Introduction
At the dawn of the twenty-first century,
Africa must quickly select the path it wishes to follow. On the one hand, it could allow
the forces of implosion and ethnic warfare to become the masters of its fate, to the
advantage of a few potentates lacking in vision or warlords with transient alliances.
Thus, history would repeat itself, with all the suffering that this entails, and this old
continent would be at the mercy of all types of corruption. Africa would be stripped of
the wealth of its soil and the promise of its youth and left marginalized, adrift in the
wake of history.
On the other hand, it could say no to
marginalization and fully integrate itself into the great global village that the world
has become in this internet era. This would mean that its youth could build a future
brimming with hope and every man and woman could participate in developing their nations,
thereby ensuring both transparency in the management of public affairs and a sense of a
common destiny. These are the foundations of a stable, inclusive, and predictable
environment.
Since the early 1990s, many countries in
sub-Saharan Africa, the region on which this article is principally focused, have been
implementing sound macroeconomic policies and structural reforms to raise real per capita
incomes, reduce inflation, and narrow financial imbalances, thereby changing the economic
landscape dramatically. But despite these reforms, poverty remains widespread, private
investment is subdued, and most African countries continue to depend heavily on external
assistance. Moreover, macroeconomic imbalances are still sizable, and most countries
remain highly vulnerable to changes in external conditions.
Today there is a widespread consensus, both
within Africa and among its international partners, that intensified efforts are required
to increase growth by fostering private investment through more open markets and trade and
by ensuring a more secure environment through economic, political, and judicial reforms.
Africa's economic recovery
Sub-Saharan Africa has made substantial
progress toward macroeconomic stability during the current decade through sound financial
policies and market-friendly structural reforms. The IMF has often supported these efforts
by providing technical assistance and making financial assistance available under various
facilities, most prominently under its highly concessional Enhanced Structural Adjustment
Facility (ESAF).
After years of stagnation, average real
economic growth in sub-Saharan Africa has increased from an average of 1.0 percent during
199294 to about 5 percent during 199598 (see table). Strong growth has been
seen in an increasing number of countries, and real per capita GDP has started to rise.
Forty out of 47 countries are now showing increases in their annual per capita incomes.
There has also been considerable success in bringing down inflation and reducing internal
and external financial imbalances. For the region as a whole, average inflation (as
measured by the consumer price index) declined from a peak of more than 60 percent in 1994
to some 10 percent in 1998. The region's external current account deficit, including
grants, fell from an average of 7.0 percent of GDP in 1992 to 5.5 percent in 1998, while
the overall fiscal deficit was cut from about 8 percent of GDP to 5.5 percent over the
same period.
Sub-Saharan Africa: Selected economic and financial indicators,
199298 |
|
|
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998
(Est.) |
|
|
|
|
(growth
rates, percent) |
|
Real GDP
Real GDP, per capita
Consumer price index |
0.0
3.6
46.4 |
1.2
3.8
44.2 |
2.0
1.4
60.6 |
4.8
2.5
45.3 |
5.8
2.8
45.6 |
4.9
1.9
17.4 |
4.5
1.3
10.3 |
|
|
(percent
of GDP) |
|
Gross fixed
capital formation
Domestic savings
Central government fiscal balance,
including official transfers
Current account balance,
including official transfers
External public debt outstanding
|
15.2
9.3
8.3
7.0
92.5 |
15.8
10.3
7.2
7.1
106.0 |
16.7
12.5
6.0
5.8
128.9 |
16.9
12.1
4.6
5.8
114.9 |
17.4
13.3
3.6
5.3
107.6 |
17.9
14.2
3.4
4.9
104.9 |
18.3
13.9
3.2
5.5
103.1 |
|
Source:
IMF, World Economic Outlook, October 1998 (Washington).
Note: Excluding Nigeria and South Africa owing to the relatively large sizes of their
economies. |
|
|
Meanwhile, the restructuring of many
African economies has been gaining momentum. Government intervention in economic activity
is on the wane. Administrative price controls are being removed, and agricultural
marketing has been widely liberalized. Most countries have made considerable strides in
opening their economies to world trade by eliminating multiple exchange rate practices and
nontariff barriers and also lowering the degree of tariff protection. In most countries,
the process of restructuring and privatizing state enterprises has been under way for some
time, though it has proceeded with varying speeds and has enjoyed varying degrees of
success. Labor markets are also progressively being liberalized. Fiscal reform is gaining
ground: African countries are taking steps to rationalize their tax systems, reduce
exemptions, and enhance their administrative efficiency while reorienting expenditures
away from wasteful outlays and toward improved public investment and spending on key
social services, particularly health care and primary education. On the monetary front,
most countries have made progress in establishing market-determined interest rates,
eliminating selective credit controls, and introducing indirect instruments of monetary
policy, such as reserve requirements and open market operations. Greater attention is also
being paid to rehabilitating weak banks and promoting healthy and competitive banking
sectors. Moreover, the IMF and the World Bank have recently launched a joint initiative to
help heavily indebted poor countries (HIPCs) that pursue sound policies to tackle their
external debt burdens, including their large multilateral debts. So far, five African
countriesBurkina Faso, Côte d'Ivoire, Mali, Mozambique, and Ugandahave become
eligible under the HIPC Initiative.
Need for faster growth
The recent achievements in Africa are
undoubtedly encouraging, but are they sufficient to make a real dent in poverty? African
countries would need to achieve sustained real per capita annual growth of 89
percent to attain one-half of today's real per capita income levels in industrial
countries within a generation, and growth rates of 67 percent would be needed just
to keep up with the expected increase in Africa's labor force. The remarkable fact about
such numbers is not that they are high, but that they fall within a range that an
increasing number of policymakers would consider feasible. If Africa is to sustain such
growth rates, however, it urgently needs to become a better place to save and invest,
first and foremost for Africans themselves but also for foreign investors.
Toward economic security
The basic objective of the "second
generation" of reforms before us, in IMF Managing Director Michel Camdessus's words,
is "to expand the scope for private investment by promoting greater openness in
domestic and external trade and creating a more secure environment." Meanwhile, it is
essential that the progress made to date in maintaining macroeconomic stability be
consolidated and extended. Let me spell out this agenda before discussing how it may be
advanced.
Appropriate regulations and their
evenhanded implementation are necessary to support free trade, which is critical for a
better allocation of resources and the spread of know-how and innovation. This requires
the following actions:
A redefinition of the role of government
away from direct involvement in production and toward the provision of essential public
services is critical.
A faster and more transparent privatization
process is needed to create scope for the private sector. In support of these efforts, a
comprehensive and well-defined privatization strategycovering not only management
responsibilities but also ownership, and involving local as well as foreign
investorsshould be developed and implemented. The establishment of an appropriate
legal framework, along with effective regulatory policies and institutions, is another
essential step in promoting a transparent and predictable environment for investors,
reducing the fear of expropriation, and fostering healthy competition.
Financial sector reform that would
strengthen savings mobilization and intermediation and promote the soundness of banking
systems, together with the correct sequencing of reforms, is vital, as the Asian crisis
has amply demonstrated. Sub-Saharan African countries will have to move decisively to
deepen and broaden their relatively weak financial markets, establish independent and
efficient banking supervision agencies, open their banking sectors to healthy
international competition, apply best practices in bank management, and improve the legal
framework for banking activities and contract enforcement. At the same time, they need to
develop institutions and instruments dedicated to long-term savings
mobilizationstock exchanges, pension funds, insurance, and other contractual savings
systemsand make domestic financing facilities accessible to small investors,
including farmers.
Notwithstanding the substantial progress in
trade liberalization sub-Saharan countries have made since the mid-1980s, their trade
regimes remain complex and restrictive compared with those of most other countries. They
therefore need to speed up trade liberalization and tariff reform to enhance the
efficiency and competitiveness of their domestic producers and help them become more fully
integrated into the world economy. These efforts should include the elimination of all
significant nontariff barriers; a substantial, phased reduction of tariff levels; and the
reduction or elimination of export taxes. The benefit of trade liberalization would be
enhanced if the process were supported by properly sequenced and paced liberalization of
capital flows, in order to create scope for an increased contribution of foreign direct
and portfolio investment. Moreover, trade liberalization and tariff reform should be well
publicized and undertaken as part of a comprehensive medium-term tax reform program. The
industrial countries could also make an important contribution to achieveing this goal by
eliminating the barriers that limit the access of African producers to their markets.
Ensuring economic security is critical for
eliciting the participation of each and every individual in developing the nation. The
steps needed to achieve this goal include the following:
The transparency, predictability, and
impartiality of the regulatory and legal systems must be guaranteed. This should go well
beyond ensuring respect for private property rights and the enforcement of contracts to
include the elimination of arbitrariness, special privileges, and distortionary ad hoc
exemptions.
Achieving good governance is very
important, and national authorities should spare no effort in tackling corruption and
inefficiency and in enhancing accountability. In July 1997, the IMF's Executive Board,
recognizing the importance of good governance for macroeconomic stability and sustainable
growth, adopted guidelines to ensure that the IMF pays greater attention to these issues.
Well-defined property rights are a key
element of economic security for small landholders and informal entrepreneurs; they are
also a key requirement for deepening the financial system. Meeting this need requires
imagination and a close coordination with stakeholderssimply duplicating the legal
instruments of advanced economies in developing countries with diverse cultural and
administrative backgrounds will not work.
A variety of instruments is available to
support free trade and advance economic security, including the following:
A capable and efficient civil service is a
key ingredient of sound public administration. In many countries, however, limited skills,
overstaffing, and deteriorating remuneration in real terms have contributed to low morale,
weak incentives to improve performance, and illicit activities in the civil service. For
many African countries, a key step will be overhauling their civil services. The
substantial progress already made in reducing internal and external financial imbalances
has resulted from fiscal consolidation, which has come primarily from compressing public
expenditure, while in many countries the revenue base remains inadequate. Revenue efforts
should focus on broadening the tax base and strengthening tax administrationthere is
little room for higher rates. A comprehensive medium-term approach to tax reform is needed
to optimize the composition of revenue and take into account the impact of the tax
structure on investment incentives and income distribution. Expenditure levels will
continue to be constrained by available resources. The efficiency of outlays thus remains
the key to successful fiscal adjustment in the short term. Making further improvements in
the composition of expenditure by reducing unproductive expenditures and increasing the
shares of education, health, and infrastructure will also be essential.
Forging a partnership with civil society to
build a consensus on reforms, as well as to provide checks and balances, is essential. To
succeed, African governments need to actively encourage the participation of all segments
of civil society in economic policy debates and do a much better job of explaining the
short-term costs, as well as the medium- and long-term benefits, of policy options.
With closer economic integration, each
African country has an interest in ensuring that its partner countries follow appropriate
policies. Virtually all African countries are now members of regional organizations.
Increased regional cooperation and coordination of national policies would allow African
countries to overcome the disadvantages of their relatively small economies and geographic
limitations and, by providing access to larger markets, make it possible for them to
realize economies of scale. Enhancing trade links among African countries naturally also
strengthens their ability to participate in trade on a global scale and could lead them to
make further progress toward nondiscriminatory multilateral trade liberalization. The
challenge of the future will be to ensure that these regional organizations establish
common regional objectives and are perceived as effective vehicles for the integration of
African countries into the world economy, providing mutual support to their members in
their reform efforts. The pace of progress toward this end should be what is feasible, not
what is comfortable for the slowest member.
Conclusion
Economic security, good governance, and a
better dialogue with civil society to build a social consensus for reforms should be the
key concerns of African policymakers in the future, in addition to implementing sound
macroeconomic policies and bold structural reforms.
As I consider Africa's agenda for the
twenty-first century, I am struck above all by its hopeful character. All approaches
converge on the single objective of building institutions to release and support the
initiative of each and every African. But I am also all too aware that African news
headlines often tell a different tale, one of terrifying ethnic strife, cynical
corruption, and widespread misery and disease. How can this hopeful agenda be reconciled
with these stark realities? The answer lies in the power of human creativity, once it is
released in a secure environment.
An African renaissance is unfolding before
our eyes. Most countries, through most of their years of independence, have been ruled by
autocratic leadersautocratic because, whether enlightened or not, they stood above
the law. Today, the rule of law is asserting itself. More than ever before, Africans are
demanding accountability and honesty from their leaders, freedom from repressive
governance, and the right to participate in influencing and formulating public policy. The
growing demands for more participatory systems of political representation are overdue and
will enable African governments to build popular consensus behind their economic and
social policies. Ethnic strife and widespread misery can be resolved only under the rule
of law, which is the foundation of peace and prosperityinitiative, investment, and
saving cannot flourish without it.
A new partnership is needed to support
sustainable growth and development in Africa. International support should beand
isfocused on those African countries that have the will to break clearly with the
past and that are ready to implement far-reaching economic and political reforms. It is in
the interest of the international community for democracies to spread and market economies
to develop in Africa.
Let there be no mistake: the fight for
economic security is political. It is a fight for the substance of power. A new basis of
power exists in Africa today in all the men and women who are struggling to establish a
new order. In their hopes lies my hope for a more humane Africa.
An earlier, expanded version of this
article was published in the Winter/Spring 1998 issue of the Brown Journal of World
Affairs.
Alassane D. Ouattara assumed office as
Deputy Managing Director of the International
Monetary Fund on July 1, 1994. He is from Dimbokro, Côte d'Ivoire and has published
widely in the political, economic, and social fields.