Africa Forum: Challenges and HopeEmpowering Approaches Toward

Sustainable Development

Robert C Byrd Center for legislative StudiesShepherd UniversityWest Virginia

March 28-29, 2008

Charles Chukacchuka@msn.com

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Introduction

“In response to complaints that we only cover the NEGATIVE aspects of the news, here is a list of all the people in the world who were NOT killed today.”

Bizarro, by Dan Piraro, published in the Express, a publication of the Washington Post, 09/22/05

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“With rare exceptions, the people I encounter, from all walks and stations in life, still think of Africa as the “dark continent” made darker still by the ravages of AIDS and the ongoing conflicts that occasionally produce enough carnage to merit a minute or two on a television newscast. But just as not all Africans are dark-skinned, neither is the continent a dark place. In fact, the continent of Africa is a multifarious place, comprising fifty-four countries, home to some 800 million people, encompassing a multitude of ethnicities and races and a complex range of eccentricities." “

Hunter-Gault, Charlayne, New News out of Africa, Uncovering Africa’s Renaissance, Oxford University Press, 2006

AFRICA’S TIME HAS COME

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Outline

Introduction New news Old news Role of business empowerment Some suggestions on way forward

THE NEW NEWS

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ACRONYMS SSA: Sub-Saharan Africa HICs: High-income countries LDCs: Developing countries ECA: Europe and Central Asia LAC: Latin America and the Caribbean EAP: East Asia and the Pacific SA: South Asia MENA: Middle East and North Africa GNI: Gross national income GDP: Gross national productivity FDI: Foreign direct investment NOT: Net official transfers NDF: Net debt flows TFP: Total factor productivity

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Expenditure on Education (Percent of GNI)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Pe

rce

nt

EAP ECA LAC MENA SA SSA HICs

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Technological Diffusion(Years from discovery to reaching 25% threshold)

0

20

40

60

80

100

120

1800-99 1900-50 1950-75 1975-2000

EAP

ECA

LAC

MENA

SA

SSA

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Figure :Technological Diffusion in SSA(Years from 5% to 25% threshold)

0

20

40

60

80

100

120

5 Percent 85 56 18

25 Percent 109 69 21

1800-99 1900-50 1975-2000

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Figure : Foreign Direct Investment 2000-06 (Percent of GDP)

0

0.5

1

1.5

2

2.5

3

3.5

1970-79 0.5 0.5 0.5 0.3 0.6 0.5 0 0.7

2000-06 2.9 2.7 2.3 2.2 3.5 1.1 0.7 2.5

MICs LICs EAP ECA LAC MENA SA SSA

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Figure : Inward FDI Flows 1970-2006(Percent of Fixed Capital Formation)

0

5

10

15

20

25

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Pe

rce

nt

LDCs Africa

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Figure : Private Debt and Equity Flows ($ Millions)

-5000

0

5000

10000

15000

20000

25000

30000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Equity flows Guaranteed debt Non-guaranteed debt

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Figure: FDI Flows ($ millions)

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45

81

32

69

57

90

65

63

39

14

89

1

10

30

9

14

56

2

12

35

2

16

55

91

68

83

50

17

49

39

40

39

52

99

77

43

67

15

91

25

12

56

5

13

54

3

20

38

9

23

30

0

0 5000 10000 15000 20000 25000 30000 35000 40000 45000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

FDIn Profit

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Real GDP Growth 1994- 2008

0

1

2

3

4

5

6

7

8

9

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Pe

rce

nt

HICs LDCs Africa

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Figure : Net Official Debt Flows

-8000

-6000

-4000

-2000

0

2000

4000

6000

8000

10000

$ m

illio

n

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

NDF NOT

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Official Net Debt Flows and Transfers – 1996-2006

-7000

-6000

-5000

-4000

-3000

-2000

-1000

0

1000

2000

3000

$ M

illio

ns

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Net flows Net transfers

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Official Debt Outstanding, Disbursements and Repayments

0

20

40

60

80

100

120

140

160

$ B

illio

ns

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Outstanding

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External Debt to GDP 1994-2008

0

10

20

30

40

50

60

70

80

90

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Per

cen

t

LDCs Africa

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Consumer Prices 1994-2008

0

10

20

30

40

50

60

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

An

nu

al P

erc

en

t C

ha

ng

e

LDCs Africa

THE OLD NEWS – THE TROUBLE WITH AFRICA

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Figure : TFP – By Income Group(Relative to US in 2005 Index US = 100)

0

20

40

60

80

TFP 77.1 53.1 23.7 9.6 5.6

HIC1 HIC2 MICs1 MICs2 LICs

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Figure : Total Factor Productivity (TFP) – By Region(Relative to US in 2005, Index US = 100)

0

5

10

15

20

25

TFP 8.4 21.7 19.3 13.3 5.8 5.6

EAP ECA LAC MENA SA SSA

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Figure : Technological Progress 1990-2005, By Income(TFP annual growth)

0

0.5

1

1.5

2

2.5

3

3.5

%Change 1.3 0.7 1.2 3.2 1.7

HICs1 HICs2 MICs1 MICs2 LICs

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Figure : Technological Progress 1990-2005, By Region(TFP annual growth)

0

1

2

3

4

5

6

%Change 5.1 2.2 0.2 0.5 2.3 0.2

EAP ECA LAC MENA SA SSA

WHY THE GAP?

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The World Bank, in its Global Economic Prospects 2008, writes “A central finding..is that most developing countries lack the ability to generate innovations at the technological frontier. ..Moreover, relatively thin domestic technology sectors and much better economic and scientific opportunities abroad mean that many nationals of developing countries perform cutting edge research in high-income countries. ..2.5 million of the 21.6 million scientists and engineers working in the US were born in developing countries.”

An organization called The Share The World’s Resources (STWR) writes “Africa trains and sends 77,000 professionals abroad each year to work in North America and Europe. There are more Ghanaian doctors in New York than in the whole of Ghana”

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Populations Without Electricity 2005 (Millions)

0

100

200

300

400

500

600

700

800

Popl 547 224 706 45 48

SSA EAP SA LAC MENA

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Access to Electricity, 2005(Percent of Population)

0

10

20

30

40

50

60

70

80

90

100

Percent

Total

Urban

Rural

Total 25.9 88.5 51.9 90 86.7

Urban 58.3 94.9 69.7 98 92.7

Rural 8 84 44.7 65.6 76.8

SSA EAP SA LAC MENA

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Figure :Costs of Access to Technology(Percent of monthly income in US$)

0

5

10

15

20

25

Per

cen

t

World HICs EAP ECA LAC MENA SA SSA

Fixed line phones

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Total Per capita Wealth and Component 2005($ Thousands)

0102030405060708090

100

$,00

0

EAP ECA LAC MENA SA SSA HICs

Total wealth (TW) Intangible capital(IC)

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Natural Resource Depletion (NRD) and Consumption of Fixed Capital (CFC), 2005 (Percent of GNI)

0

5

10

15

20

25

30

35

Per

cent

EAP ECA LAC MENA SA SSA HICs

CFC NRD

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Adjusted Net savings, 2005(Percent of GNI)

-10

0

10

20

30

40

50

EAP ECA LAC MENA SA SSA

Gross national savings Adjusted net savings

CAN THESE CONSTRAINTS BE ADDRESSED?

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Are Empowerment Approaches a Solution?

Well, that and perhaps a short prayer. A short prayer for new leadership as training is not the whole

answer.

Ronald Bailey wrote in The Wall Street Journal in 2007 “The World Bank’s path breaking Where is the Wealth of Nations convincingly demonstrates that the “main springs of development” are the rule of law and a good school system. The big question is: How can the people of the developing world rid themselves of the kleptocrats who loot their countries and keep them poor?”

Scaling up empowerment programs should help to eliminate unnecessary human suffering, stem civil conflicts and keep children in school.

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Role of Empowerment Approaches

Every empowerment approach adds some value: management approaches; improving access to finance approaches; community participation approaches; and gender empowerment approaches; income transfers approach, and so forth.

And in some circumstances, affirmative action. To both keep children in school and address SSA’s technological

deficit, wo approaches deserve special attention: Inclusive and Shared Growth Approacheso South Africa’s experiment with Black Economic Empowerment; Capacity Building and Supply Chains Approacheso African Management Services Company (AMSCO); ando The Strategic Partnerships approach of MOZAL.o BHP Billiton’s company procurement system.

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Inclusive and Shared Growth Approaches (Cont.)

Black Economic Empowerment (BEE) In it’s a Strategy for Broad-Based Black Empowerment, the South African

Government states “South Africa has enjoyed 10 years of consistent growth. Much has been achieved since 1994. Unfortunately, the extent to which this growth has been shared equitably amongst all South Africans is not yet adequate for the requirements of a stable, integrated and prosperous society…we need to take additional colleective actions in order to achieve our objective,..This ….argues for the state to actively lead the development and implementation of a focused and coherent strategy to achieve broad-based black economic empowerment…”

Mary Alexander wrote ““South Africa’s policy of black empowerment (BEE) is not simply a moral initiative to redress the wrongs of the past. It is a pragmatic growth strategy that aims to realize the country’s full economic potential.” “Black empowerment is not affirmative action, although employment equity forms part of it. Nor does it aim to merely take away wealth from white people and give it to blacks. It is simply a growth strategy, targeting the South African economy’s weakest point: inequality.”

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Inclusive and Shared Growth Approaches (Cont.)

In 1998 Donald McNeil took a more critical look at BEE and said “Black empowerment is the rage in the private sector and the law in the public sector. In the last four years, so many empowerment deals have been struck that blacks now control 28 companies worth a total of more than $13 billion, about 6 percent of the Johannesburg Stock Exchange.” “In general blacks and whites are surprised and pleased that it has gone so well. The leading “black chip” companies outperformed the Johannesburg Consolidated Investments Ltd., one of the country’s oldest mining houses.” “But there is growing dissatisfaction with mega-deals that enrich only a few fortunate and well-placed blacks.”

Later on in 2006, Jim Sutcliffe commented on the success of BEE “It is pushing the growth rate …on to a higher trajectory. It has helped the 12-year-old democracy move ahead of India as a destination for foreign direct investment.” “The number of black people in the upper brackets grew 30 percent and the proportion of blacks in the top income brackket is now 20 percent, up from close to zero a decade ago.”

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Capacity Building and Supply Chains Approaches

AMSCO The Africa Management Services Company (AMSCO) was

established more than 15 years ago to provide African businesses with access to a range of training and professional management services that help them to become more sustainable, profitable and globally competitive organizations. Since then, the company has helped hundreds of companies in Africa to develop strong professional management teams and create sustainable businesses that provide employment to thousands of people.

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Capacity Building and Supply Chains Approaches

MOZAL The management of Mozal wrote on their official website:

“From the beginning of the Mozal start-up, there has been a drive to identify and develop local companies and make them competitive in a completely new business environment, that of aluminum production. A program was developed to educate and train the newly formed small and medium enterprises (SMEs) on a world-class tendering package, allowing them to compete with foreign companies. Work packages were exclusively allocated to local companies so as to enhance their development. This was done without compromising the principles of competitive pricing, compliance to specifications, timely delivery and safety.” “The Mozal Community Development Trust (MCDT) was established in August 2001 by the Mozal shareholders to develop ..five key areas: small business development; education and training; health and environment; sports and culture; and community infrastructure. The targeted community includes those within 10 km radius of the smelter. …MCTDT believes that the community should take ownership of programs and play a proactive role in improving their lives.”

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Capacity Building and Supply Chains Approach (Cont.)

Management on BHP Billiton has a similar approach in the implementation of BEE:

“Our objectives are to provide access by black suppliers to the company’s procurement activities, with a resultant greater participation in resource-related industries, and to ensure that all buying organizations within the group have the support to successfully achieve legislated procurement targets.”

Management on BHP Billiton has a similar approach in the implementation of BEE:

“Our objectives are to provide access by black suppliers to the company’s procurement activities, with a resultant greater participation in resource-related industries, and to ensure that all buying organizations within the group have the support to successfully achieve legislated procurement targets.”

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Can Africa Make It?

Yes, Africa can. New leadership is already emerging and hope is becoming a reality in a

number of countries. Africa can lip-frog the digital divide to mitigate the problem of being land

locked. Africa launched an e-Schools Initiative to fund internet access in 120 schools in 16 countries by mid-2007.

Africa needs to focus on human development and spend more on primary and tertiary education.

Africa should utilize its natural resources to invest in human development and institutional capacity building. Botswana is already doing that and the lessons can be replicated across the continent.

Africa’s resource curse is curable: Already 17 countries are reported to have signed up to participate in the Extractive Industries Transparency Initiative (EITI).

A little external help is needed to address regional infrastructure bottlenecks and expedite continental and regional integration. The continent needs to be made into a large domestic economy.

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thank you