2005, blessing or curse for African economy

China View

NAIROBI, Dec. 19 (Xinhuanet) -- The year 2005 has been both a blessing and a curse for the African economy. The world's poorest continent no longer wanders at a crossroad, but rather on a track for the good, yet old specters refuse to go away and threaten the continent's very hope of recovery. The best news came in the middle of the year, when G8 group of rich Nations announced sweeping debt relief and aid initiatives to help the continent, second on the list was historic polls held in turbulent Liberia in the latter half of the year, ending years of conflict and delivered a clean sheet of electoral conduct. But all at the same time the world watched almost indifferently, at least for some time, hungry people in Niger and Malawi scrape along by, sometimes, eating tree bark, while Darfur and Somalia, after encouraging developments last year, mired deeper into conflict and insecurity.

HELP AFRICA OR HELP IT TO HELP ITSELF

    The G8 group of industrialized countries in July agreed in Scotland to double aid to Africa, which would mean 50 billion US dollars every year. Along with an earlier announced initiative to cancel 40 billion US dollars of multilateral debt owed by 18 poor countries, the bulk of which in Africa. More African countries' debts are also scheduled to be canceled.

    The continent was jubilant. Without the burden of servicing huge foreign debt, Zambia is able to employ more teachers; Tanzania is capable of abolishing primary school fees; Uganda will ensure more of its people get clean water... Not to mention what is to come with the aid package. "It was a good gesture," S. M. Nyandemo, an economist with the University of Nairobi told Xinhua in a recent interview. He said the debt relief and aid initiative was one big step toward the right direction in resuscitating African economy, which would eventually do not only Africa, but also the whole world much good.

"Whatever they (African countries) have to pay for those debts, and whatever they used to service those debts, can now be directed back into their economies, and invest" into where money is most urgently needed, Nyandemo said.

    But can debt relief and aid buy Africa the much-needed recovery is subjected to doubt. No successful poverty eradication effort in recent history, be it China's turn to market or India's nod to Entrepreneurship is brought to the hands of nations by outside aid. In fact, there are worries that "easy money" from the outside might not bring a robust home market and energetic private sector, although liberalized markets and privatized industries are usually among strings attached to aid money.

    "The key question is how positively these aid money can be used," Nyandemo said. Events took place after the G8 meeting in July demonstrated the urgency to build up certain capacities in Africa, which aid money alone cannot do. Top of the list is hunger in Niger, predicted even before this year started, when locusts ate away the already meager crops for harvest.

    But the government's plea for assistance exactly one year ago went largely unnoticed as the world grappled to come to terms with the shock of the Indian Ocean tsunami which killed two hundred thousand. When food aid finally started to arrive in August, situation in Niger already reached crisis level. And its prospect of attracting further aid was again overshadowed by Hurricane Katrina sweeping across Louisiana. So was the case with a similar hunger crisis in Malawi later this year, which was eclipsed by the earthquake in south Asia.

    "In many cases the donor community doesn't respond in time to Africa's calamities," Nyandemo said, suggesting African economies "team up to assist themselves," and African institutions such as the African Development Bank and the African Union "play a key role" in alleviating African disasters, "before the international donor community comes in."

  "Hunger crisis was created largely by poor agriculture policies," Nyandemo said, noting the lack of reform in agriculture sector and nearly non-existent scientific research in the sector in Africa did nothing to help enhance food security.

    Albeit there are problems aid alone cannot solve, aid can bring reforms that put Africa back on track. Jeffrey Sachs, a renowned economist in charge of United Nations' Millennium Project, reckoned the continent is simply too poor to grow. Doomed by disease and smallness of the countries and the majority of the populations' remoteness to the coast, Africa can attract little capital to support a feasible recovery. And its population save only a fraction of their income compared to what Asians do. Without huge amount of money injected from the outside, the continent is trapped in a vicious circle of poverty. The key question is just how to use the money positively, and not let it leak away along its course to reach all levels of the society.

    MATCHING WHAT AFRICA NEEDS AND WHAT THE WORLD NEEDS

    The African economy has seen some positive signs and a few good examples to look up to in the recent years. During the period between 1995 and 2003, the economy in the sub-Saharan African region grew by an average of 3.5 percent every year. The year 2004 was 4.5 percent. The World Bank and the International Monetary Fund both predicted it to top five percent this year. Quite a few countries, such as Uganda, South Africa and the oil producing West African lot, have performed especially well along the way. But the United Nations has already given a verdict on African poverty, saying its population living in extreme poverty has increased during the past decade, and will continue to increase in the near future, expected to be around 340 million in 2015, drawing a bizarre picture where poverty increases while the economy marches on.

    The West African oil giant Nigeria's coveted oil fields in the Southern Niger Delta churn out some 2.5 million barrels of oil every day, earning the country envied crude cash by the billions every year. But this year, amid sky-rocketing oil price, the traditionally volatile golden field of Nigeria is getting more turbulent, with facilities of oil giants such as Chevron Texaco and Shell seized by local youth and militias, interrupting production nearly every month. The government responded to the lack of law and order in the region by arresting some of the most prominent militia leaders and more frequent raids on those groups advocating for independence of the Delta.

    As evident in the Nigerian stand-off between oil giants and poor locals in the Niger Delta, who claimed the multinationals, have done little to help them while creating hordes of problems such as pollution, Foreign Direct Investment (FDI), though viewed as the one panacea to rid poverty and restore development, was questioned if it really helps Africa. The United Nations Conference on Trade and Development (UNCTAD) said in a recent report that foreign investment in Africa, mainly in mining and oil sector, have yielded little benefit for African countries' economies, and created few jobs for the continent's growing youth population.

  According to the UN agency, annual FDI received by Africa increased nine fold in the past 20 years to 18 billion US dollars, driven by a strong global demand for fuel and minerals.

  However, beneficiaries to this growth were a minority in Africa. The UNCTAD said the investment in oil sector, for example, remain locked in "enclaves" and did little to help the communities around them, hence the problem in Nigeria.

    "History has a habit of repeating itself," the study said. "In the past, foreign firms steered a development course for Africa at odds with local needs."

    In more explicit terms, UNCTAD Secretary-General Supachai Panitchpakdi told journalists that "the expectation for FDI to create growth, to create diversification, technology spillover and jobs has not really been fully realized according to expectations."

    Moreover, "the inflow of capital from FDI may be a benefit but the resulting outflow of profits may be so high as to make it a substantial cost," the report said. For example, Ghana and Tanzania had received as little as five percent of the value of gold exports from a foreign investment rush,according to the survey.

    "The best investment in Africa are those that trickles down and benefit the poor," Nyandemo, the economist with the University of Nairobi, told Xinhua, saying what Africa needs most is investment in physical infrastructure and human capital.

    The agricultural sector is the most important if the African economy is to take off, Nyandemo said, calling it the "core sector" that can create room and base for other sectors to evolve and develop.

    Nyandemo suggested African governments forge "partnership" with foreign investors where they always take 51 percent in the joint venture, and invest the profit in infrastructure and agriculture, in whichmultinationals rarely show any interest.

    However, the shape of things are not what Nyandemo would like to see. In order to compete with each other, many African countries even offer incentives to such a degree that they have become a sort of subsidy to foreign corporations, according to the UN report.

    OLD GHOSTS DIE HARD

    The paradox of growth in both the African economy and African poverty demonstrates the challenges the continent is facing. Heavy burdens of disease, corruption, conflicts and bad governance and an unfair world trade system all contribute to the painfully slow progress or even reversal in the sharing of newly created wealth. Some old ghosts die hard, and threaten to devour the precious improvements.

    Africa's disease burdens are like no other continent has ever seen. Its people account for 85 percent of the world's 1.2 million malaria deaths every year, and 75 percent of more than three million annual AIDS deaths. Rare but painful, even deadly, diseases such as river blindness, Guinea Worm and sleeping sickness also testifies to the health problems in Africa.

    Sub-Saharan Africa is also home to some 25 million people living with HIV, a time bomb that will one day impact hard and deep in the African economy.

    Efforts to reduce AIDS deaths have yielded results in Africa, with the World Health Organization's "Three by Five" initiative, which began in 2003, helping to transform HIV from a death sentence to a chronic but manageable disease by putting more than a million people in low- and middle-income countries on expensive cocktail of drugs.

  "Between 250,000 and 350,000 deaths were averted in 2005," UNAIDS announced last month. The "Three by Five" initiative was "dramatically scaled up" in the past year.

 However, as hopeful signs emerge, there are still about 3.2 million new infections in sub-Saharan Africa in 2005, far exceeding its 2.4 million deaths sin the same period, and outstripping efforts to contain it.

    Except disease, conflicts and corruption still haunt the continent. In Sudan's troubled western region of Darfur and the Horn of Africa nation Somalia, the chance of peace is again eclipsed by tribal, political and ethnic feuds, backtracking the much hyped progress made last year, sending tremorsall across the African continent as Darfur crisis enters into its third year, and pirates hijack ships carrying food aid in the high seas off Somalia's 3,000-km coastline.

    The African continent has long been considered the most corrupt, with evil-doing politicians go unpunished and officials follow their examples. Corruption watchdog Transparency International said in October out of 44 African nations covered in its 2005 Corruption Perceptions Index (CPI), 31 scored less than three -- "a sign of rampant corruption" -- on a scale of zero to ten.

    But that is not to say there's no positive progress. West Africa has seen a few things unlike what's likely to happen in the past. In Togo, the West African bloc of ECOWAS forced Faure Gnassingbe, son of longtime leader Gnassingbe Eyadema, who passed away in February, to back off from taking the helm without a popular vote, and go through elections to be declared president.

    Liberia, the one country that has seen more bloodshed than any other nation in Africa has, and destabilized its region for the past decade, held internationally heralded general polls in October and November, and began its journey towards peace and prosperity. Burundi has also done the same, while the Democratic Republic of the Congo held its vote on a new constitution this month.

Governments in Africa have their ups and downs, but with democracy taking roots on the continent, responsible governance is bound to be the trend, and steer African countries towards development. Yet the world market doesn't seem too friendly to aspiring African nations. Rich nations continued to provide huge subsidies to their farmers, denying African produce a fair chance in their markets. Farm export subsidies, which in the European Union alone amounts to 55 billion euros (about 66 billion US dollars) yearly, will not be scrapped until 2013,

according to a watered-down deal agreed on Sunday by World Trade Organization members meeting in Hong Kong. The deal also promised to provide "duty-free and quota-free market access for at least 97 percent of product originating from LDCs (least developed countries)" beginning by 2008 or after an overall Doha Round framework agreement is completed. The current Doha Round of development trade talks began in 2001, and is due to end at the end of next year.

    But like it or not, 2005 has been a more constructive year for Africa than a lot of its predecessors we've seen in the recent history. More than a decade of economic reforms have created the right environment for business and economic growth, with several countries' average growth rates go beyond 6 percent. Ghana and Mozambique have seen reforms driving economic growth; income in oil-laden west Africa and copper-rich Zambia were boosted by higher prices, and continent powerhouse South Africa also recorded strong growth.

 "African economies are indeed growing" and the G8 debt relief and more aid will eventually bring more progress, according to Dr.Nyandemo, citing Tanzania and the west African region of ECOWAS, whose oil income have been Invested to expand economy and tackle debt, as the shining points in the Africaneconomy this year.