African Economy in 1994 and Prospects for 1995
Preliminary Assessment of the Performance of the African Economy in
1994 and Prospects for 1995 End-of-Year Statement
by Layashi Yaker
UN Under-Secretary General, Executive Secretary of the ECA
Addis Ababa, 15 December 1994
Excellencies,
Distinguished Ambassadors and Heads
of Diplomatic Missions;
Distinguished Heads of African
regional organizations and of United Nations organizations and specialized agencies;
Representative of the media;
Ladies and Gentlemen;
Dear Colleagues;
1. It is a pleasure for me to
welcome you to Africa Hall today on the occasion of this End-of-Year Statement. I want to
thank you all for honouring our invitation. The Economic Commission for Africa greatly
values the opportunity to share its views and analyses on topical policy questions
relating to Africa with our member States and sister institutions as well as with all
those interested in the progress of Africa -- governments and people of member states,
African regional and sub-regional organizations, and development partners, including
international and non-governmental organizations.
2. The End-of-Year Statement is
traditionally devoted to a preliminary assessment of the economic and social situation in
Africa in the year that is ending and prospects for the coming year as seen at this time.
Accordingly, I will be reviewing the performance of the African economies in 1994 and the
region's prospects for 1995. On this occasion, I would also like to dwell on the national
and international requirements for facilitating Africa's transition to accelerated growth
and development.
3. Beginning with today's
End-of-Year preliminary assessment of the state of the African economy, the Commission
closes one time series and opens a new one. Until now, our series did not cover the
Republic of South Africa, one of our founding members, which was excluded from the
Commission in 1965 because of its racist policies of "separate development".
With the demise of apartheid, the adoption of a non-racial interim constitution, and the
installation of the first government ever to be elected democratically by all South
Africans, I am greatly honoured to welcome the new Republic of South Africa back into the
fold of the Commission's member States. And so, today we begin a new time series of
socio-economic statistics which will cover the whole continent of Africa from Algiers to
Cape Town, from Cape Verde to the Seychelles.
I. Economic and Social Situation
in 1994.
4. Preliminary data available at
the United Nations Economic Commission for Africa on the state of African national
economies in 1994 point to a modest increase in the regional economic growth rate. We
estimate that during this year, 1994, African economic output has grown by 2.8 per cent,
up from 1.1 per cent in 1993 and -0.3 per cent in 1992. This means that income per head is
still declining and that the region is continuing to lose ground both in absolute and
relative terms. Over the period 1990-1994 GDP has in fact declined at a rate of nearly 1.5
per cent per annum. Over this period, the proportion of the population living under
conditions of poverty has increased at even a faster rate. This applies to both the rural
areas where the economy continued to decline and the cities where there has been a lack of
dynamism in fostering growth and job creation in the industrial and service sectors.
5. The global economic situation
continued to improve in 1994, led by robust growth in the United States, Canada, United
Kingdom and Australia. Output from the OECD economies as a whole is expected to grow by
2.6 per cent during 1994. The transitional economies of Eastern Europe, the Baltic states,
Russia and the other CIS states as a group are expected to shrink by about 6 per cent this
year. On their part, the developing economies as a whole are expected to expand at an
annual rate of 5.0-6.0 per cent in 1994. Most of this growth, however, has taken place in
China which is expected to post about 10 per cent, the newly industrialising economies of
South-East Asia and, to a lesser extent, India and Latin America. World economic output is
expected to grow by about 3 per cent during the year, up from 2 per cent in 1993.
6. Even though the region has
posted its fastest growth rate in five years, Africa's share of aggregate world economic
output has continued to shrink, in spite of the fact that its population growth rate is
roughly twice that of the world. Africa has also continued to fall behind the other
developing regions which are now accepted as important engines of world economic growth.
7. On the demand side, based on
preliminary data, we estimate African domestic consumption, the aggregate of public and
private consumption, to have grown by 0.9 per cent, compared to 1.7 per cent last year
(Table 4). Fixed capital formation, including changes in stocks (fixed investments) is
tentatively expected to have grown by 5.2 per cent, up from 1 per cent in 1993.
8. The long list of factors, active
to differing extents in the African countries, which explain the region's weak economic
performance over the years has invariably encompassed the following:
. foreign exchange resource
constraints arising from the escalating debt burden, inadequate flow of foreign assistance
and the deterioration in the terms of trade;
y poor economic management at the
micro and macro levels, including economic policies not conducive to saving, investment,
and sustainable development;
y leakages and misallocation of
scarce national resources stemming from lack of transparency and accountability;
. structural deficiency of the
African economies which also tend to accentuate the impacts of external shocks, such as
sudden price changes, droughts, pests, etc.
y political instability and
conflict situations; and
y inadequate support for the role
of women in development.
9. The modest gain in the regional
economic growth during 1994 must necessarily be credited on improvements in some of these
factors. The weather was more favourable to agriculture in most parts of the continent
than in 1993, though a number of countries were ravaged by drought during at least a part
of the year with consequent reduction in agricultural output. Regional agricultural output
has grown by a modest 3.1 per cent in 1994 compared to 1.8 per cent in 1993. The food
sub-sector however failed to much its impressive growth in 1993 having increased by only
2.5 per cent compared to 4 per cent last year. Moreover, in view of Africa's population
growth rate, per capita food production has declined by about 0.5 per cent, leaving the
continent no nearer to its goal of food self-sufficiency. A failed rainy season in the
third quarter of 1993 and first quarter of 1994 precipitated famine conditions over a wide
area covering about 22 million people and spread over some ten countries in the Horn of
Africa in the first half of the year. In the most affected countries, notably Eritrea,
Ethiopia and Kenya, death and massive population displacements were averted through timely
distribution of increased food imports and food assistance. However, the situation was
brighter in the other subregions. In Northern Africa, Morocco and Egypt enjoyed bumper
harvests of wheat and coarse grains in 1994 largely due to adequate rains in the growing
season. In the Sahel belt and in the coastal countries of West Africa above-average
harvests are expected. South Africa and Zimbabwe had bumper harvests of wheat and maize.
Even areas in the Horn of Africa expect a good harvest, thanks to a respectable main rainy
season in mid-1994. Compared to aggregate food imports and food assistance of 8.6 million
tonnes in 1993/94, import requirements in 1994/95 are likely to be somewhat lower, in the
order of 15.2 million tonnes.
10. The peaceful constitutional
transition from apartheid to a new democratic and non-racial dispensation in the Republic
of South Africa under the leadership of President Nelson Mandela kindled domestic and
international confidence in that country's future. A number of other countries also made
the transition from long- established one-party rule to multi-party democratic governance
under remarkably peaceful conditions. The majority of African countries continued to
implement economic reforms, but at considerable social costs.
11. On the other hand, while no new
conflict situations emerged on our continent in 1994, the chronic flashpoints continued to
be of much cause for concern not only for Africa but for the world community of nations.
Indeed, the conflict in Rwanda which, in 1993, had only simmered with a negotiated
power-sharing solution in sight, suddenly erupted in April 1994 into a horrible genocidal
cataclysm for which neither Africa nor the international community were adequately
prepared. Nearby, Burundi teetered on the brink; while hostilities continued in Angola and
southern Sudan. Tensions persisted in different countries, among them Egypt, Algeria and
Zaire, while Nigeria, one of the three largest economies in Africa, endured a period of
political tension and labour unrest. The stalemate in Somalia continued. Inevitably, these
situations repressed somewhat Africa's economic growth rate in 1994.
12. With the conflict-affected
countries excluded (Angola, Liberia, Rwanda and Somalia) the remaining countries have
posted a growth rate of 2.9 per cent against 1.2 per cent last year (Table 1). However, to
the extent that they have reinforced the misconception that all African countries without
exception are "conflict-prone" and "unstable", these situations, quite
likely served to discourage investment inflows to Africa, reducing economic growth
prospects over the medium term.
13. Africa's modest growth in 1994
however reflected considerable variations. As to be expected, there were significant
variations in performance by subregion and country. Economic output of the six countries
in North Africa has grown at an annual rate of 2.5 per cent this year, compared to 0.8 per
cent in 1993. The sixteen countries of the West African subregion have posted a growth
rate of about 2.6 per cent, against 3.2 per cent last year. The twenty one countries of
East and Southern Africa, including the Indian Ocean Island States, have had a growth rate
of 3.7 per cent, against 1.5 per cent last year. The seven countries of the Southern
African subregion, including the Republic of South Africa, are expected to grow by 3.8 per
cent, compared to 1.2 per cent in 1993. However, output from the ten countries of the
Central African subregion is expected to have shrunk by 0.2 per cent during 1994,
following the 4.8 per cent decline in 1993. The 32 African least developed countries
(LDCs) are expected to post a growth rate of 1.7 per cent, slightly up from 1.6 per cent
last year. And Africa's oil-exporting countries are expected to grow by only 2 per cent
compared to 1.7 per cent in 1993.
14. At the country level, eleven
African countries have recorded negative growth rates this year compared to seventeen last
year, while 12 are expected to exceed 5 per cent; the same number of countries as last
year, which explain the slight improvement of economic performance at the regional level.
(Table 2).
15. Africa's export revenues in
1994 are expected to rise to $ 95.2 billion from $ 91.3 billion in 1993, a nominal rise of
only 4.26 per cent, in spite of the large raises in commodity prices. African exports have
recorded only a modest growth of 2.0 per cent in volume terms, compared to 1.1 per cent in
1993 (Table 4). The rise in export values was attributable to impressive surges in the
prices of almost all primary commodities, especially coffee, cocoa, tea, cotton and
minerals during the year. On the other hand, the weakening of oil prices by about 7.6 per
cent has however dampened export growth.
16. Imports, on the other hand, are
estimated to have risen from $ 95.5 billion in 1993 to $ 101.7 billion in 1994 in value
terms, a nominal increase of roughly 6.5 per cent (Table 4). The widening trade deficit on
the merchandise account, combined with a reduced surplus on transfer payments and an
increased deficit on the services account are expected to result in a current account
deficit of about $ 7.8 billion, somewhat larger than last year.
17. Based on preliminary data, the
comprehensive African Export Price Index compiled by UNECA has increased by 2.1 per cent,
with petroleum included. However, when it is excluded, the export commodity price index
rises by 18.7 per cent. The price index of beverage commodities as a group enjoyed a
spectacular surge of almost 60 per cent, mostly due to buying and speculative pressures in
the coffee market provoked by news of frost and drought in the coffee-growing areas of
Brazil and due to low stocks of cocoa. Food prices have increased by some 5 per cent.
Mineral and metal prices have risen by about 6 per cent, spurred by recovery in
industrialised economies. On the other hand, as noted above, prices of crude petroleum
have declined by 7.6 per cent, due to OPEC's decision to maintain its world market share.
This was, no doubt, a boon to the African oil-importing countries, but a significant loss
of revenues to the oil exporters. On the side of imports, Africa benefitted from the
continued moderate inflation in the industrially advanced economies. Thus, world prices of
manufactured goods have risen by only 0.7 per cent after falling by 2.2 per cent in 1993.
In spite of the impressive performance of commodity markets in 1994, Africa's terms of
trade improved only slightly by 0.6 per cent during 1994, after falling by 4.9 per cent
last year (Table 5). However, there was a wide gap between oil- exporting and other
countries, with the former suffering a large decline in their terms of trade (up to 9 per
cent) while the latter enjoyed a significant improvement (up to 17 per cent).
18. Prospects of robust growth of
the world economy, particularly in the industrialised economies, have provoked fears of
renewed inflationary pressures. The world financial markets have tended to see recovery in
commodity prices as an early sign of future higher inflation rates. An additional factor
in the medium-term perspective of the financial markets is, no doubt, the expectation of
strong world-wide demand for capital -- for the transformation of the former
centrally-planned economies; for the continuing expansion of the newly-industrialising
economies; covering the structural fiscal deficits of the leading industrialised economies
as well as the financing requirements of their enterprises to strengthen their position in
a more competitive global economy. Consequently, long-term bond yields (i.e., interest
rates on long- term debt) have risen significantly in the latter half of 1994. Bond
markets have weakened, and both the long-standing and the emerging stock markets alike
have suffered considerable volatility while retreating from the peaks attained earlier in
the year.
19. Developing countries, including
African countries, have been adversely affected by developments in the world financial
markets in several ways, in view of the globally integrated nature of the post-Cold War
and post-Uruguay Round world economy. They have been affected in the first instance
because their currencies, convertible at best only to a limited extent, are usually pegged
to the US dollar or some other major currency; so they are forced to bear the
macro-economic consequences of appreciation or depreciation. Secondly, since commodity
prices (and export revenues) tend to be quoted in US dollars while developing countries'
expenditures on imports and debt servicing are spread over all the major currencies, the
depreciation of the dollar must have amounted to a significant terms-of-trade loss for
some countries. Thirdly, the rising interest rates increased the debt servicing
obligations of countries with debt contracted at variable interest rates, and raised the
cost of capital for all and curtailed access to the financial markets by countries with
weak credit ratings.
20. Perhaps the most important
economic international event in 1994 was the signing of the Final Act of the Uruguay Round
of the General Agreement on Tariffs and Trade (GATT) by the leaders of more than 120
countries assembled at Marrakech, Kingdom of Morocco in April 1994. It mandates sweeping
liberalisation of international trade through a reduction of tariff rates by more than
one-third and by lowering if not eliminating non-tariff barriers. It brings trade in
agriculture and services under the umbrella of the GATT for the first time. Though not
enough progress was made during this round of negotiations in the direction of reducing
tariffs, producer and export subsidies and other non-tariff barriers erected predominantly
by the richest economies against agricultural exports of the developing countries, these
issues will be on the agenda of future rounds of negotiations. Similarly, little actual
progress was made on trade in services, partly due to concerns voiced by the developing
countries about their fear of domination by advanced countries' better capitalised service
enterprises, and partly due to the reluctance of the United States to open its services
sector without firm guarantees of reciprocity. These, again, are issues on which progress
can be expected to be made, however painstakingly, in Tcontinuing and future rounds of
negotiations.
21. The Final Act provides for the
establishment of an institutional successor to the GATT, the World Trade Organisation
(WTO), which will implement international trade agreements and oversee future negotiations
to extend the scope of global trade liberalisation. In view of the importance that
developing and developed countries alike increasingly attach to international trade, and
considering the asymmetrical distribution of bargaining power, the WTO is destined to
wield enormous influence over the economic policies of the developing countries. What will
be critical, therefore, is what coordination will emerge between this new organisation and
the Bretton Woods institutions on the issues involved in macro-economic policy advice to
the developing countries. This, in turn, will be determined to a great extent by how much
say the developing countries will be able to exercise in the formulation and supervision
of global trade policy. The WTO is expected to take over from the GATT on January 1, 1995
when the Uruguay Round agreement enters into force.
22. The GATT secretariat recently
revised their assessment of the benefits expected to accrue from the implementation of the
Uruguay Round agreement. It raised its estimate of the expected boost to global output
from over $ 200 billion to over $ 500 billion per annum. The overwhelming share of
benefits, however, will flow to countries with a flexible industrial base backed by a well
developed skills base, nimble enterprises, reliable and efficient physical
infrastructures, adequate domestic savings and a sound macro-economic environment. This
means the industrially-advanced market economies of the OECD and the dynamic
newly-industrialising economies, particularly China, the South-East Asian and Latin
American economies. Africa, on the other hand, stands to gain the least from the Uruguay
Round agreement. Indeed, some influential earlier studies before the recent GATT study
estimated that Africa could lose as much as $ 2.6 billion annually as a consequence of
lost preferences under mandatory revisions to the GSP and Lom Convention as well as
increased food import bills. For Africa to play a meaningful role in the emerging
international trading systems, massive investments are required for the rapid
diversification of the African economies and building up their competitiveness in areas of
comparative advantage to them. A policy shift should also take place in the agricultural
sector so as to boost production and lessen Africa's dependency.
23. Let me now turn to the social
scene. The year witnessed a further exacerbation of some of Africa's perennial problems.
Today, the number of refugees in Africa is in excess of 7 million or approximately one
third of the total world refugee population. About three times that number are internally
displaced in various parts of the continent. The recent crises in Rwanda and Burundi alone
generated over 2.4 million refugees, with a devastating impact on the population as a
whole especially on the vulnerable groups. Today's refugees and displaced persons in
Africa are mostly the product of internal conflicts, ethnic tensions, political violence
and natural disasters, whose return home is complicated by problems of poverty, social
inequity and the ever-present fear of ethnic reprisals or killings.
24. Africa's population continues
to grow rapidly. At 3 per cent per annum, it outstrips average annual rates of economic
growth and food production, which as we indicated earlier were respectively 2.8% and 2.1%
in 1994. Rapid population growth has made natural resource management more urgent than
ever, as population pressures contribute to unsustainable use of natural resources and
environmental degradation which, in turn, accentuates poverty. At the centre of the
population problem is the slow pace of economic development. Indeed, development is an
essential condition for the slowing down of population growth.
25. Severe cut backs of expenditure
on education and emphasis on cost recovery and cost sharing continue to affect adversely
the education sector, evidenced in falling gross enrolment ratios, haphazard attendance,
high attrition and repetition rates, low morale and exodus of teachers from the
profession. In some cases, pay disputes between governments and teachers' associations as
well as political tension or strife have contributed to the closure of many educational
institutions. As with the educational sector, so with the health sector. Cost recovery
programmes as well as pay disputes have interrupted the demand for and supply of quality
health care in many countries.
26. Let me observe that this year
witnessed many important events that will have a salutary effect in advancing social
development in Africa. This year the International Conference on Population and
Development was held in Cairo, Egypt from 5-15 September, 1994. The Cairo Conference
adopted a Programme of Action on population and development. The Programme underlined,
among other things, the goals of promoting education especially for girls, gender equity
and equality; and the reduction of infant, child and maternal mortality. The objectives
and goals of the Programme of Action are consistent with those of the Dakar/Ngor
declaration on population, family and sustainable development, which was Africa's input to
the Cairo Conference.
27. The first meeting of the
Conference of African Ministers Responsible for Human Development met in January this year
to adopt an African Common Position on Human and Social Development in Africa as the
region's input to the World Summit for Social Development to be held in Copenhagen,
Denmark in March, 1995. The Common Position has outlined several recommendations in the
areas of poverty reduction, social integration, and unemployment -- the main issues to be
discussed at the Social Summit.
28. The Fifth African Regional
Conference on Women met in Dakar, Senegal in November to articulate an African Platform
for Action which will be submitted to the Fourth World Conference on Women to be held in
Beijing, China in September, 1995. The African Platform for Action underlined the need to
empower African women politically and economically, increase their access to education,
training, science and technology, support their vital role in society and the family, and
protect their legal and human rights.
29. Social policy in African
countries will benefit from these events, in as much as African countries initiated or
joined other nations in making commitments for social progress through these meetings.
II. Economic Policy Developments
in Africa in 1994
30. As in recent years, African
countries continued to face macro- economic imbalances in 1994. At the same time, however,
the overwhelming majority strove to restore balance and stability by implementing reform
programmes. The fact that they all did not succeed in achieving their budgetary targets is
not so much because of a lack of resolve or conviction but, rather because of rigidities
in expenditure and due to unforeseen circumstances, such as drought or instabilities,
which blew initial economic projections off course. Economic reforms in African countries
necessarily comprise a broad agenda all of which cannot indeed be tackled at the same
time. There is room, therefore, for individual countries to select their own priorities
and sequencing among the structural problems they would like to correct in order to move
their economies towards price, interest and currency exchange rate stability, efficiency
and higher productivity, economic recovery and sustained growth with social equity and
poverty reduction. 31. In a number of countries, fiscal reforms were undertaken aimed at
enhancing public revenues and restraining public spending with the objective of reducing
the fiscal deficit in proportion to GDP. They took a two-pronged approach towards
enhancing public revenues : through institutional reforms, e.g., strengthening revenue
agencies, to increase the collection rate; and through the broadening of the tax base by
increasing the scope of indirect taxation, e.g., by introducing value-added tax and user
charges on some public services. In a number of countries, members of the business
community viewed taxes as a major disincentive to investment. Some countries have taken
steps to redress this situation. At the same time, several governments took steps to
reduce spending by reducing the public sector payroll, by cutting or eliminating subsidies
and by holding down the growth rate of public consumption. This also involved public
sector restructuring and expenditure rationalisation in some countries, and public
enterprise reforms in some others.
32. In spite of all these concerted
efforts, the fiscal gap continued to widen due to unforeseeable factors. In Malawi, for
example, the prolonged severe drought has drastically reduced agricultural tax revenues
while it has increased expenditures on food imports for relief distribution to fill the
massive food shortfall. In Morocco, on the other hand, which had a better than average
harvest in 1994, the Government had to buy surplus grain from the farmers at guaranteed
floor prices. In countries making the transition from conflict to peace, for example
Mozambique, the enormous costs of demobilisation consumed some of the savings from
military spending. Also, in many countries loopholes which distort the fairness of
taxation have yet to be closed and efficient revenue collection systems were yet to be put
in place to minimise corruptive tendencies. Consequently, fiscal deficits are expected to
average about 6 per cent of GDP, up from about 5 per cent last year. However, in order to
contain monetary expansion, some African countries have financed the bulk of their fiscal
deficits by issuing treasury securities rather than directly resorting to borrowing from
their Central Banks.
33. In addition to efforts to check
excessive money supply growth, in different African countries, monetary and financial
reforms were in the direction of freeing interest rates, restructuring financial
institutions and introducing a measure of deregulation in the operations of the financial
sector while strengthening the prudential supervisory role of the Central Bank over other
financial institutions. The aim clearly was to establish the basis for the development of
a sound financial sector for increased mobilisation of domestic savings and improved
allocation to investments through more efficient intermediation. Some countries, such as
Morocco, prepared to expand the scope of private participation in the financial sector,
either through whole or partial privatisation of state-owned financial institutions. In
Ethiopia, the first private banking and insurance share companies since 1974 were
established wholly on private initiative, following the promulgation of a comprehensive
new law governing the registration of financial enterprises. It is still too early to
judge the success of these initiatives in raising the gross domestic savings rate or
improving the quality of investments; however, they are steps in the right direction.
34. A number of countries have
embarked upon currency reforms. The devaluation of the CFA franc in January 1994 was the
most notable case of exchange rate adjustment in Africa during the year. This was because
of the number of countries that were involved -- 14 countries in two regions, West and
Central Africa, plus the Comoros. It was also due to the 100 per cent scale of
devaluation, from 50 CFA F to 1.00 FF to 100 CFA F to 1.00 FF, which initially caused some
consternation in different segments of society in the CFA zone countries. The CFA franc
devaluation was negotiated as an overall package including the cancellation of some of the
public debt owed to France plus new resources from the IMF, the World Bank and other
development partners in support of a range of macro- economic reforms.
35. The impact of the devaluation
during the first year has been rather mixed. It appears, as would be expected, to have
shifted the domestic terms of trade in favour of tradeables vis vis non- tradeables
as well as in favour of industries which utilize local inputs versus those heavily
dependent on imports. But, while exports have revived in some countries, this has not yet
attained the level that would be expected from the quantum leap in world market
competitiveness conferred to CFA zone producers by the devaluation. On the other hand,
domestic demand, by and large, appears to have been curbed. While this will have helped to
reduce imports, it has also repressed economic growth somewhat. At the same time,
devaluation triggered a jump in prices during the year. It is to be expected that these
initial negative impacts of the devaluation shock will attenuate with the passage of time.
Clearly, however, other important determinant factors of competitiveness must also be
addressed seriously -- transport, telecommunications and energy infrastructures;
productive skills in the labour force and labour market reforms; more vibrant enterprises
that are aggressive in search of export markets; policy incentives; etc. These factors
should be given at least as much attention as macro-economic stabilisation in the
structural adjustment programmes of the CFA zone countries.
36. However, the impression should
not be given that the only development on the African currency scene in 1994 was
devaluation and depreciation. In some countries where reforms have already reached an
advanced stage, notably in Uganda and Kenya, in fact, currencies appreciated against a
weaker US dollar ($). But, more importantly, this reflected increased supply of foreign
exchange from export revenues, modest increase in remittances, and budgetary assistance
from donors in support of agreed reform programmes. Similarly, while interest rates have
generally risen with the implementation of monetary and financial reforms, in countries
where inflationary expectations have been curbed, such as in Uganda, rates have began to
decline.
37. Privatisation is another area
targeted by economic reforms. Here, progress is thwarted by the paucity of domestic
savings within African countries, lack of aggressive entrepreneurship and lack or
underdevelopment of stock markets. There is understandable reluctance on the part of the
countries to dispose of public enterprises entirely to foreign investors often at
give-away prices. Thus, countries are searching for an approach that would ensure that
nationals retain significant equity in privatised assets, for example, through joint
ventures with foreign investors. To the extent possible, they would also like to have a
wide dispersal of shareholding in major privatised enterprises. Thus, before the
government of Ghana floated on the London Stock Exchange its remaining shares in the
Ashanti Goldfields Company early this year, it reserved almost 2 per cent of the shares
for the workers. In Ethiopia, the government has chosen to break up the assets of the
state-owned transport corporation into three shareholding companies to be wholly
transferred to the workers in the form of a loan equal to the value of the transferred
assets. Indeed, privatisation, properly conceived, should be a strategy to accelerate
economic growth and development with equity, rather than widening economic disparities in
society by increasing the concentration of economic power.
38. Progress was also made in other
areas of reform notably, as regards market and tax reforms geared towards the improvement
of the investment climate for domestic and foreign investors.
39. Thus, the African countries are
living up to the commitment they made in the UN-NADAF to implement reforms to make their
economies more efficient. The same is true also in the case of democratisation.
Unfortunately, while Africa's external partners have continued to provide development
assistance, they have not fully lived up to their commitments under UN-NADAF. The level of
net resource transfers to Africa over 1990-1994 has fallen far short of the $ 30 billion
advocated for 1992 alone and with an expected growth rate of at least 4 per cent per
annum. In 1994, for instance, net external financing to all African countries, including
South Africa, is not expected to exceed $ 14 billion, only a small improvement on 1993. In
the other developing regions with greater dynamism, foreign direct investment has become
the dominant vehicle for the transfer of resources from the rich to the poorer countries.
Africa, however, is not yet in a position to attract FDI and portfolio funds on a scale
that would make a sizeable impact, because of the continent's relatively uncompetitive
position in the world. Africa therefore will continue to need substantial official
development assistance from its partners.
40. A second commitment of Africa's
partners was to take meaningful steps to lighten African countries' crushing external debt
burden which Secretary-General Boutros Boutros-Ghali has likened to a "millstone
around the neck of Africa". And yet, almost mid-way in the implementation of
UN-NADAF, with Egypt excepted, no meaningful steps have been taken collectively by the
creditors to substantially reduce the stock of debt of any African country. Thus, in spite
of the repeated backing of the "Enhanced Toronto Terms" by the leaders of the
Group of Seven richest industrialised states (the G7), from 1991 to 1994, 21 African
countries have negotiated rescheduling agreements amounting to only $ 7.14 billion of
their debt. The limited scope of such attempts to tackle the African debt problem is
obvious, considering that at the end of 1993, the aggregate external debt owed by the
African continent, including South Africa, was $ 301.8 billion. Excluding South Africa,
the debt to GDP ratio of the rest of Africa had risen to 95 per cent, while it was more
than three times the value of exports.
III. Prospects for 1995
41. Prospects for Africa's economic
performance in 1995 obviously depend on the out turn in a number of domestic as well as
external factors that traditionally have a bearing on Africa's growth and development.
42. Weather conditions,
availability of vital agricultural inputs, Tthe situation regarding locusts and other
agricultural pests, all continue to be very important determinants of agricultural and
food output. Another crucial factor is the level of world market prices for export crops
such as coffee, cocoa and tea. If all these factors are favourable in 1995, and if policy
emphasis is placed on the development of rural infrastructure, improvement of producer
incentives, and more efficient marketing arrangements, the rate of growth of agricultural
output could increase to 4-5 per cent, well above the rate of population growth.
43. African countries' earnings
from agricultural and mineral exports may retain their current positive trends if the
dynamics of the recovery in the OECD countries are maintained. But, on the other hand, the
surges in commodity prices this year may well encourage producers in other competing
countries to step up production and increase supplies on the world market -- which could
reduce prices from the levels attained this year. Prospects for an improvement in the
petroleum market are rather clouded in 1995.
44. Progress towards the
restoration of peace would launch countries previously embroiled in conflict recovery and
sustainable development. The recent successful elections in Mozambique, held under the
auspices of the United Nations, should create conditions for the restoration of peace
throughout the country, opening up opportunities for the exploitation of its rich natural
resource potential and its strategic importance in the transport infrastructure of the
Southern African subregion. The recently concluded peace agreement in Angola will also,
hopefully, help create conditions for the relaunching of development in that country. It
is hoped, similarly, that significant breakthroughs towards peace and reconciliation will
be forthcoming in Liberia, Somalia and southern Sudan, and that the fragile situation in
Rwanda and Burundi will become more viable in 1995. It is also hoped that transition to
democracy in African countries will be achieved under peaceful conditions. In all these
situations, substantial assistance will be needed from Africa's development partners to
underpin the reconstruction and development process.
45. African countries will no doubt
continue to intensify their economic reforms in the direction of growth and transformation
in 1995. It is to be hoped that the economic efficiency and macro- economic stability
concerns of the reforms will be integrated within a sustained long-term programme to build
critical capacities in the areas of human resources, institutions, and economic and social
infrastructures to put it on a sustainable footing and make it fully competitive in the
modern world economy.
46. In South Africa, 1995 should
see an intensification of efforts, through the implementation of the Reconstruction and
Development Programme (RDP) to correct socio-economic imbalances inherited from the
apartheid era. Coupled with the firm stance towards fiscal responsibility, price
stability, support for the private sector, and encouragement of foreign investment, South
Africa's economic growth rate should accelerate. This, however, will also require labour
and employers to build a new pragmatic relationship, based on a sympathetic understanding
of each side's basic concerns as they set out to correct the labour market distortions
entrenched by forty years of apartheid.
47. Altogether, therefore there are
some grounds for modest optimism for the continental African economy in 1995. As in
previous years, however, the vicissitudes of the weather and pests obviously continue to
cast a cloud of uncertainty over future prospects, in view of the importance of
agriculture's contribution to Africa's aggregate output, export revenues, and employment.
Assuming normal conditions, the UNECA secretariat estimates that continental Africa's
economic output should grow by about 3 per cent in 1995.
IV. Facilitating Africa's
Transition to Accelerated Growth and Development
48. The picture that emerges from
the preceding review of the economic and social situation in Africa is one of modest
improvement in performance. Even so the urge and impetus for progress is widely felt in
virtually every African country. This has found expression in the economic restructuring
embarked upon by some; in the political reforms to improve governance taking place in
many; and in the renewed emphasis on social justice that is emerging, exemplified in the
various announced policy commitments to empower women, protect children and settle
conflicts that have plagued some countries. Africa, indeed, is in the midst of change. In
short, Africa is a region in transition, slow and uneven though that transition might be.
49. The transitions in Africa at
the domestic level are matched by equally important changes at the international level.
The end of the Cold War, early this decade, set the stage for sweeping changes in the
geopolitical structure. But, arguably, it is the changes in the international economy that
will exert influence on the pace of Africa's transformation and to which, in turn, African
countries must respond. There is always great danger in extrapolating current trends into
the future. Nonetheless, some key features of the evolving international economy are
evident:
the formation of regional trading
blocs, with the novel feature of industrialized countries joining together with developing
countries in some cases; a strengthened framework for international trade resulting from
the Uruguay Round which has given further impetus to trade liberalisation, expanded the
range of products brought under negotiated international trade rules, and created the
World Trade Organization that will oversee the conduct of global trade;
intensified competition in the
production and marketing of goods and services, but also in access to markets for trade,
finance and investment;
globalization of production
processes and finance, both in the sense that financial impulses in one country are
rapidly transmitted to another but also in the sense that transnational corporations --
major agents of economic globalization -- can rapidly relocate production facilities in
response to perceived risks and rewards;
increased speed with which
international markets reward sound national economic decisions and penalize imprudent
actions.
50. Against this backdrop, and with
only five years away from the dawn of a new millennium, obviously, Africa has no option
but to come to terms with the highly competitive global economic environment of the
future. This environment has been created by leaps of technological progress especially in
transport and telecommunications, the waning of monopoly over skilled human resources by
the industrially-advanced economies, the end of the post-Cold War era and the revolution
in economic relations which it ushered in throughout the world. The Uruguay Round
agreement has merely codified these fundamental forces which ultimately underlie the
ongoing sweeping liberalisation of the global trade regime. The challenge facing Africa
therefore is to embark without delay upon an equally sweeping overhaul of its economic
structure.
51. At one level the reforms
referred to earlier are important elements in grappling with the challenges of a new era.
There is a political as well as economic dimension to this task. Competing effectively in
the new international environment requires that the economic reforms must induce
structural transformation and, in that context, African countries must inject efficiency
and dynamism into their economies by eliminating distortions, empowering the private
sector to seek competitive solutions to socio-economic problems and attract domestic and
external savings to be invested in sustainable development. The political reforms, on the
other hand, should, in addition to promoting popular participation in the political
process, provide a framework for a peaceful, stable environment in which political
disagreements and differences as well as contractual disputes are resolved through
judicial arbitration.
52. At another level, it is clear
that the critical capacities needed to underpin the various reforms are lacking. This
argues for building and utilising the human, institutional and infrastructural capacities
for managing a modern economy and polity. And yet at another level, it is imperative that
African countries promote collective policy actions to cope with the new and emerging
trends in the world economy.
53. The African Economic Community,
whose treaty came into force last May is an example of concerted action that reinforces
Africa's capacity as a potentially major player in the international arena. The word
potential needs to be underlined. The AEC puts Africa on the eve of a new era. As such,
the commitments made in the Abuja Treaty need to be matched by requisite actions for its
promise to be realized. The African Economic Community must be perceived and conceived not
only as a vehicle for expanded regional cooperation, but as a strategic response to a
world economy evolving around trading blocs.
54. Now that the Abuja Treaty has
entered into force, the first of the six stages towards the establishment of the African
Community should be accelerated. According to the Treaty, this requires the strengthening
of the Regional Economic Communities, notably, Maghreb Arab Union (UMA), the Economic
Community of Western African States (ECOWAS), the Economic Community of Central African
States (ECCAS), the Common Market of Eastern and Southern Africa (COMESA), and the
Southern African Development Community (SADC). Through their Joint Secretariat, the
Organisation for African Unity (OAU), UNECA and the African Development Bank (ADB), will
continue to provide technical assistance towards the implementation of the Abuja Treaty,
as mandated by our Heads of State and Government. The UNECA-sponsored institutions, are a
vital resource in the building of critical capacities for Africa's sustainable
development; and they are an indispensable instrument in strengthening regional economic
cooperation and making the AEC an early reality. It is within this context that I appeal
to our member States and particularly to our development partners to consider them among
the highest development priorities of the continent.
55. Neither the efforts in
undertaking reforms nor at building critical capacities nor even at regional integration
will succeed without significant infusion of financial resources. African countries simply
do not possess the amount of resources needed to underwrite these efforts. The estimates
of the order of magnitude of resources needed for Africa's development in the next 15-20
years made by various international organizations, including UNECA, confirm this. It is
thus beyond doubt that Africa needs more international financial and economic assistance.
However, current trends in the flow of external financial resources point towards
contraction.
56. Assistance to Africa is
alternately portrayed as charity or contribution to a bottomless pit! But while aid to
redress many natural disasters and other emergencies in Africa, as elsewhere, has been
inspired by humanitarian considerations and while, there have clearly been instances of
inefficient disbursement and use of aid in Africa, the fact is that much of what passed
for aid during the Cold War did not go to promote development. Rather, aid was driven by
considerations of ideological loyalty, with military component accounting for a large
part. It is now when -- African countries are embarked on market-friendly reforms,
establishing democratic polity, and showing commitment to promoting social justice -- that
aid is most needed to buttress these promising developments. If this first opportunity to
use aid to foster the core issues of development is denied, it will represent a severe
blow to multilateral cooperation for development.
57. It will also be a paradox. On
the one hand, international cooperation -- in the sense of consensus or agreements on a
wide range of issues -- is growing. There is consensus to promote environmental
sustainability, to eliminate trafficking in illicit drugs, to curb population explosion,
to empower women, to protect children, to reduce poverty, and to promote social
integration and cohesion without which national and international peace and security are
impossible. There is also broad consensus on the five pillars of development articulated
in the Secretary-General's Agenda for Development. On the other hand, there appears to be
a growing disinclination on the part of the wealthy nations to contribute to realizing
these common causes by increasing aid flows -- the so-called "aid fatigue". In a
way, the summons to increase aid to Africa is primarily a call to the industrialized
countries to live up to their moral commitment to a better and common future for all.
58. South-South cooperation
represent an important instrument to pursuing the goals of recovery and development. By
drawing, in particular, on the experience of economic development and transformation in
Asia and promoting economic and technical cooperation with them, Africa can apply and
benefit from the lessons from that region. The organizations of the United Nations can and
should play an important role in facilitating the transfer of experience and assistance
between Africa and other developing regions.
59. As I have said on many
occasions, Africa has a future but realizing this promise is a shared responsibility
between us, Africans, and our development partners. The enormous potential of Africa, in
terms of natural and human resources, geographical position and its rich heritage are
among the essential assets that the development of the continent should be built on. It is
the challenge for all of us partners in development. It is time to act and act fast.
Africa cannot afford to be left behind in the development race.
60. I thank you for your kind
attention.
Table 1: Gross Domestic Product Growth
Distribution
1992 1993 1994 1990-1994
GDP (1990 prices) : growth rate
Africa -0.3 1.1 2.8 1.5
North Africa 1.0 0.8 2.5 1.8
West Africa 2.3 2.8 3.0 4.3
Central Africa -4.7 -4.8 -0.2 -2.7
East & Southern Africa -1.9 1.5 3.7 0.9
Southern Africa 2.0 1.2 3.8 0.8
Oil Exporters- 0.9 1.7 2.0 1.5
African LDC's -0.4 1.6 1.7 0.9
Memoranda Items:
South Africa -2.2 1.2 4.1 0.5
Africa excluding States in -0.3 1.2 2.9 1.6
Conflict
Source:UNECA Secretariat
Table 2: Frequency Distribution of Countries, by Growth
Rates
Negative Between 0 and 3 % Between 3 and 5 % More than 5
%
Number of countries
-In 1993 17 14 10 12
-In 1994 11 17 13 12
Source:UNECA Secretariat
Table 3: Growth in Value-added for the Production Sectors
1992 1993 1994 1990-1994
Agriculture -1.6 1.8 3.1 1.9
Manufacturing -1.2 0.1 4.8 0.4
Mining -1.8 1.3 -4.2 -0.7
Public Administration 1/ 3.2 1.1 -3.7 0.3
Services 1.2 1.7 2.0 1.6
Memoranda Item:
Oil production (million tons) 343.4 339.2 338.2* 1.2
Source:UNECA Secretariat
1/Public administration, electricity and water
*Estimate
Table 4: Growth on the Demand Side
1992 1993 1994 1990-1994
Domestic consumption: 1.2 1.7 0.9 2.0
- Public 2.1 4.4 0.4 2.2
- Private 1.0 1.0 1.0 1.9
Gross fixed capital -1.0 -1.0 7.2 -0.1
formation
Exports -0.5 2.1 3.2 0.7
Imports 0.2 2.6 2.8 1.8
Source:UNECA Secretariat
Table 5: African Price Indices 1/
1992 1993 1994 1990-1994
Consumer price index
Commodity price index 83.8 74.9 74.8 77.8
including oil
- food 100.7 99.6 104.8 101.7
- beverage & tobacco 81.8 86.9 138.9 102.5
- agricultural raw 99.9 100.5 108.7 103.0
materials
- metals and minerals 86.6 72.8 77.2 78.9
Petroleum crude prices:
Brent crude ($/b) 19.4 17.0 15.7 17.4
- Petroleum price index 80.6 71.0 65.6 72.4
African export price index 86.5 79.9 81.6 82.7
(including oil)
Memorandum Item:
African commodity price index 93.5 87.2 103.6 94.8
(excluding oil)
I. African countries will no doubt
continue to intensify their economic reforms in the direction of growth and transformation
in 1995. It is to be hoped that the economic efficiency and macro-economic stability
concerns of the reforms will be integrated within a sustained long-term programme to build
critical capacities in the areas of human resources, institutions, and economic and social
infrastructures to put it on a sustainable footing and make it fully competitive in the
modern world economy.
II. In South Africa, 1995 should
see an intensification of efforts, through the implementation of the Reconstruction and
Development Programme (RDP) to correct socio-economic imbalances inherited from the
apartheid era. Coupled with the firm stance towards fiscal responsibility, price
stability, support for the private sector, and encouragement of foreign investment, South
Africa's economic growth rate should accelerate. This, however, will also require labour
and employers to build a new pragmatic relationship, based on a sympathetic understanding
of each side's basic concerns as they set out to correct the labour market distortions
entrenched by forty years of apartheid.
III. Altogether, therefore there
are some grounds for modest optimism for the continental African economy in 1995. As in
previous years, however, the vicissitudes of the weather and pests obviously continue to
cast a cloud of uncertainty over future prospects, in view of the importance of
agriculture's contribution to Africa's aggregate output, export revenues, and employment.
Assuming normal conditions, the UNECA secretariat estimates that continental Africa's
economic output should grow by about 3 per cent in 1995.
IV. Facilitating Africa's
Transition to Accelerated Growth and Development
IV. The picture that emerges from
the preceding review of the economic and social situation in Africa is one of modest
improvement in performance. Even so the urge and impetus for progress is widely felt in
virtually every African country. This has found expression in the economic restructuring
embarked upon by some; in the political reforms to improve governance taking place in
many; and in the renewed emphasis on social justice that is emerging, exemplified in the
various announced policy commitments to empower women, protect children and settle
conflicts that have plagued some countries. Africa, indeed, is in the midst of change. In
short, Africa is a region in transition, slow and uneven though that transition might be.
V. The transitions in Africa at the
domestic level are matched by equally important changes at the international level. The
end of the Cold War, early this decade, set the stage for sweeping changes in the
geopolitical structure. But, arguably, it is the changes in the international economy that
will exert influence on the pace of Africa's transformation and to which, in turn, African
countries must respond.
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