-regional economic communities have a crucial role to play in domestic resource mobilization by proposing common legalizations on capital flows and common tax policies vis a vis foreign investors.

3) South-South Cooperation and Solidarity
African economic integration will greatly benefit from building closer ties between Africa and other Southern regions. In particular, it would open a number of possibilities for non traditional financing for Africa. With the rise of new powers with substantial foreign exchange reserves and willing to build a new type of cooperation with African countries, the continent has new opportunities that should be used wisely. Already, several African countries are turning more and more to these powers, like China, India, Iran, Venezuela and Gulf countries, for loans, direct investments and joint-ventures. The South-South trade has increased from $577 billion to $1,700 billion between 1995 and 2005 and it keeps rising[13].  In 2008, trade between Africa and China was estimated at $107 billion, with a favorable balance for Africa.

Economic and political ties with South America are also growing. In June 2009, the President of the African Union Commission, Mr. Jean Ping, in a visit to Venezuela was quoted as saying that African countries would strengthen their cooperation with ALBA countries. He hailed the cooperation between Africa and South America in general and called for strengthening their ties at all levels. At the political level, the second Africa-South America Summit will be held in Caracas in September 2009 (9-14), after the first Summit held in November 2006 in Abuja (Nigeria).
These are very encouraging signs that a growing consciousness is taking place at the level of African leaders on the need to “look South”. Indeed, by developing its economic and financial cooperation as well as the political solidarity with the rest of the South, Africa will not only benefit from new sources of financing but also strengthen the policy space it needs to weaken the influence of “traditional partners”, especially the international financial institutions.

4) Repatriation of Stolen/Illegal Wealth
The African Union Commission and the African Development Bank and the Economic Commission for Africa (ECA) have issued a joint document calling for the cooperation of Western countries and international institutions in Africa’s efforts to get back the wealth that rightfully belongs to the African people. This is a positive development that gives a new momentum to the demand made several years ago by African civil society organizations working on the issue of Africa’s illegitimate.
This campaign for the repatriation of the wealth stolen from the African people and illegally kept abroad with the complicity of Western States and financial institutions is long overdue. Therefore, sub-regional and continental institutions should work closely with civil society organizations for a strong and sustained mobilization on that issue. With only half of the wealth illegally kept in Western banks, Africa’s development financing could be largely covered[14].

NOTES

[1] Director of the African Forum on Alternatives & Member of Jubilee South International Coordinating Committee (JS/ICC), Dakar (Senegal).

[2]UNCTAD, Economic Development in Africa 2008. Export Performance Following Trade Liberalization: Some Patterns and Policy Perspectives. United Nations: New York & Geneva, 2008.
[3] UNCTAD, Economic Development in Africa Report 2009: Strengthening Regional Economic Integration for Africa’s Development. New York & Geneva: United Nations, 2009

[4] UNCTAD. Economic Development in Africa. Trade Performance and Commodity Dependence. New York & Geneva: United Nations, 2004.
[5] UNCTAD, Economic Development in Africa Report 2009, op.cit, p.29
[6] ECOWAS is composed of 15 countries. It includes all 8 WAEMU members and 7 other countries, like Nigeria, Ghana, etc. Each of these 7 countries has its own currency.
[7] UNCTAD, Trade and Development Report, 2007, p.99

[8] The Committee is composed of the Finance Ministers of South Africa, Egypt, Nigeria, Cameroon and Tanzania and Central Bank Governors of Algeria, Botswana, Kenya, West African Central Bank (BCEAO), Central Bank of Central African States (BEAC) and African Development Bank President.  
[9] UNCTAD, Trade and Development Report, 2008, p. 34, table 2.3

[10] African Development Bank (2008), Ministerial Conference on the Financial Crisis, Tunis, November 12, 2008. Briefing Note No. 1: The Current Financial Crisis: Impact on African Economies
[11] Christian Aid (2008), Death and Taxes: the true toll of tax dodging. London, A Christian Aid Report (May)
[12] UNCTAD (2007), Economic Development in Africa. Reclaiming Policy Space: Domestic Resource Mobilisation and Developmental States. New York & Geneva: United Nations
[13] Le Monde Diplomatique, L’Atlas, February 2009, p. 183
[14]See Léonce Ndukumana and Hippolyte Fofack (2008), Capital Flight Repatriation. Investigation Into its Potential Gains for Sub-Saharan African countries (October 2008).

Africa