Global Policy Forum

By Barnabas Thondhlana

AFRICA urgently needs rich nations to deliver on their promises of more generous aid and wider trade opportunities to reverse the cruel effects of the HIV/Aids pandemic, civil wars, and persistent low growth rates, the World Bank said this week.

At last month's Financing for Development conference in Monterrey, many of the world's wealthiest nations pledged to boost the flow of foreign aid to developing countries with sound social and economic policies. But without greater access to the world's wealthiest consumer markets, many African countries will fail to secure any sustainable advantage for their people, many of whom are facing increasingly dire prospects.

The World Bank's latest annual report on social and economic conditions across the continent - African Development Indicators 2002 - sounds a clear warning that the rapid spread of HIV/Aids, anemic aid and investment flows, and weak commodity prices threaten to undo the hard-fought gains of recent years.

Preliminary data show growth in Africa's gross domestic product climbed to 3,2% in 2000 from 2,9% the year before, supported by a continuing expansion in real exports. But the average annual growth rate since 1990 has been 2,6% and social indicators reflect the hardships of a population growing faster than social services and economies can cope. To halve poverty by 2015, sub-Saharan Africa economies will need to grow at 7% a year on average, according to World Bank studies, fuelled by much higher domestic savings, and external flows of grants, loans and investment.

"Many African governments are already putting in place policies that will boost growth, strengthen governance, and more effectively deliver social services. They are keeping their side of the global bargain. They now need rich countries to deliver speedily on theirs," says Callisto Madavo, World Bank vice-president of Africa region.

African Development Indicators 2002 shows clearly where the regions greatest social challenges and opportunities lie. The scope of their problems re-inforce the need for African countries to be given the means to build their economies and increase their exports. The onset of the HIV/Aids pandemic-its costs are only beginning to be felt - is shortening life spans after progress in past years, and many governments are still struggling to provide the most basic education and health services.

As growth has slowed, incomes also have declined. Income per capita in sub-Saharan Africa fell to US$474 in 2000 from US$552 a head in 1991. Average income per capita in this region is down 0,6% in the 12 years to 2000. Both Mauritius (US$3 800) and Botswana (US$3 300) showed higher incomes per capita in 2000.

According to African Development Indicators 2002, two important sources of finance, foreign direct investment (FDI) and official aid, declined in 2000, even to those countries widely perceived as adhering to sound economic and social policies. At the same time, the gross domestic savings rate in sub-Saharan Africa has shrunk to an average 16,1% of GDP, according to the most recent data, compared with 20,2% in the 10 years to 1984. While FDI - net of outward investment flows - is now running, on average, around three times the levels of the early 1990s, it has been uneven, and the events of September 11 likely will make investors even more risk averse, regardless of African economic conditions in the near-term.

As has been the trend in recent decades, the dominant share of FDI has been reserved for resources-rich countries, particularly oil producers. Of the US$2,9 billion in FDI that flowed into sub-Saharan Africa annually, on average, and net of investment outflows during the last decade, just three countries accounted for much of that flow - Angola, US$657 million, Lesotho, US$175 million, and Nigeria, US$920 million.

While providers of official development assistance have become more selective, this hasn't yet translated into a significant increase in assistance to good performing countries - instead, aid flows have fallen for almost all African countries. Net official development assistance to sub-Saharan Africa dropped by one billion dollars to US$12,3 billion in 1999 from the year before, and is well below the US$18,1 billion received in 1994. Neither trade nor aid alone can underwrite success - experience has shown that more of both will be essential for successful development.

Africa's leaders are already taking the initiative on policies. Faced with the most challenging economic and social conditions, and further confronted by the HIV/Aids pandemic, they have recognised the need to improve their policies, spelled out in the New Partnership for African Development (Nepad) signed in October 2001. Many African heads of state have pledged to pursue a compact of good governance with their people.

The question, post-Monterrey, is how these efforts can be supported by rich nations to create sustainable economies that will, one day, outgrow the need for aid. So far, the US, the European Union and Canada have responded by pledging in Monterrey to boost aid. African Development Indicators 2002 highlights the urgent need for these promises to be kept, especially for countries following good policies.

"Donors must also help African countries make more efficient use of aid. This involves working together - co-ordinating their policies and procedures, and ensuring that aid recipients do not face multiple requests for studies and reports. Dealing with multiple donors has absorbed half of the time of scarce management expertise of some African governments - this must end," says Alan Gelb, World Bank chief economist, Africa region.

But increasing aid and streamlining its delivery is not enough - trade access to rich country markets and a level playing field are also critical. Subsidies to agricultural producers in rich countries are hurting farmers in poor countries. The leaders of the G-8 who will gather in Kananaskis in June have the chance to ensure their aid efforts are even more effective by opening their markets quickly to African countries.

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