By Ghelawdewos Araia, PhD
Tigrai Onlne - January 01, 2014
The Africa Competitiveness Report 2013, put out by the World Economic Forum (WE Forum), is a comprehensive analysis and critique of the overall development status of thirty-eight African countries. It has also recommendations on how Africa can uplift itself and successfully become part of the global economy. Based on the World Bank and the African Development Bank (AfDB) data base and recommendations, the Report makes a thorough assessment of African countries’ economic parameters, ranging from their use of information technology to regional integration in the context of other successful countries outside Africa, as well as developed nations that could become major foreign direct investment (FDI) potentials.
There is no doubt that the Report could serve as a guide to African policymakers especially if the latter meaningfully address the many recommendations that the Report has craftily assembled. However, African policy makers should not dogmatically embrace the WE Forum Africa Competitiveness Report 2013 as if it is the only blue print for development. Africans should meticulously sift through the corpus of the Report and adopt aspects of the Report that are relevant to their specific realities on the ground. They should also carefully assess the heavy emphasis of the Report on the private sector although, to its credit, the Report also underscores the public-private partnership (PPP). Africans should also critically examine the old fashioned yardstick known as GDP as opposed to human development index (HDI), and more importantly they should seriously consider equitable distribution of wealth while they strive to garner economic growth and development.
At the very outset, the Report discusses a “policy vision that can help Africa, connect its markets and communities through increased regional integration,” but with respect to the realization of the latter the WE Forum believes that “a vibrant private sector – as the producer of tradable goods and services – will play a key role.” It is indisputable that the private sector, or capitalism as a whole as testified in its long history, contributes to economic growth and development but from this premise we should not necessarily make inference that the private sector alone is the engine of development while the state (more specifically the government) or public sector stand by idly or as the Report puts it, “Governments can lay the foundations for the sound business climate required for firms to prosper, and can provide the legal and regulatory frameworks required for regional integration.”
The Report seems to view governments as facilitators and not as key players in economic growth and development, and I believe this is one of the shortcomings of the Report. Throughout history, in one form or another, governments or states in the broader sense, have played a major role in development not only as facilitators and regulators but also as initiators of industrial policies for transformation in their respective countries. These types of nations are known as developmental states (a concept that is not mentioned in the Report) and are best exemplified by countries like Japan, South Korea, Taiwan, China, and Sweden etc.
I have fully addressed the role of the developmental state (DS) in my book entitled ETHIOPIA: Democracy, Devolution of Power, and The Developmental State. Chapter 13 of the book is entirely devoted to what Ethiopia can learn from other DSs such as Japan, the High Performing Asian Economies, China, and other emerging economies such as Brazil, India, Botswana, and Mauritius. However, I have also discussed the role of education in development as well as good governance in the context of democratic experiments in the United States and Europe and what Ethiopia can learn from these democratic nations. Democracy might not be directly linked to development but good governance, as we shall see later, would play a decisive role in the overall developmental and transformational measures undertaken by countries.
The Report, which runs into some 221 pages, opens with optimism by stating, “Africa is at an auspicious moment in history, when the success of past decades and an increasingly favorable economic outlook combine to give the continent an unprecedented opportunity to boost investments and spur regional integration to end poverty within a generation.” The same Report concludes with optimism as well: “The present time is fortuitous for Africa. The continent is enjoying solid growth, and much of international attention is focused on Africa as an investment destination, with a specific emphasis on the continent’s infrastructure. Unfortunately, this growth is uneven and highly reliant on natural resources, with a number of resource-rich countries enjoying very strong growth – in some cases over 10 percent – and other countries not doing well.”
Since some countries are not doing well in Africa and the continent as a whole is not fully integrated into the global economy, it is important to figure out the problems and obstacles that Africa has encountered, and once the latter are clearly identified African countries should be able to come up with sound polices and solutions. Other major obstacle that Africa countenanced was the Cold War but after the latter subsided following the end of the Soviet Union, or more specifically after 1991 when some African countries began to emerge as “more hopeful” (to use the Economist’s phrase) in the development march, Africa seemed to traverse on a bright path.
However, even when some African countries began to emerge in the post-Cold War era, both internal impediments in the form of corruption and bad governance, and external factors such as indebtedness to foreign nations and influences to unviable and wrong economic polices such as the structural adjustment program (SAP), have contributed to the lethargic economic performance of Africa.
The inability of African countries to emerge as viable economies was addressed three decades ago by Africans themselves, and their reaction to the problem resulted in the formation of the Lagos Plan of Action (LPA), a blue print for African development that was not implemented; and some four and half decades ago by some scholars such as Andrew M. Kamarck, who served as director of the Economics Department of the World Bank and who also lectured at the School of Advanced International Studies of the Johns Hopkins University.
Analyzing African economies in the context of private companies investments, Kamarck had the following to say: “The immediate effect of the chartered companies’ early opening up of Africa were not all positive. In the attempt to make a profit or to get their capital back, some of the companies and concessionaries indulged in activities that resembled plundering of the territory under their control more than it did economic development; the forced labor exacted from the Africans to collect and transport rubber, ivory, and timber or construct roads and railways prevented the Africans from producing for themselves and killed off large numbers from disease, overwork, and famine.”1
Kamarck did not (and he could not at the time) blame Africans for the underdevelopment of the Continent during the colonial and immediate post-colonial periods. It is abundantly clear that the colonial legacy had an imprint on the staggering African economies long after the colonizers departed but the latter continued to exploit African resources indirectly even when Africans asserted their self-determination and independence.
The WE Forum Report 2013 does not address the intricate colonial and Cold War legacies, perhaps conjecturing that Africa is now on its own and there aren’t exogenous forces that influence and/or manipulate African policies. This conceptual framework, however, is fallacious and to be sure much of Africa is still under the influence of the Commonwealth and the Francophone post-colonial networks in particular and under Western influence in general, which for the most part exhibit hegemonic pressures. However, blaming external forces without critically examining endogenous factors is also equally fallacious, because it is not just the former colonizers that are responsible for Africa’s backwardness; African leaders from the 1960s to the 1990s and beyond are to be blamed as well.
Unfortunately three decades after Kamarck’ incisive analysis of African economies and even after the World Bank recognized the failure of SAP and its renewed emphasis on the significance of institutions and the role of the state in the economy, the Economic Commission for Africa (ECA) argued, “What Africa needs is a “second generation” of reforms which would focus on speeding up trade liberalization to boost the efficiency and competitiveness of domestic producers, tackle public enterprise reform, redefine the role of government away from direct involvement in production and toward the provision of essential public services, and promote a viable and vibrant private sector.”2
Apparently Allassaine Quattara, the then IMF official and the current president of Cộte d’ Ivoire advanced the argument in favor of a “viable and vibrant private sector”. Interestingly, Quattara’s paper delivered at the IMF Seminar sponsored by the Swiss Coalition of Development Organizations, at Berne, is entitled “Putting Africa on a Sustainable, High Quality Growth Path.” Allassaine Quattara is now in a much better position to assess Africa’s growth and also whether the continent has indeed made a stride on sustainable development strategies or not.
Moreover, the ECA working paper series of 1997 states, “the new economic international order is expected to increase global benefits [but] weak structural economic situation and the scarcity of applicable institutional and human resources capacities in many African countries could be major impediments for these countries to take advantage of these new trade opportunities.”3 This ECA assessment is correct but it does not cogently appraise why Africa has encountered impediments and how this new global order could be beneficial to the continent. But, the ECA at least enumerates the constraints that African countries face: weak technological capacity; paucity of long-term finance; expensive trade credit and pre-shipment finance; deficiencies in the physical infrastructure; inadequate legal and regulatory frameworks; and absence of a coherent strategy for export development.4
What the ECA working paper series addressed on African economies and development strategies is now repeated in a more elaborate way by he WE Forum but the latter’s Report is focused on “the potential of regional integration as a stepping stone for building economies of scale, increasing competition, and fostering economic diversification.” It is a well-known fact that regional integration would serve as a vehicle for a stronger and competitive economy by circumventing the current “fragmented regional markets” across the board in the continent, and it is for this apparent reason that Africans have created regional communities long before the WE Forum Report 2013 was drafted.
Some of the regional African communities are Economic Community of West African States (ECOWAS) that was established in 1975 and has sixteen member states; Southern African Development Community (SADC) founded by the Lusaka declaration in 1980; the East African Common Market, whose precursor was the East African Community (EAC); Common Market for Eastern and Southern Africa (COMESA), whose members include from both SADC and EAC and some from Inter-Governmental Agency for Development (IGAD), which essentially comprises the Horn of Africa countries like Djibouti, Ethiopia, Somalia, Sudan and some from the EAC like Kenya and Uganda; COMESA, in turn, would accommodate all of the above including northern African countries like Egypt and Libya except ECOWAS.
Of all the above regional African communities the relatively most successful are ECOWAS and SADC. ECOWAS has departments such as trade, customs, industry, and free movement presided over by a commissioner, and a director who runs each department. SADC initiated a free trade area and joined COMESA in 2008 and the EAC, thus creating the largest African free trade zone, with 26 countries and estimated $624 billion in GDP.
The new EAC, now officially know as East African Common Market (EACM) includes Kenya, Uganda, Tanzania (former members of EAC) and Rwanda and Burundi. On July 10, 2010, the Institute of Development and Education for Africa (IDEA) wrote an editorial entitled “Hail The East African Common Market” and discussed, among many other relevant issues, the significance of the new regional integration in terms of open borders, common customs, common currency, and ultimately common flag.5
All African regional organizations were met by formidable challenges such as weak infrastructure, different products, tariff regimes, and different currencies but they are on the process of overcoming these hurdles. Of all regional communities, the weakest is IGAD and it is mainly due to the instability and lack of security in the region.
The WE Forum Report is highly emphatic on the necessity and significance of regional integration but it also notes the deficit in electricity and provision of paved roads, and believes that “Africa needs well structured networks linking production centers and distribution hubs across the continent to deepen regional trade and integration.”
There is no doubt that regional integration would accelerate African countries economic development, but the regional communities would become empty associations of nations if they are not supported and reinforced by the necessary resources and the right policies that would enable Africa compete at global level. The WE Forum states, “Regional integration is not an end in itself. Efforts to close Africa’s competitiveness – particularly in the areas of institutions, education, skills, and technological adoption – will be central to African economies to build their productive capacities.”
Once African countries meet the necessary requirements or prerequisites for regional integration and ultimately integration into the global economy, individually or in groups, they will be evaluated on the basis of global competitiveness index (GCI) because it is assumed that each country or a cluster of countries could exhibit different stage of development. In order to fully gauge a country’s stage of development, thus, the GCI “distinguishes three stages of development: factor-driven, efficiency-driven, and innovation-driven.”
If we follow the WE Forum GCI of 2012-2013, we can compare African countries within themselves and with other countries outside Africa based on their score. For instance while China’s score is 4.8 and South Asian average is 4.5, that of South Africa and Mauritius is 4.4; that of India is 4.3 and the North African average is 3.8 and sub-Saharan average is 3.6. In the latter group, while Ethiopia scores the highest 3.6, Burundi scores the lower of 2.8; in between 2.8 and 3.5 scores are Cape Verde, Uganda, Nigeria, Malawi, Madagascar, Cộte d’Ivoire, Zimbabwe, Burkina Faso, Mauritania, Swaziland, Lesotho, Mozambique, Chad, Guinea, and Sierra Leone.
However, the average score is only one variable in the GCI and may not tell the whole story of the stage of development. For instance, in terms of macroeconomic stability and “better fiscal position that results from strong resource reserves,” while South Africa and Kenya perform well at global level, Algeria and Nigeria also follow suit. By African and world standard, South Africa has become a promising successful country and it has even become the latest addition to the BRICS group that is, Brazil, Russia, India, China, and South Africa; it is also part of India, Brazil, and South Africa (IBSA). Now, the major challenge for South Africa is not as such its GDP growth but its fulfillment of the human development index (HDI), a stark deficiency in the provision of goods and services to the Black majority of South Africans.
One other important development strategy that the WE Forum brought forth is what it calls ‘toward sustainable and inclusive growth’ and the key word I like to discuss here is ‘sustainability’. The WE Forum’s definition of sustainability is “the set of institutions, policies, and factors that enable all members of society; to experience the best possible health, participation and security; and that maximize potential to contribute to and benefit from the economic prosperity of the country in which they live.”
The WE Forum definition of sustainability is palatable to me, but I had my own perspective on sustainability that was discussed in my article entitled “African Education and Sustainable Development” (www.africanidea.org/African_education.html) and, in turn, incorporated in my new book: “sustainable development cannot be realized without a multidisciplinary approach and a multivariate analysis of the various attributes such as ecological process, biological diversity, human population and their needs, renewable energy and non-renewable resources, and global re-distributive justice etc. Sustainability requires practical constructive engagement and the above mentioned attributes could not be meaningfully addressed and dealt with unless 1) political systems exhibit commitment to enhance citizen participation in decision-making (this also entails accountability and transparency); 2) economic systems generate surplus and technical know-how on a sustained basis (by extension, this must foster human development index – HDI); 3) social systems provide mechanism to resolve conflicts that may arise as a result of development; 4) production systems preserve the environment or the ecological base for development; 5) technological systems keep up with new devices that are environmentally friendly; and 6) international systems promote sustainable patterns of trade , finance, and development that are deliberately geared toward reducing, if not eliminating hunger and poverty.”6
I wrote the above definition of [perspective on] sustainability ten years ago and although the WE Forum definition is acceptable to me, it is not broad enough in its scope to dissect the complex parameters of growth and development, and it is for this reason I found it important to include my own definition, which is relatively comprehensive.
The WE Forum Report compares sub-Saharan Africa GDP growth of 5.7 percent average from 2012-2013 with the GDP growth in developing Asian countries that score 8.5 percent on average; it also compares the intra-regional trade of Africa (12%), ASEAN (25%), EU (65%), and NAFTA (49%). But, this is not a fair comparison. The more developed and more connected Europe cannot be simply compared with those African countries at a lower stage of development and poorly connected countries; African countries should not be compared with the NAFTA bloc either for the same reason I have indicated above. However, it would be reasonable to compare developing African countries with developing Asia, and since the latter exhibited good connectivity in order to enhance its intra-regional trade, African countries must do the same in order to boost their regional communities and intra-trade activities.
On the other hand, the WE Forum’s assessment of the reasons behind poor regional integration in Africa is correct as enumerated below:
In order to overcome the above problems and meaningfully implement sound and safe intra-regional trade, African countries should abide by the criteria of the enabling trade index (ETI), which, in turn, comprises several sub-indexes such as:
The sub-indices, in turn, are composed of a “number of pillars of enabling trade, of which there are nine in all:
The African Development Bank (AfDB) regional integration strategy (RIS) for 2009-2012 examines regional infrastructure, trade, and regional public goods and makes recommendations on how to implement the Bank’s program. As per AfDB, “Regional projects are complex but transformational. For example, the Ethiopia-Kenya power inter-connector and the Zambia-Tanzania-Kenya inter-connector will link the Southern Africa Power Pool and the Eastern Africa Power Pool, resulting in a large regional market for electricity.”
The above AfDB recommendation is one of several other recommendations and the regional inter-connectors could serve as efficient and effective power pools for the COMESA countries in particular and other African countries in the long haul. On top of regional market for electricity, as indicated in Box 6 of the Report, thanks to AfDB’s initiatives, the use of green energy in Africa is on the rise. “Africa has more than half of the worlds renewable energy potential: its wind, geothermal, and hydropower potential has barely been tapped.”
Some examples of renewable energy mentioned in the Report are The Grand Ingra Dam in the Democratic Republic of the Congo, which has a potential of 100,000 megawatts (MW) of electricity; the Great Rift Valley, which has a potential to generate 7000 MW of geothermal electric power; the Cabeolica wind farm in Cape Verde; the Tunisian solar thermal power that has the potential to export 2000 of MW to Europe; the Turkana Wind Project and the Menengai Geothermal Plant in Kenya. Two dams that could be major sources of electricity for regional integration that are not mentioned in the Report are the Gilgel Gibe Dam and the Grand Renaissance Dam of Ethiopia. Gilgel Gibe is now complete but completion date for the Grand Renaissance is expected to be around 2017 and when finished it is going to be the largest dam in Africa, with 63 billion cubic meter of reservoir, with capacity of 6000 MW and with net generation of 15000 MWh.
The African potential in renewable energy, including sun, wind, electricity, and biomass is tremendous but the continent is also blessed with strategic minerals, and in regards to the latter I wrote an article on the DR Congo in 1997 (when the country was officially known as Zaire) and have argued as follows: “Zaire is no just on of the largest countries in Africa; it is also one of the richest in the Continent. The country is blessed with vast deposits of copper uranium, gold, diamonds, platinum, chrome, uranium, cobalt, tin, silver, zinc, manganese, tungsten, cadmium etc. 50% of Africa’s total cobalt comes from Zaire and the country’s hydroelectric potential is equal to ¨û of our planet’s total hydro power.”7
With huge untapped resources, Africa indeed is the future continent but there is always a catch to renewable and non-renewable resources if we critically examine them in terms of capital, know-how, and governance to effectively utilize the resources and realize Africa’s competitiveness in the global market. And because the energy pools are capital-intensive, Ethiopia currently uses only 8 MW in geothermal because the country at present could not afford the high engineering costs. Therefore, the question we must ask in relation to the green energy exploitation is who owns what? If European, American, or Japanese companies invest in this project by providing capital, technology, and their expertise, African dependence will continue unabated as always, and this erstwhile African problem is not clearly addressed by the AfDB or the WE Forum.
If Africans attempt to maintain their independence and yet encounter the dilemma of depending on Western technology and capital, it is still possible to create growth poles in order to attract FDI as the We Forum recommends, but we must ask, “What are growth poles?” WE Forum has an answer: “Growth poles are composed of multiple simultaneous investments coordinated throughout many sections with the purpose of supporting self-sustaining industrialization in a country. Growth poles projects are not oriented around addressing in indemnifying market failures, but around capitalizing on and augmenting opportunities that already exist in an economy.”
But even with growth poles and FDI that can really catapult self-sustaining economies and reinforcing regional integration, African countries must be able to foster some degree of self-reliance because, in the final analysis, as Perroux argues and the Report clearly states, “for an economy to attain a higher income levels, that economy should first develop within itself one of several regional centers for economic growth.”
It should also be known that African countries could become success stories in attaining all the necessary ingredients for regional integration and global competitiveness if the groundwork for public-private partnerships (PPPs) is laid down. One good example of this viable strategy the Report gives us is that of Madagascar: “In Antananarivo-Antsirabe, PPPs have been established in skills development for the garments, tourism, and information technology industries. For example, the growth pole includes a private university and firms in the garment industry, which have collaborated to offer the first textile engineering diploma program in Madagascar.”
Similar to the Madagascar PPP experience is that of Ethiopia, which is not mentioned in the Report, but one that I have discussed in my book. Based on UNIDO’s findings, I have discussed linkages that would “enhance enterprise competitiveness through the realization of economic of scale and scope and are a source of sustainability, as they increase of the economic actors [ability] to collectively react to crisis and turning points. Linkages also pave the way for broad-based and inclusive development, where the poor among entrepreneurs and workers participate of economic activities on fair terms.”8
Furthermore, in order to explain Ethiopia’s efforts in the realization of PPPs, I have argued as follows: “Interestingly, although networking and linkages are at their infancy vis-à-vis the expanding trade and industry in the country, in some instances the significance of linkages has been appreciated and even implemented. A good example of the linkage effort is the initiative taken by Adama University in the Oromia Regional State of Ethiopia. The University has signed an agreement with the National Association of Ethiopian Industries (NAEI), an overarching organization for the various industrial associations, to produce skilled workforce for the Ethiopian industrial sector.”9
Finally, I like to reflect on democracy, good governance, transparency, and accountability, which in my view should be prerequisites to the realization of the recommendations put forth by WE Forum. As I have pointed out earlier, although democracy is not a precondition to development, it is nonetheless a vital and necessary vehicle to the smooth administration and running of an economy, at firm level or at national level. Without transparency and accountability, it would be simply impossible to fight the endemic corruption that pervades African governments that has also metastasized in the private sector, and in this sense the democratic process could play a catalytic role in lessening or eliminating this major problem.
On top of democratic governance, it is of utmost importance that African nations consider the HDI factor in their development strategies. Based on my principled stands, visionary outlook, and philosophical underpinnings, I have endorsed the UNDP’s HDI, which comes very close to my philosophy of social constructivism, which, in turn, advocates the necessity of significant changes in society in order to overcome injustice, inequity, and other social ailments. Among the UN agencies, UNIDO and UNESCO have done their part over the years to help nations realize just and equitable societies, but the UNDP stands out in this effort.
The WE Forum should have included some data and rationale of the UNDP 2013 Report in order to address the many social issues that are also inextricably linked to economic growth and development. The UNDP is grassroots oriented and people-centered UN agency and as such prescribes the participation of people in development. “Unless people can participate meaningfully in the event and process that shape their lives,” says the UNDP, “national human development paths will be neither desirable nor sustainable.”10
The UNDP 2013 Report (henceforth UNDP Report) poses a question, “how have so many countries in the South transformed their human development prospects?” and answers it as follows: “Across most of these countries, there are three notable drivers of development: A proactive developmental state, tapping of global markets and determined social policy and innovation.”
Among the three UNDP Drivers, although I am most interested in the ‘proactive developmental state’ that I have discussed in detail in my book, I will briefly examine all three drivers. In this paper, however, instead of quoting my own work, I am going to refer to the UNDP’s Drivers so that readers can get the flavor of different perspectives:
In concluding this essay, I like to address the conundrum surrounding transnational corporations (TNCs) in relation to the new opportunities that the WE Forum has underscored and the promising scenario of ‘the rise of the South’ that the UNDP has heralded. I am inclined to accept both premises because it is through regional integration and the right economic policies that Africa could become competitive in the global trade as the WE Forum recommended, and as the UNDP noted it is quite impressive to witness that 87% out of 107 developing countries “can be considered globally integrated”12, although most African countries are lagging behind and the world has not yet resolved the unequal partnership between TNCs and developing nations. While TNCs can contribute to FDIs, they could also have an impact on local or host economies; and since TNC’s for the most are governed by expediency in promoting their interests, they can go to the extent of controlling firms across national boundaries and as I have pointed out earlier, the ‘who owns what’ puzzle could simply manifest persistent inequality in the global economy. There is no global regime to regulate the unfettered and almost inexorable undertaking of the TNCs worldwide and emerging economies as well as regionally integrated African nations must come with their own rules in negotiating international trade.
NB: All other quotations in the text are taken directly from the WE Forum African Competitiveness Report 2013
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