africa make or break: action for recovery

8/7/2019 Africa Make or Break: Action for recovery

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Working for a Fairer World

Action for recovery

An Oxfam report


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ISBN 0 85598 245 4

Oxfam UK and Ireland 1993Oxfam is registered as a charity, no . 202918Printed on environment-friendly paper by Oxfam Print ServicesOxfam UK and Ireland, Oxfam House, 274 Banbury Road, Oxford 0X2 7DZ, England

This book converted to digital file in 2010


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ContentsH o - [

Executive summary: a call to actionIntroductionMap of Africa

1 Growing poverty: Africa's 'lost decade 'Human welfare in declineHealth and educationProspects for the futureRising to the challenge: Oxfam's experience and response

2 Obstacles to recoveryTrade

Export-led collapseImproving the termsDiversification and protectionRegional trade

DebtPaying the unpayableDevelopment finance in reverseReschedulingThe 'enhanced Toronto Terms'The shortcomings of the 'enhanced Toronto Terms'Multilateral debtThe International Monetary FundTowards real reform

Financing recoveryDepending on aidDevelopment budgets under threatAiding recoveryImproving quality

Structural adjustment: a failed prescriptionThe case for reformSAPs and the rural poorPoverty reductionTowards a new approach

Challenging hungerConflictDroughtTowards self-relianceAfrica's food-aid needsFood dumpingInvesting in the poor

Poverty and EnvironmentUnsustainable exportsReclaiming the land

3 New opportunities and old threatsPeace and conflict

Supporting the peacePolitical supportThe role of the UN

Democracy and dictatorshipPolitical change'Good governance'

iiivvi11235777910111 11213131414151517171719202222232424252 52627272828293 131323434343536373738

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Africa, make or break: action for recovery

Executive summary: a call to actionIn recent months, conflict in Somalia, Sudan andAngola has brought the familiar images of starvingAfrican children to our television screens. Theirplight has attracted deep public concern. But it hasalso reinforced the widespread view of Africa as aregion destined for disaster - its people the victimsof an unavoidable human tragedy.Oxfam rejects that view. Africa's poverty isdeepening, especially among women and children,and the obstacles to development are formidable.But there are also new opportunities for recovery;an d for building on the resourcefulness andingenuity shown by African communities infighting their poverty.

After almost two decades of armed conflict,fuelled by Cold War rivalries, peace has come toEthiopia, Eritrea and Mozambique, makingreconstruction possible - and bringing hope tomillions of Africa's most vulnerable people.There is further hope in the political andeconomic changes taking place in Africa. Ineconomic policy, governments are recognising themistakes of the past; and they are implementingreforms aimed at improving competitiveness andefficiency. At the same time, popular demands formore representative government have generated animpetus towards democracy and greateraccountability. That impetus could make animportant contribution towards the framing ofredistributive policies which will ensure that thepoor benefit from economic reforms.Despite these positive developments, Africa isbalanced on a knife edge. Without recovery, morethan 300 million people - half the region'spopulation - will be living in poverty by the end ofthe decade; infant mortality rates, already thehighest in the world, will continue to rise; andvulnerability to hunger will increase.

This human tragedy can be prevented. ButAfrica will not recover without internationalsupport for the efforts its people are making: itsresources are too limited, its poverty too pervasiveand its problems too intractable.That is why Oxfam is calling for an internationalplan of action to back Africa's recovery efforts, builton cooperation between African communities, theirgovernments, and the international community, andbacked by the financial resources of the industrialworld. Such a plan will need to incorporateredistributives measures, so that the poor canbenefit from economic growth; and to recognise thekey role of women in development.Unfortunately, Northern governments havefailed to seize the opportunity created by thepositive changes in Africa. As a result, recent gains

for peace, stability and democracy are threatened byformidable obstacles to recovery, including: A crushing debt burden which drains the regionof over $10bn annually, diverting resourcesdesperately needed for investment and povertyalleviation. A hostile trade environment, in which fallingprices resulted in the loss of some $50bn during thesecond half of the 1980s - more than double theamount that Africa receives annually in aid flows. Insufficient foreign aid and investment tosupport recovery. World Bank and IMF structural adjustmentprogrammes which have failed to create aframework either for sustained economic recovery,or for enabling the poor to benefit from marketreforms. Inadequa te financial and political backing forUN peacemaking and peacekeeping operations.Such is the scale of the challenge posed by Africa'sneeds, that Oxfam believes the time has come for aninternational plan of action to support recovery, andto invest in its people. There is a precedent for thisin the Marshall Plan, through which the US investedin supporting peace and democracy in post-warEurope. Today, Africa stands in desperate need of asimilar sense of moral purpose, politicalcommitment and vision on the part of Northerngovernments.As this report argues, Africa's recovery planshould include measures by Northern governmentsto:1 Reduce Africa's debt burden in order to releaseresources for investment in its people andeconomic recovery by adopting the full Trinidad Terms debt reliefmeasures, reducing debt stock by two- th i rdsinstead of the 50 per cent provided for under the'enhanced Toronto Terms'. This should be the firststep towards a more comprehensive write-off ofbetween 90 per cent and 100 per cent of the debt ofthe poorest, most indebted countries. reducing multilateral debt stock, and halting thenet transfer of resources to the IMF (which hasdrained Africa of over $3bn since 1983). Thereduction of IMF debt should be financed either byNorthern governments through a new issue ofSpecial Drawing Rights (the capital used by theFund), or through the sale of IMF gold stocks.Unless there are fundamental reforms of the terms


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iv Africa, make or break: action for recovery

and conditions attached to IMF loans, the Fundshould be withdrawn from Africa and its role takenover by a more appropriate agency.2 Increase aid flow s to support peace, democracyand recovery by moving to wa rds the UN target of 0.7 per cent ofGDP for aid budgets; Britain setting a good examp le by prov iding anaddi t ional 100m for Afr ican recovery in i ts1993-1994 aid b udg et; the EC establishing a 80m (ECU 100m) bud getfor African recovery, and mobilising unspent LomeConvent ion a id funds for use in pos t -warreconstruction; imp rovin g a id qua l i ty by insu r ing tha t itconforms to internationally-agreed guidelines forenvironmental protection, and that it is carefullyevaluated for its impact on poverty in general, andwomen in particular.3 Improve Africa's trading prospects by f inancin g the esta bl is hm en t of an Afr icanDivers i f i ca t ion Fund, as proposed in the UNProgramme of Act ion for Afr ican EconomicRecovery and Development, to support investmentin processing; ending the subsidised disposal of agriculturalsurpluses on world and regional markets; reducin g protectionist barriers against Africa'sexports.4 Reform structural adjustment programm es toprovide a framework for economic recovery andpoverty alleviation by enhanc ing the produ ctive capacity of the poorestproducers - especially women - and most marginalareas through carefully targeted investment aimedat improving people's access to resources such asland and credi t , and bui lding up t ransport andmarketing infrastructure; revising loan cond itions to allow selective andtemporary protection, and investment support forindustries adjusting to increased competition; prom oting measures to achieve greater foodself-reliance through smallholder agriculture;

reducing the emphasis on expanding productionof primary commodities for already saturated andchronically depressed world markets; increasing investm ent in essential health andeducation services.5 Strengthen the role of the UN to impro ve itsability to respond to humanitarian emergenciesand to prevent and mediate in conflicts by ful ly and spe edi ly fundin g UN rel ief andrehabili tation plans to cover the estimated $2.2billion shortfall; increasing the recently established peace keepingreserve fund from $150 million to $400m; mak ing one repres entative , accoun table to theSecretary General, responsible for coordinating allUN hum an i t a r i an , d i p l om a t i c and ( whe r eappropriate) peacekeeping activities in each countryaffected by conflict; and improving coordination inNew York and Geneva between different parts ofthe UN system; addressing the threat posed by landm ines topopulations returning to their homes after conflict.In particular, the international community shouldstrengthen the 1981 Landmines Protocol to betterprotect civilians from the indiscriminate use ofant i - pers onn el m ines , and es tabl i sh a fund tosupport mine removal operations.

All of these interventions will require politicalwill backed by financial resources. In Africa, as inother par ts of the world, peace, s tabi l i ty anddemocracy does not come cheap. However, failureto act will also carry a price. That price will be bo rneprincipally by Africans, in the form of increasingpoverty, disease, and prema ture death.Even without this overwhelming humanitarianconsiderat ion, i t i s not in the interests of theinternational community to see Africa consigned toa fu ture of deepening pover ty and conf l i c t .Northern governments will have to meet the costs ofresponding to increasing numbers of humanitarianemergencies, and they will be faced with increasedpolitical instability on th e internationa l stage.

That is why Oxfam believes the industrialworld shares a common interest with Africa ineradicating poverty from the region - and why itmust invest in a better future for Africans.


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Introduction

Africa, make or break: action for recovery v

Sub-Saharan Africa is on a knife edge. For morethan a decade the region has been locked in adownward spiral of economic and social decline.That decline, unlike the tragedies of famine anddrought, which dominate news coverage of theregion, has been largely invisible to the outsideworld. Yet it has spread human suffering andmisery on an unprecedented scale. Hard-won gainsin health and education have been reversed; livingstandards, already among the lowest in the world,have fallen; hunger is on the increase. And thetragedy is set to deepen. On current trends, theranks of the 218 million Africans already living inpoverty will increase to 300 million - equal to halfthe region's population - by the end of the decade.The work of Oxfam (UK and Ireland)* in Africais motivated by a conviction that this dismalprospect can be avoided, and the fight againstpoverty won. This conviction is based partly on ourexperience of working with Africa's greatestresource: its people. Across the region, we h ave seenchronically poor and vulnerable communities showimmense courage, ingenuity, and tenacity infighting poverty, against daunting odds. Their spiritof defiance starkly contrasts with the images ofhelplessness familiar to Western audiences, and itoffers hope of a better future.That hope is reinforced by wider changes inAfrica. Although armed conflict continues to scarthe region, peace has come at last to Ethiopia,Eritrea, and Mozambique. After almost two decadesof civil war, millions of people in these countriesnow have a real opportunity for recovery andreconstruction. Moves towards more accountableand representative government are also gatheringpace, driven by popular demands for greaterdemocracy. Less well-publicised than thedemocratic revolution which has transformedEastern Europe, these moves have been no less far-reaching. And they have been accompanied bydramatic shifts in economic policy. Increasingly,governments are admitting past mistakes andadopting painful reform measures which offer theprospect of more self-reliant gro wth .

The impetus towards peace, democracy, andeconomic reform in Africa has opened a window ofopportunity for development and the alleviation ofpoverty. But that window will slam shut unlessNorthern governments show more commitment tosupporting recovery. Admittedly, the challenge is aformidable one. Economic stagnation, socialbreakdown, decaying infrastructures, crippling debtburden s, ruinous prices for commodity exports, andenvironmental degradation threaten to retardAfrica's development prospects into the next

century, with frightening consequences for humanwelfare. But Northern governments have the meansat their disposal to help make recovery a possibility.That is why Oxfam is calling on thesegovernments to back an international plan forrecovery and poverty eradication in Africa. There isa precedent for this in the Marshall Plan, throughwhich the United States used its resources to restoreeconomic growth and protect democracy in post-war Europe. There is also an opportunity. Foralmost half a century, East-West militaryconfrontation had first call on the vast resources ofthe industrial world. Now there is chance to divertthese resources to the more worthwhile challenge oferadicating global poverty, and to the establishmentof a new international order built on thefoundations of justice and stability. What is neededis the vision, political will, and sense of moralpurpose to build that o rder.

Unfortunately, these qualities remainconspicuous by their absence from the internationalstage. Preoccupied with more 'strategic' concernselsewhere, the industrial countries have allowedAfrica, the world's most impoverished region, tobecome increasingly marginalised. Financialresource flows are stagnating in real terms, debt-relief measures have been inadequate, and there hasbeen no attempt to improve the region's externaltrade environment. To make matters worse, theinternational donor community and multilateralagencies - the World Bank and InternationalMonetary Fund - continue to insist on economicpolicy reforms which have manifestly failed togenerate recovery, while imposing huge social costs.It is increasingly clear that the current economicprescriptions favoured by the North are hurting butnot working. Against this background, there is areal danger of hope giving way to frustration anddespair, jeopardising recent gains for democracyand stability in the process.

Africans themselves want to take responsibilityfor determining their future pattern of develop-ment. But it is up to Northern governments to helpto create an enabling environment, in which econ-omic growth on a continuing and environmentallysustainable basis becomes possible. The alternative,which their current policies offer, is another 'lostdecade' for development, with the world's poorestregion consigned to a future of deepening poverty,malnutrition, and disease. Above all, this will be atragedy for Africans. But it will also cast a longshadow of injustice over the whole world as weenter the next century, shaming and diminishing usall.


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v i Africa, make or break: action for recovery


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Africa, make or break: action for recovery 1

1 Growing poverty: Africa's lost decadeJust over 30 years ago, sub-Saharan Africa enteredindependence with great expectations. Thoseexpectations have not been fulfilled. In economicdecline since the mid-1970s, today the regionaccounts for 32 of the 47 nations on the UN's list ofpoorest countries. Most of the citizens of thesenations are worse off than they were atindependence, and they are becoming steadilypoorer. Reversing this decline, which the WorldBank has described as 'the greatest sustaineddevelopment failure of the century', is perhaps themost pressing challenge facing the internationalcom mun ity in the 1990s.Outside Africa, it is often difficult to appreciatewhat the region's economic crisis has meant inhuman terms. In the United Kingdom, the modest

fall in average income caused by the currentrecession has given rise to deep concern over livingstandards, even though they have risenprogressively over the past decade. By contrast,average incomes in Africa, already abysmally low,have fallen by around a quar ter since the mid-1970s.In 1990, incomes in the 24 poorest countries in theregion, accounting for three-quarters of the totalpopulation, averaged less than US$1 a day. In fact,inequalities in the distribution of wealth dictate thatmillions of people - including many of those withwhom Oxfam works - earn even less. For them,economic recession means increasingly inadequatediets, insufficient income to clothe children and tobuy fuel for heating and lighting homes, andmounting susceptibility to disease.

Human welfare in declineStatistics on income levels do not convey the fullhuman tragedy of Africa's development crisis. Ratesof infant mortality in the region are 50 per centhigher than the average for low-income countries,and over 50 times higher than in the industrialworld. In 1990, an estimated 4.2 million childrenunder the age of five died as a result ofmalnutrition-related disease. Another 30 millionwere un derw eight. M illions are affected by po verty-related health problems: 20 per cent of the totalpopulation suffers from anaemia, 8 per cent fromiodine deficiency and 18 million from Vitamin Adeficiency. Exposu re to disease is heightened by thefact that two-thirds of all Africans do not haveaccess to clean water for cooking and drinking.Meanwhile, more than half the region's populationis denied access to institutional health care. Ruralareas, in which the poor are concentrated, areparticularly badly served because of a concentrationof resources on urban-based curative healthprovision. To make matters worse, Africa is nowsuffering an AIDS epidemic, with the number ofHIV-positive cases having risen from 1.5 million to6.6 million since 1985 - a figure expected to increaseto 10 million in 1994.

The health of African women is considerablyworse than that of men. The most striking indicatorof their poor welfare is an unacceptably high* maternal mortality rate. African women are around

50 times more likely to die in childbirth tha n w omenin the North. Inadequate health and social-careprovision is one factor responsible for this wastageof life. Another is inadequate nutrition, whichresults in two-thirds of pregnant women sufferingfrom iron deficiency and a far higher- than-average

incidence of vitamin deficiency and malnutrition.As in other developing regions, the low healthstatus of African women reflects their inadequatecontrol over household resources, excessiveworkloads and a wide range of cultural practices.The same combination of factors accounts for theirdisproportionately low educational attainment.Unacceptably high gender disparities in primaryand secondary school enrolment mean that boys are60 times more likely than girls to enjoy access toeducation. Family poverty, heavy domesticworkloads, distance to school, early marriage andpregnancy all contribute. But the single mostimportant factor is what the United NationsChildrens' Fund (UNICEF) has described as 'anapartheid of gender', which accords low status towomen, and systematically deprives them of accessto the resources needed to realise their potential.Economic crisis and the adjustment measuresadopted in response to it have dramaticallyworsened the plight of the poor. Structuraladjustment programmes (SAPs), implementedunder the auspices of the World Bank and the IMF,have resulted in the simultaneous reduction - orabolition - of food subsidies, the decontrolling ofprices, and devaluation, which increases prices forimports. Prices for basic consumer goods .such asfood and fuel have risen dramatically as a result. InZambia, the decontrol of prices has resulted in theconsumer price index for low-income familiesdoubling over the past 18 months. At the same time,austerity measures have resulted in a sharp declinein incomes across Africa. Oxfam has seen theconsequence of this price-income squeeze in theTanzanian capital of Dar-es-Salaam, where low


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2 Africa, make or break: action for recovery

income groups have been forced to reduce theirnumber of daily meals from three to two, and cutdown their intake of more expensive higher-proteinfoods.Child welfare, a particularly sensitive barometerof social welfare, has suffered a markeddeterioration as a consequence of the fall in realincomes. In Zambia, the number of childrensuffering from malnutrition has risen from 1 in 20 to1 in 5 over the past decade. Oxfam has respondedby supporting community initiatives aimed atmaintaining nutritional standards. For example, inthe Kapisha com pound, an impoverished settlementin Zambia's copper-belt, we are suppo rting market-gardening schemes. These enable vulnerablefamilies partially to counteract the effects ofunemployment and falling incomes by producingfood both for home consumption, and for sale onlocal markets. But at best such communityinitiatives and interventions by non-governmentagencies prov ide isolated islands of ho pe in a sea ofsocial and economic despair.

Women have been at the epicentre of the socialcrisis caused by Africa's economic decline. Withtheir multiple roles in production, motherhood andin household labour, African women commonlywork between 16 and 18 hours daily. This excessivework burden is one of the major reasons for theirpoor health status - and the demands on their timeare increasing. Falling household incomes haveforced women to work longer hours, often taking ontwo or more occupations; to allocate additional timeand energy in finding cheap foods and gatheringfuelwood (as kerosene becom es too costly); and tospend more time and money tending sick children.Meeting these demands has forced women tosacrifice the only two resources available: their sleepand already virtually non-existent leisure time.Women's employment conditions have alsodeteriorated. Already less likely than men to beemployed in formal sector employment, women aremore than twice as likely to be laid-off. This has anegative impact on their ability to care forthemselves and their children. The growinginformal sector has provided a cushion of sorts, aswo men try to meet family surviva l needs. But workin the informal sector produces low returns for longhours, and is often undertaken in unsafe andinsanitary conditions, with attendant implicationsfor women's health.Health and educationPressure on governments to cut back on socialexpenditure, such as schools, hospitals, andhousing, has compounded the plight of the poor. By

1990, two-thirds of African governments werespending less on health in pe r capita terms than in1980. Infrastructure for health care has visiblydeteriorated as a result, especially in rural areas.Budget pressure has also prompted governments torecoup costs by increasing charges - or 'user fees' -for health and education services. Both the WorldBank and the IMF have backed this approach on thegrounds of efficiency, but the effect has been to putmany services beyond the means of the poorestgroups. In countries such as Ghana and Nigeria, theindiscriminate or poorly-targeted introduction ofuser fees caused a contraction in demand forservices, especially preventative services such asimmunisation and ante-natal care.Reduced access to already inadequate healthprovision would have dire consequences at anytime. In the midst of a recession, where the brunt ofcosts is falling on the poor, it has been a prescriptionfor catastrophe. In the Zambian capital of Lusaka,epidemics of diseases such as cholera and typhoid,conditions that were not life-threatening on a largescale a decade ago, are claiming an increasingnumber of lives. Malaria, once subdued , is returningas a major hazard. In West Africa diseases such asyellow fever, which had been almost eradicated, aregaining ground again. And the incidence ofpotentially fatal respiratory and diarrhoeal infectionamo ng infants is increasing across the region.The minds as well as bodies of Africa's childrenhave suffered from the region's economic decline.Rising costs of education, declining standards, andpressures on children to earn income hav e reversedwhat was a steady improvement in schoolenrolment. Primary-school enrolment rates, whichrose rapidly in the 1970s, fell from a regionalaverage of 78 per cent to 68 per cent in the 1980s;and less than a third of children now attendsecondary school. This is in a region where onlyaround two out of every three men, and one out ofevery three women, are literate. The education ofyoung girls has been particularly vulnerable toeconomic pressures, since families with limitedfinancial resources tend to withdraw theirdaughters from school rather than their sons. Theoverall result is a twin process of disempowerment.Africa's women are being disempowered and theirlow status reinforced by increasingly inadequateeducation; and Africa is being disempowered as theeducational g ap between itself an d othe r parts of theworld widens.These pressures on health and educationexpenditure have serious long-term consequencesfor Africa because educated, healthy people areessential for achieving social and economicdevelopment. This should be readily evident to


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governments in the industrial countries, whichrecognise that investment in health and education isessential, not only for moral reasons, but to providethe foundations for economic growth and futureprospe rity. It is also evident to local comm unities inAfrica, who are seeking to maintain health andeducation services throu gh local initiatives.Oxfam is supporting their initiatives through itsinvolvement in primary health care, sanitation, andother projects across the region. An example is theKisiga water supply project in western Uganda,where local communities have assumedresponsibility for maintaining clean water suppliesin the face of a collapse of government services.Elected village water committees have overseen thedigging of trenches (which involved moving some

40,000 tons of soil), and the installation of pipelines,storage facilities, and community outlets. Thesecommittees have been assisted by water-engineersprovided by the Kaganda Rural DevelopmentCentre, which Oxfam supports. As a result, around24,000 people now benefit from access to cleanwater.This is just one illustration of the perseverance ofpoor people in the face of adversity. However,community initiative cannot be a substitute forpublic investment in the effective provision of basicwelfare services. That is why this report argues forsupport from the international community to enableAfrican g overnm ents to invest in their people.

Table

RegionAll developing countriesSouth AsiaEast AsiaSub-Saharan AfricaMiddle East & North AfricaEastern EuropeLatin America & the Caribbean

1: Poverty in the developing worldPercentagethe poverty198530.551.813.247.630.6

7.122.4

of populationline199029.749.011.347.833 .1

7.125.5

below200024 .136.9

4.249.730.6

5.824.9

1985 -2000Number of poor (millions)1985 1990

1,051 1,53218 2184

605

87

133562169216

735

108

20001,107

5 1 173

30489

412 6

Source: World Bank: World Development Report 1992 (Washington, World Bank)

Prospects for the futureGrim as the experience of the 1980s was, things aregetting steadily worse. On current trends, more thannine million people will fall below the poverty lineeach year for the rest of the decade, making Africathe only developing region in which the proportionof the population in poverty rises. (See Table 1.) Asa result of these trends, Africa has the further tragicdistinction of being the only region in which childwelfare is set to deteriorate. The United NationsChildren's Fund (UNICEF) estimates that by theyear 2000 African children will account for 39 percent of infant deaths worldwide - compared with 29per cent in the mid-1980s.Averting this deterioration in huuman welfaredepends critically on economic recovery. Rapid

population growth rates mean that the region'seconomies need to expand by over 3 per cent a year,simply to keep incomes constant. This hasprompted some to argue that Africa's developmentcrisis is, essentially, a 'population problem' - andthat reduced population growth is the key toAfrica's recovery. Oxfam regards this view assimplistic. In many countries, rapid populationincrease does contribute to a cycle of low grow th a ndpoverty. But the linkages between population,poverty and economic growth are complex. At onelevel, rapid population growth is itself a symptomof poverty. For example, high infant mortality ratesand the prospect of insecurity in old age encouragepeople to have larger families. This is why risingliving standards are usually accompanied by a slowdown in population growth. There is an even more


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powerful correlation between improvement in thestatus of women and reduced b irth rates. Access toeducation, effective family-planning services, theprovision of employment opportunities beyondchild bearing, and the right of women to decide forthemselves how many children they will have andwhen, are particularly important determinants ofpopulation grow th rates.

Sustained econom ic grow th is essential if the linkbetween population increase and poverty in Africais to be broken. Some indication of the scale ofgrowth required was provided by the World Bankin a 1990 report, Sub-Saharan Africa: from crisis tosustainable growth. This estimated that a growth rateof between 4 per cent and 5 per cent would beneeded for the rest of the decade to provide for amodest improvement in income, employment, andnutrition. W ithout recovery on this scale, Africa willbecome increasingly unable to feed and clothe itspeople, to educate a school-age population rising byover 4 million annually, and to provide jobs for alabour force which is set to double in size over thenext 30 years. With unem ploym ent already affecting100 million people (four times as many as in 1979),the implications for huma n welfare of continuedeconomic stagnation are obvious.

Unfortunately, the World B ank's 1990 target no wappears wildly optimistic. During the first two yearsof the 1990s, growth for the region (excluding

Nigeria) was under 2 per cent, so that averageincomes continued to fall. Agricultural andindustrial production levels have expanded at lessthan half the target rate set by the World Bank, andinvestment levels, one of the main determinants ofrecovery, have not recovered. These are nowhovering around 16 per cent of Gross DomesticProduct (GDP) - a quarter lower than in 1980 andwell below the 25 per cent level which the WorldBank estimated was needed to sustain recovery.

More recent projections of Africa's economicprospects (in the World Bank's 1992 WorldDevelopment Report) suggest that the rate of growthof per capita income in sub-Saharan Africa is unlikelyto exceed 0.3 per cent a year for the rest of thecentury. This is well below the anticipated increasein other developing regions, and in the North (Table2), and it would be entirely inadequate for asustained assault on poverty. In reality, however,even this modest target is likely to prove undulyoptimistic, since it is based on the dubiousassumption that growth in the industrial world willrecover to average over 3 per cent a year; and thealmost certainly flawed assumption that prices forAfrica's commodity exports will not worsen.Against this background the prognosis is for afuture of continued economic decline, withinevitable implications for the welfare of poorpeople.

Table 2: Growth of real per capita incomein industrial and developing countries, 19 80 -2 00 0(average annual percentage change)Country GroupHigh-income countriesDeveloping countriesSub-Saharan AfricaAsia and the PacificEast AsiaSouth AsiaMiddle East & North AfricaLatin America & the Caribbean

1980-19902.41.2

- 0 . 95 .16.33 .1

- 2 . 5- 0 . 5

19902 .1

- 0 . 2- 2 . 0

3.94.62.6

- 1 . 9- 2 . 4

19910.7

- 0 . 2- 1 . 0

4.25.61.5

- 4 . 6- 0 . 6

1990-20002 .12.90.34.85.73.11.62.2

Source: World Bank: World Development Report, 1992 (Washington: World Bank)Note: Figures in the last column are a projection.


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Rising to th e challenge: Ox fam's experience and responseOxfam wo rks in 25 African co untries and has officesin most of them. In 1992, 80 senior members of staffand hundreds of support staff were responsible formanaging and administering grants worth 23million, funding 1,200 projects across the continent.During the year Africa received 62 per cent of allOxfam's overseas grants.

Each project, whether a full-scale emergencyrelief operation or a long-term developmentinitiative, relies on the invo lvement of local peop le ifit is to be effective. This means listening to people,particularly women. Oxfam has found that develop-ment that does not take into account the needs ofwomen does not tackle poverty. AU Oxfam projectshave a gender component which ensures thatwomen's voices are heard and their needs areaddressed.

Building on African's strong tradition of self-reliance is central to Oxfam's work. Commun-itiesdo not sit back and wait for Oxfam to arrive withready-made solutions to their problems. Instead,with the o dds stacked heavily against them, peopleshow great resourcefulness and ingenuity intackling their poverty, finding solutions that mayrequire only modest inputs from Oxfam to bringsubstantial improvem ents in living standa rds.This self-reliance has proved crucial in times ofcrisis. Looking at new s coverage of the. famine in theHorn of Africa during the mid-1980s it would beeasy to be left with the impression that Westernintervention was wholly responsible for savingthousands from starvation. In fact, of the food thatwas effective in preventing starvation, only 10 percent of food needs in West Sudan was met byWestern donors. Local populations fell back ontraditional ways of coping with drought to providethe rest.

Relief and recoveryOxfam is perhaps best known for its headline-grabbing relief work in emergency situations, and isoften among the first agencies to arrive with tentsand technicians. But relief work is a sticking-plasterapproach to emergencies and does not providelasting solutions to the problems faced by poorcommunities. That is why, in times of crisis, Oxfamalso provides resources for long-term recovery,laying the foundations for future development. InDarfur, Sudan, in the mid-1980s, drought andfamine brought suffering and hunger to hundredsof thousan ds. As a last resort people began to eat thestocks of millet and sorghum seed intended for nextseason's harvest, despite an emergency feedingprogramme. On local advice Oxfam supported theconstruction of seed banks, building on the

traditional practice of community seed storage.Money was provided for buildings and training in.the treatment of seeds so that they would keepbetter. Each seed bank was managed by arepresentative village committee who wereresponsible for its upkeep and the distribution ofseeds to outlying villages before the rains arrived.The scheme worked; next season's harvest wassaved. Not only that, but representatives from eachof the seed-bank committees went on to form agroup to tackle some of the wider developmentissues at a district level. The Kebkabiya Small-holders Charitable Committee is working onimproved farming practices, women's literacy anddevelopment, animal traction projects, and provid-ing a community pharmacy for livestock. Oxfam hassupported KSCC throughout its development withfunding and training and will soon hand over fullresponsibility for the project to KSCC.

The community developments in Darfur, whichhave grown out of the crisis of famine, have beenimpressive; 60,000 people benefit from the project.And there are examples of this kind of approach torelief work across Africa. In Somalia Oxfam isresponding to the crisis there by providing reliefsupplies and seeds and tools for agriculturalrehabilitation. 75,000 has been spent so far onhelping to re-start food production, encouragingrefugees back from the towns to the countryside. InZambia Oxfam helped to distribute food to over350,000 people in the Eastern province as part of afood-for-work scheme where local communitiesrebuilt vital infrastructure, such as schools andwells, in return for food.

While some African countries such as Angolaand Rwanda continue to suffer war, others areemerging from decades of conflict and communitiesare looking to Oxfam for help in rebuilding theirlives. In Ethiopia and Eritrea, for example, whereOxfam has helped to increase agricultural prod-uction, food security is much improved. With thesigning of a peace accord, rehabilitation w ork is pos-sible in Mozambique for the first time in years.Oxfam is scaling up its programme there, providingfood aid, seeds and tools to enable demobilisedsoldiers and refugees to resettle and plant their land .Establishing a basis for recovery in the midst ofrelief programmes is Oxfam philosophy. Toparaphrase part of our mission statement: 'Oxfamresponds to urgent humanitarian need and helpslocal people to reduce their vulnerability to futureemergencies.' But can this type of support forgrassroots development, as seen at Darfur, besustained across the continent and bring abouteconomic revival? Community development proj-ects - essentially a 'micro' approach to poverty - can


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only achieve so much before they come up againstharsh 'macro' realities, such as debt, governmentausterity programmes, and conflict. (The Darfurprogramme was halted twice by war in neigh-bouring countries which spilled over in to Sudan.)Even if Oxfam and other non-governmentalorganisations (NGOs) - both Northern and agrowing number of indigenous groups - had anunlimited capacity to support grassroots develop-ment in Africa, the continent's recovery would stillbe in doubt. Which is why Oxfam promotes policychanges, nationally and internationally, aimed atreducing poverty and injustice; speaking out onbehalf of the poor.Sustainable developmentThree-quarters of Oxfam's grants to Africa are spenton conflict-related work, and that proportion isincreasing. But Oxfam also supports Africancommunities that are involved in less dramatic,though no less challenging, obstacles to theirdevelopment. Lack of access to land, education,health and jobs has left many African people livingin poverty. Oxfam works in many differentcommunities, supporting the efforts of poor people,especially women, to secure sustainable livelihoods,fundamental rights and access to basic services.Many rural people in Africa could be self-sufficient in food if they had greater access to land.Africa could feed itself. In the words of one farmer:'W e are poor, but we are not beggars. What we wantis to eat. In order to eat we must have land on whichto raise our cattle and crops.' This is the rationalebehind Oxfam's support of nomadic herders inBurkina Faso, Mali and Kenya. Through localgroups such as the Kenya Pastoral Steering Com-mittee and the Arid Lands networking project, newagricultural practices and ideas are exchangedwhich are bringing greater productivity and foodsecurity to areas with poor soils and unpredictableweather.

Oxfam has also supported community-basedland conservation and environmental protectionprojects. In one village in Burkina Faso 270 hectaresof unproductive land have been saved from erosionand brought back into production, providing foodfor over 1,000 people.In countries where governments have beenforced to cut back on social services just to pay off asmall part of their debt, many communities haveorganised themselves to provide their own services.In Zambia, Kenya, Uganda, Tanzania and Malawi,Oxfam has helped to promote primary health care,especially for mothers and children, in communitieswhere the collapse of state-funded health provisionhas put many medical services out of reach.Increasingly, and worryingly, Oxfam is being askedto fill some of the gaps in social services left by thestructural adjustment programmes sponsored bythe IMF and the World Bank.Throughout Africa, Oxfam is working withpeople in a process of change. People are identifyingcommon goals and working together to empowerthemselves, bringing lasting imp rovements to theirlives in a sustainable manner. Much has beenachieved, and the opportunities that are presentingthemselves today, in the form of economic andpolitical reform, hold out the prospect of a new eraof development for Africa. The road to recovery canbe taken if the efforts of local people at grassrootslevel are supported by the international com munity.The following pages present an analysis, basedon Oxfam's experience as a Northern NGO workingin Africa, of the threats to and oppor-tunities forrecovery for Africa. It is addressed to a Northernaudience, and highlights the responsi-bilities ofNorthern governments and institutions for ensuringthat African recovery takes place. However, thegrowing number of African NGOs that areemerging in the current climate of political reformand opportunity, many of whom we work with,would want us to emphasise that it is Africansthemselves who have the right and the capacity totake control of their own development and future.


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2 Obstacles to recoveryAfrican governments have taken bold - and polit-ically unpopular - measures to engineer recoverythrough market-oriented reforms, aimed at creatinggreater efficiency and competitiveness. As wesuggest below, flaws in the design and implement-ation of these reforms, introduced under thetutelage of the World Bank and IMF, have reducedtheir intended impact. But the persistence ofAfrica's crisis also reflects the crushing effect ofexternal constraints to recovery. Paramount amongthese are a hostile external trade environment, theburden of unserviceable foreign debt, and inade-quate financial support. International action toremove these constraints is vital if Africa's reformsare to be given a chance.TradeSub-Saharan Africa relies far more heavily on tradethan on aid for its economic prosperity, withimports and exports accounting for about half theregion's GDP. It follows that trade performance hasa critical bearing on Africa's prospects for recovery- even though the region is an insignificant playeron world markets, its share of world trade havingfallen from 3 per cent to just over 1 per cent over thepast two decades. Export markets provide theforeign exchange needed to import the goods andservices required for economic development, andthey generate income and employment. Over thepast decade, however, Africa has been badly hit bya marked deterioration in these markets. Unless thatdeterioration can be halted through internationalaction, there is little prospect of economic recoverytaking root.Export-led collapseAt the heart of sub-Saharan Africa's trade crisis hasbeen a protracted depression in world commoditymarkets. More than any other developing region,sub-Saharan Africa depends on primary commod-ities - such as coffee, cocoa, cotton, and copper - togenerate the foreign exchange needed to buyimpo rts. Overall, some 85 per cent of all the region'sexports derive from this source, with the vastmajority of countries dep ending heavily on just oneor two commodities. (See Table 3.) In the cases ofUganda and Zambia, coffee and copper respectivelyaccount for more than 90 per cent of export earn-ings; and coffee and cocoa alone account for morethan a quarter of the foreign-exchange earnings of14 countries.

During the 1980s, prices for most commoditiesfell dramatically, in some cases to their lowest levelsin real terms since the Great Depression, while

import prices continued to rise. This caused a sharpdeterioration in Africa's terms of trade, with thepurchasing power of the region's exports havingfallen by some 50 per cent since the early 1980s.Moreover, this regional average obscures the evenmore marked deterioration suffered by individualcountries. In 1986, coffee provided Uganda with$365 million in foreign-exchange earnings andfinanced about 70 per cent of its imports. By 1991 ityielded only $115 million, and financed less than aquarter of imports. Overall, the slump incommodity prices cost Africa $50bn in lost earningsbetween 1986 and 1990 - more than twice theamount the region receives in aid.

Deteriorating terms of trade, combined withrising debt-service payments and a sharp contrac-tion in foreign investment, have caused a markedcontraction in Africa's capacity to import. Eventhough export volumes expanded throughout the1980s, foreign-exchange earnings fell from $65bn for1981-85 to $55bn for 1986-1990. With aid and otherinflows of foreign exchange failing to make up theshortfall, import volumes fell by 8.2 per cent a yearin the first half of the 1980s, and by 4.6 per cent inthe second half. This process of 'import strangula-tion' left local industries, most of them alreadyoperating below capacity, starved of essentialinputs. Their ability to export and even to competeagainst imports on local markets suffered as aresult, adding to balance-of-payments pressures.These became increasingly severe, despite the cut inimports, with the region's trade deficit almostdoubling to $7.5bn in the second half of the 1980s.

The collapse in international commodity pricesseriously undermined structural adjustment prog-rammes (SAPs) sponsored by the World Bank andIMF, which have been premised on the assumptionthat sub-Saharan African economies can export theirway to recovery. But these programmes have alsocontributed to the crisis in world commodity mar-kets. They have done so by encouraging countriesproducing a narrow range of commodities toexpand production simultaneously, for alreadysaturated markets characterised by relatively fixedlevels of demand. In commodities such as cocoa,where Africa accounts for a major share of worldsupply, increased exports have probably made asignificant contribution to the collapse of worldprices. In effect, SAPs have had the effect of forcingthe region to struggle up a downward-movingescalator: expanding its export production fordiminishing foreign-exchange returns. For example,between 1986 and 1989, cocoa exporters in WestAfrica increased their output by a quarter, only tosee foreign-exchange receipts fall by a third asprices collapsed.


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Apart from generating problems for the balanceof payments of commodity-exporting countries, theslump in world commodity prices has eroded theability of African governments to maintaininvestment in infrastructure, by reducing revenuesfrom exports. Oxfam has direct experience of theresulting vicious circle of economic decline. In theMeatu District of Tanzania we have been involvedsince the mid-1980s in providing loans, inputs, and

other assistance to marginal farmers producingcotton. That assistance contributed to a good h arvestin 1992, but farmers were able to market only asmall part of their crop because of the collapse oftransport infrastructure. The result: vulnerablefamilies were left with a smaller household income,and Tanzania with less of the foreign exchange thatit desperately needs.

Table 3 : Commodity dependency of African countries in which Oxfam worksPrimary commodities as a %of total export earnings

99.999.797.997.995.195,95.094.793.4,aao'8*8.988.58-4.3

: 83.3 ,'&2.0

" ' M S - '72.0 . . ,

, 71.6 , '$B.S ~ -

BMJ? Ms. .

' :

48,0'- " *. to. r iwuij j . "s m ;^ ;y . ^

CountryMauritaniaZambiaRwandaNigerBurundiUgandaNamibiaSomaliaMalawiEthiopiaBurkina FasoSudanMaliTogoGuinea BissauTanzaniaMozambiqueChadSenegalZaireGhanaSierra LeoneKenyaZimbabweGambiaLesothoAngola

Individual commodities as a %of total export earnings(iron ore 45.0/fish 42 0)(copper 98 0)(coffee 73.0}(uranium 85.0)(coffee 87.0)(coffee 95.0)(diamonds 40.0/uranium 24.0)(live animals 76.0)(tobacco 55 0/tea 20.0)(coffee 66.0)(cotton 48 0)(cotton 42 0)(live animals 58 O/cotton 29.0)(phosphates 47 0)(cashew nuts 29.0/groundntits 23.0)(coffee 40.0)(fish 27.0/prawns 16.0)(live animals 58.0/cotton 29 0)(fish 32 0)(copper 58 OJ(cocoa 59.0)(diamonds 32.0)(coffee 30.0)(tobacco 20.0)(groundnuts 45.0)(mohair 24.0)(95.8 inc. oil)

Source: Belinda Coote: Th e Trade Trap: Poverty and the Global Commodity Markets (Oxford: Oxfam, 1 992 )Note: Table shows primary commodities, excluding fuel, as a percentage of total exports for 1 98 2- 19 86(showing the percentage of the individual commodity where it exceeds 20 per cent of total exports).


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Improving the termsWith commodity markets continuing to deterioratein the 1990s, there is a real dan ger of Africa's export-led decline continuing. World coffee prices werehalved following the collapse of the InternationalCoffee Agreement in 1989, costing African prod-ucers an estimated $3.2bn over the following threeyears. In 1992, cocoa prices slumped to their lowest-ever levels in inflation-adjusted term s. And worse isto come. The World Bank predicts no significantupturn in commodity prices until 1995 at theearliest, and coffee and cocoa prices are not expec-ted to 'recover' to their (depressed) levels of the1980s until after 2000.

Against this background, international co-operation to improve Africa's trade prospects isvital. In the short term, increased finance tocompensate producers for falling world prices, suchas that provided through the Stabex fund of theEuropean C omm unity's Lome Convention, could bestepped up. The re-negotiation of the Lome Con-vention due to take place in 1993 offers anopportunity for the Community to take a lead inthis area. But in the long run, measures are neededto stabilise prices for commodities - especiallycoffee and cocoa - at more realistic levels.This can be achieved only by bringing suppliesback into line with demand, thereby ending thecurrent glut on world markets. African and othergovernments in the South could contribute to thisgoal by restricting supplies. Their lack of co-ordination in this area, disagreements over marketshares, and the pressure to generate foreignexchange have been partly responsible for theslump in world markets, with exporters desperatelytrying to expand their market share to offsetadverse price trends. This is a zero sum game, evenfor exporters such as Malaysia and Indonesia, whohave played no small part in undermining com-mo dity agreem ents in coffee and cocoa.

However, welcome as improved South-South co-operation on commodities would be, it will need tobe backed by North-South commodity agreements.Sadly, these appear to be a distant prospect. As theUnited Nations Conference on Trade and Devel-opment has put it: 'International co-operation oncommodity issues is now at its lowest point sincethe 1960s'. Northern governments remain implac-ably opposed to international commodity pacts,which they see as inherently inflationary. Theresulting deadlock has blocked progress towardsnew agreements on coffee and cocoa. Unless it canbe broken - and quickly - Africa's future willremain bleak indeed.

For the future, every effort must be made to

reduce Africa's dependence on commodities. Thereis no constructive purpose in relentlessly expanding .the production of raw materials for world marketswhich, because of technological changes andrelatively static demand in the North, are set toremain chronically over-supplied and depressed.The challenge is to promote diversification intomore valuable processed goods - the kind ofproduction which has been the key to South Asia'ssuccess. Apart from reducing dependence onvolatile and depressed commodity markets,increased investment in local processing wouldgenerate employment and income for Africa'slabour force. It would also enable the region toretain a greater share of the va lue of its exports. Thisis impo rtant because foreign control over processingand marketing, which is where the bulk of value isadded to commodities, means that less than one-tenth of the final value of Africa's coffee and cocoaexports rem ains in the region. The result is a huge -albeit heavily disguised - transfer of resources fromAfrica to the industrial world, and to the giantconglomerates which control international trade infood and beverages.

Oxfam is working to create a better tradeenvironment for Africa, both by supporting fairertrading initiatives and by increasing consumers'awareness of the problems that the region faces. Forexample, we are directly involved in marketingcoffee - Cafedirect - bought directly fromsmallholder farmer co-operatives. These co-operatives receive a price significantly above worldmarket levels, because there is no transfer of profitsto intermediary traders and. Northern transnationalcompanies. This initiative is now being extendedthrough the Fairtrade Foundation - established byOxfam and other development agencies - whichwill give a 'seal of approval' to companiesmarketing goods produced under socially andenvironmentally acceptable conditions.

Apart from creating new market outlets forsmallholder prod ucers , the aim of this initiative is toprovide consumers with information about thesocial and environmental conditions under whichthe commodities which they purchase areproduced. That information will help consumers tobecome mo re aware of the links between themselvesand producers in the South. It will enable them tomake responsible and informed decisions aboutwhat to buy, and to use their power as consumers togive a better deal to producers in the South. This isthe first step on the road towards a new type ofconsumerism, in which market choices aregoverned by something more than a search forbargain-basement prices, which consign vulnerablecommunities in the developing world to poverty.


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Diversification and protectionDespite the importance of initiatives to encouragefairer trade, Oxfam recognises that consumer powerin the North has its limits as an instrument forsupporting economic recovery in Africa. Realchange will require action on the part of Northerngovernments, who must back Africa's diversifi-cation efforts with increased resources, and moreliberal trade policies. Diversification away fromprimary commodities into export-based processingis possible only if sufficient capital is madeavailable, and markets in the industrial world areopened up to allow African exports to compete.

This is why Oxfam strongly supports UNproposals to establish an African DiversificationFund, and for the strengthening of existing facilities- such as UNCTAD's Common Fund for Com-modities - aimed at supporting investment inprocessing. At the same time, trade barriers must belowered. Tariffs which discourage local manufac-turing are imposed by industrial countries on manyexports from Africa. For instance, the average tariffon cocoa beans is only 2.6 per cent, but on processed

beans it is 4.3 per cent and on chocolate 11.8 percent. This tariff escalation has the effect ofreinforcing Africa's dependence on primarycommodities by discouraging investment in localprocessing.Even in the EC, where it enjoys preferentialmarket access under the terms of the LomeConvention, Africa faces trade barriers. (See Table4.) These are especially m arked in prod ucts coveredby the Comm on A gricultural Policy (CAP) - such assugar, beef, and vegetables - which are subject to awide range of quotas and marketing restrictions.Moreover, the EC continues to produce excessagricultural output and dump the surplus on worldmarkets. In the case of sugar, an important exportcrop for Africa, the EC is now the world's largestexporter, and these exports have substantiallydepressed world prices. Quite apart from theexcessive cost of the CAP to Euro pean taxpayers, itsdamaging effect on poor farmers in the South,unab le to compete in markets distorted by subsid-ised exports, makes a compelling case for moreeffective reforms than those so far initiated toreduce surplus production.

Table 4: Trade Barriers on Exports from Sub-Saharan Africa

ProductFish and preparationsFruits and vegetablesBeveragesTobaccoTextile fibe rsPetroleum productsVegetable OilsChemical elementsFertilizersPlastic materialsTextilesNonmetallic manufacturingNonferrous metalsNonelectric machineryTransport equipmentFurnitureClothingManufacturing, not specified elsewhere

Tariffs and ad-valorem equivalentsfor nontariff barriers, percentage protectionEC9.2

13.50 .1

46.03.20.21.31.92 .1

10.56 .10.40. 24.02.6

21.842.2

8. 3

Japan28.986.6

0.10.00 .13.94. 34.70.04. 8

13.52.90.83.20.04.7

19.40.6

USA7.27.70 .0

10.32. 60. 60 .05.60.04.6

11.70.72.72.52. 42.5

52.11.8

Source: Global Coalition for Africa: African Social and Economic Trends (1992)(Washington: Global Coalition for Africa)


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One of the ironies of North-South trade relationsin recent years is that the industrial countries, whilepreaching free trade, are becoming increasinglyprotectionist. Since the early 1980s, the United Statesand European Community in particular haveresorted to a wid e range of non-tariff barriers - suchas 'voluntary export restrictions' and quotas -aimed at commodity-exporting countries of theSouth. There is a further irony in that the samegovernments have used their domination of theWorld Bank and IMF to press developing countries,including those in Africa, into more liberal tradepolicies. As a recent study by the Ford Foundationnoted, countries such as Nigeria, Kenya, and Ghanahave undertaken particularly radical measures toreduce restrictions on im ports. These policies, whichprovide local industries with better access toimported machinery, are designed in large measureto pave the way to export-led recovery. Yet byclosing their own markets, the industrial countriesare undermining the conditions needed for suchprogramm es to succeed.

Deepening trade tensions and imbalancesbetween the USA, the EC, and Japan, combinedwith the uncertainty surrounding the future of theGATT world trade talks, poses the threat ofincreased protectionism in the North. In the face ofthis threat, Oxfam believes that Northerngovernments should undertake binding commit-ments to 'roll back' existing protectionist measuresaimed at exports from the South (something theyagreed to do at the outset of the Uruguay Round in1986), and not to introduce new barriers.

In relation to the GATT talks, Africa is in ananomalous position. As the weakest member of theinternational trading system, with limitedretaliatory capacity, it has an obvious interest in thesurvival of a rules-based multilateral system, and inaverting a return to 1930s-style trade policies - thelikely result of a collapse of the Uruguay Round.However, the GATT agreement now underconsideration envisages generalised import liberal-isation in industrial-country markets. This wouldreduce Africa's preferences in the EC, exposing theregion to increased competition from morepowerful Latin American and Asian exporters.According to one estimate, a GATT accord ontropical products could cost Africa $66m in lostforeign-exchange earnings for coffee alone (1987/88prices). Given the precarious state of Africa'seconomies, their dependence on EC markets and thesteady erosion of their world-market shares over thepast decade, there is an overwhelming case forprotecting the region's preferences. At the sametime, differences between the US and the EC overagricultural policy must not be allowed to postpone

indefinitely those parts of a GATT agreement fromwhich Africa could benefit. That is why Oxfambelieves the re is a strong case for implem enting at an early stage those pa rts of the GATT accord whichwould benefit developing countries, irrespective ofthe ultimate fate of the Uruguay Round.Regional tradeIncreased regional trade could play a positive rolein supporting efforts at diversification. AlthoughAfrican economies are extremely open, regionaltrade accounts for only some 5 per cent of theregion's total trade flows. Clearly, the expansion ofthis trade is not an answer to Africa's economiccrisis. But it could contribute to the development oflarger markets capable of sustaining manufacturingindustries, and to long-term development objectivessuch as increased food self-reliance. Additionally,regional trade could cushion the adverse effects ofrecession in the industrial economies, and providescope for diversification.

African governments themselves should do farmore to develop regional trade by reducing barriers,co-ordinating investment strategies, andundertaking joint investment in infrastructure. TheEconomic Community of West African States(ECOWAS), encompassing 16 countries, and the tencountries of the Southern African DevelopmentCommunity (SADCC) have a well established basisfor future co-operation. However, long-termdevelopment in this area will require substantialexternal finance. The EC is well placed to provideboth this finance and technical support for Africaninitiatives, since the p romotion of regional trade is acentral objective of its aid programme. But inaddition to extra finance, Northern governmentswill need to reverse the current emphasis ofstructural adjustment programmes, which attachprimacy to increasing exports for the world market,in favour of a more self-reliant regional strategy.Debt'External debt is a millstone around the neck ofAfrica ... Easing the continent's debt b urde n must bea priority for the international community.' Thisstark assessment by the UN Secretary General,Boutros Boutros Ghali, is one which Oxfam shares.So, in their public statements, do the governmentsof the industrial countries. Yet successive debt-reliefinitiatives have done little more than apply ill-conceived, short-term palliatives to wh at is arguablythe most intractable obstacle to Africa's recovery.Unless this approach is abandoned, and measures toreduce debt-service payment to levels compatible


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with long-term development needs are speedilyadopted, Africa's economic reforms will remaindoomed to failure.Paying the unpayableAfrica's debt crisis can be traced to the 1970s when,in the face of declining com mod ity prices and risingimport costs, governments (encouraged byinternational financial institutions) resorted toheavy borrowing to sustain imp orts and investment.This debt-led strategy for growth collapsed underthe twin pressures of rising interest rates anddeclining terms of trade in the early 1980s. Fiscaldeficits in the USA and other industrialisedcountries have kept interest rates high in real termsuntil recently. The legacy is a financial crisis which,for more than a decade, has deepened Africa'spoverty and undermined recovery efforts.

Between 1980 and 1992, sub-Saharan Africa'sdebt more than tripled to around $183 billion. (SeeTable 5.) Compared with Latin America's debt of$446bn, this total may appear small. It is less, forexample, than the combined debts of Brazil andMexico. Yet Africa is considerably more 'debt-distressed' than Latin America. During the 1980s,the region's de bt increased from the equivalent of 28per cent of its Gross National Product (GNP) to 109per cent. This compares with 37 per cent for LatinAmerica. In other words, sub-Saharan Africa owesmore than it earns. Every Zambian women, man,and child now has the dubious privilege of owingthe country's creditors around $766 - more than

twice the average annual income level. Meanwhile,Mozambique is embarking on a programm e of post-war reconstruction shackled by a foreign debt equalto four times its national incom e.There is another important difference betweenLatin American and African debt. Whereas theformer comprises mainly commercial credit, inAfrica official debt accounts for about two-thirds ofthe total. About two-thirds of this is bilateral debt,some 80 per cent of which is owed to the countriesof the Organisation for Economic Co-operation andDevelopment (OECD). Around half of bilateral debtis concessional, with long repayment periods andlow interest rates. Multilateral debt, owed mainly tothe World Bank and the IMF, increased inimportance in the 1980s as credit from other sourcesdried up and repayments mounted. Currently,multilateral debt accounts for around 26 per cent ofsub-Saharan Africa's total stock, compared with 19per cent in 1980.

This debt profile has important implications, fortwo reasons. Firstly, the growing importance of theIMF and World Bank as creditors has made debtmanagement less flexible. Neither agency ispermitted, under existing rules, to reschedule orwrite-off debt; and repayments to both have to bemet in full - while bilateral creditors typicallyreceive only around a quarter of their scheduledpaymen ts. Secondly, because W estern governmentsand multilateral institutions controlled by themaccount for the overwhelming bulk of Africa's debtburden, the primary responsibility for reducing thatburden falls on them.

Total debt stock(of which interest& principal arrears)

Principal repaymentsInterest repaymentsTotal debt serviceDebt servicing/exportsof goods and services (%)Total debt/GNP (%)

Table 5 : Debt198056.2

0.2

2.93,3.

:.6.2

198598.7

5.3

6.64.7

11.326.856.1

in sub-Saharan Africa (19 80 -19 92)1986

116.07.55.94.2,

w . i '

74.5.'.

1987142.8

10.85.23.68.8

22.197.4

1988145.7

17.7

5.44.7

10.124.797.1

1989153.9

18.95 .14.59.6

21.8

103.0

1990172.6

23.9

6 04 8

10.820.0

106 7

1991178.0

29.65.15.2

10.319.8

109.6

1992183 4

5.34.8

10.118 5

108 8Source: World Bank: World Bank Debt Tables, 1992-93 (Washington: World Bank)


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Development finance in reverseThere is a common misconception in the North thatAfrica is a bottomless pit into which Westernfinance is poured. In fact, despite its abject poverty,desperate shortages of foreign exchange, and lowinvestment, Africa disbursed $81.6bn in debtpayments between 1985 and 1992 alone. Thesepayments diverted government spending fromdesperately needed social expenditure. In Tanzania,for example, interest payments have absorbed agreater share of the government budget than eitherhealth or education since the mid-1980s. Debtservicing is also draining the region of almost aquarter of its income from exports - income whichshould be invested in recovery and meeting humanneeds. Shortages of foreign exchange resulting fromrepayments to Western creditors has inhibitedagricultural and industrial output, compromisingprospects for recovery and sustainable develop-ment. As the World Bank has put it: 'The bite thatdebt-service payments take out of countries'capacity to import each year is clearly u nsustaina blein an environment of low investment and stagnantGDP.'

Even the current haemorrhage of financialresources - now runnin g at over $10bn a year - doesnot tell the full story, since it represents only aroundhalf of what is due, or scheduled payments. Had debtrepayments been met in full, they would have costthe region more than 50 per cent of its exportearnings. But this regional average, striking as it is,obscures the extent of the gap between Africa'sfinancial obligations to creditors and its ability topay. In 1991, for example, Tanzania was able tomeet less than a quarter and Zambia only around athird of scheduled debt-service payments.Moreover, with most countries able to maintainmultilateral debt payments only at the expense ofbilateral debt, arrears have increased at afrightening rate, from $220m a decade ago to $llbntoday. The scale of these arrears is testament toAfrica's financial bankruptcy, and to the urgentneed for international m easures to restore the regionto solvency.

Nowhere is the legacy of accumulated debtproblems more threatening than in Ethiopia, wherethey could hinder moves towards democracy andpost-war recovery. Up until 1989, the countryserviced its debt almost in full. However, debt stockincreased from $804 million in 1980 to $3,475 millionin 1991. By 1990, the combined effects of civil warand increasingly insupportable foreign-exchangedemands had forced the country into seriousarrears, with only 40 per cent of repayments beingmet. Even disregarding these arrears, it is now

estimated that the economy - which contracted by 6per cent last year - will need to mobilise $1 billionannually for 1993-1995 to cover debt-servicepayments.ReschedulingExtensive default on Africa's debt has beenprevented only by repeated reschedulingoperations, in which official creditors, meeting inthe Paris Club, have allowed interest and futuredebt charges to accumulate by deferring payments.More than 30 African governments have beenforced to reschedule, many of them repeatedly.Paradoxically, however, these reschedulingexercises have fuelled rather than alleviated thedebt crisis, by contributing to the unsustainablebuild-up of arrears. Over 40 per cent of the non-concessional debt owed by sub-Saharan Africa tothe industrialised countries represents deferredinterest payments capitalised by the Paris Club andadd ed to the total debt stock.

As the severity of the Africa's debt crisisdeepened during the 1980s, more concessionalarrangements were introduced in an effort to staveoff default. Between 1989 and 1991 official creditorscancelled some $10bn worth of sub-Saharan Africadebt, associated mainly with their overseas aidprogrammes. However, since this debt wasoriginally on very soft terms (and most of it was notbeing repaid in any case), its cancellation has madelittle difference, either to debt repayments or to thestock of debt. In 1990, cancellations saved less than$100m, out of total debt-service pay me nts of $11 bn.The fact that Africa's total debt stock is now $30bnhigher than it was in 1989, when large-scalecancellations began, underlines the futility of thesegestures.

More concessional arrangements for non-concessional debt date from 1987. Under the 1988Toronto Terms agreement, adopted after a meetingof the Group of Seven industrialised countries,creditors acknowledged that a judicious mixture ofpartial debt write-offs, longer repayment periods,and concessional interest rates were needed toreduce Africa's debt. Up to a third of the debt stockscheduled for repayment during a stipulated period- known as the 'consolidation period' - becameeligible for cancellation. However, because thatperiod was typically very short, the Toronto Termsbrought few benefits in terms of foreign-exchangesavings. The 28 rescheduling operations carried outunder the arrangement reduced the debt stock oflow-income creditors by only $lbn.


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The 'enhanced Toronto Terms'Dissatisfaction with the Toronto Terms promptedthe then British C hancellor, John Major, to prop ose amore far-reaching option. The Trinidad Terms, ashis 1990 plan became known, called for thecancellation of two-thirds of the entire stock ofofficial deb t contracted before a specified 'cut-offdate, and for the remaining third to be rescheduledover 25 years. The proposal was backed by awarning that, if other countries refused to accept it,Britain would break ranks and act unilaterally.

In the event, other creditors succeeded indiluting the Trinidad Terms - and Britain did notact on its unilateral pledge. The 'enhanced TorontoTerms', as the package agreed in December 1991 isknown, lowered the debt-reduction option to 50 percent. More importantly, it ruled out dealing with theentire stock of debt at the outset, offering instead a

vague commitment to considering this option after athree-to-four-year probationary period. Thisapproach has the effect of adding to financialuncertainties, with adverse consequences for capitalflows and foreign investment.The inadequacy of the new package iscompounded by the fact that only debt contractedbefore a country's first recourse to the Paris Club iseligible for relief. For most African countries thismeans the first half of the 1980s, even thoughservicing debt contracted after that period is aserious problem for many. Moreover, reschedulingcontinues to apply to relatively short repaymentperiods. This might be appropriate to debtors facingtemporary liquidity problems. However, in the sub-Saharan African context it has the result of lockingwhat are basically bankrupt governments into anendless round of negotiations over unpayable debt.

The shortcomings of the 'enhanced Toronto Terms'With an annual pe r capita income of under $250,Uganda is one of the poorest countries in theworld. It is also a victim of the havoc wrought bydespotic rule, having suffered from a series oftyrannical governments, and a brutal civil war.The legacy of economic collapse and social declinewas inherited by the National ResistanceMovement Government (NRM) when it assumedpow er in 1986.Foreign debt is the main obstacle to the NRM'seconomic recovery programme. Fully servicing thecountry's $2.5bn debt would require 25 per centmore foreign exchange than Uganda earns from allof its expor ts. The collapse of earn ings from coffee,the country's main export, has increased the urg-ency of debt relief by creating severe shortages offoreign exchange. Unless it maintains the capacityto import a minimum level of imports, there is areal danger of Uganda's 'adjustment' programme(which is enthusiastically supported by the WorldBank and Western governments) collapsing.

Despite this, Uganda has derived little benefitfrom its 1992 debt-rescheduling arrangementunder the 'enhanced Toronto Terms' package, fortwo reasons. First, over half of the national debt isowed to the World Bank and the IMF, which donot reschedule their debt. Second, of the $288million owed to Western governm ents, as much as50 per cent was contracted after the July 1981 'cut-off date fixed by the Paris Club. Debt whichaccumulated after this date is not eligible forreduction or rescheduling.The upshot of this is that between 1993 and2010, the Ugandan economy will be drained of$2bn annually, of which $1.3bn will go tomultilateral creditors (including $623m to the IDAand $322m to the IMF). Repayments will risesharply after 1994, peaking in 1998 - the peakbeing caused almost entirely by repayments to theIMF. According to the most optimistic projections,Uganda's total expected debt-service paymentswill not start to fall until after the year 2012.

Judged as an attempt to resolve Africa's debtcrisis, the enhanced Trinidad Terms are a failure.For most countries they will do little more thanreduce the gap between scheduled repayments andactual repayments, slowing the accumulation ofarrears, but bringing negligible foreign-exchangesavings. For example, Tanzania's scheduled debt-service ratio (the percentage of foreign-exchange

earnings needed to meet debt repayments) will fallfrom 81 per cent to 44 per cent durin g the first yearsof its enhanced Toronto Terms rescheduling, withsubsequent savings bringing it down to 27 per centby 1995 (this is on the optimistic assumption thatexports will grow by 5 per cent a year). However,the country's current actual debt-service ratio isbelow this figure, so that in real terms there will be


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no foreign-exchange gains. Zambia is in a similarposition. Research carried out for Oxfam by theOverseas Development Institute suggests thatZambia's scheduled debt-service ratio will fall fromover 40 per cent in 1990 to less than 20 per cent inthree years (again assuming a 5 per cent growth inexpo rts). Since this is still in excess of the 13 per centthe country was paying in 1990, the main effect willbe to do no more than narrow the gap betweenscheduled and actual debt service.Even Mozambique, which has an overwhelmingcase for debt relief to support its recovery fromdrought and civil war, will obtain only marginalbenefits from its recent Paris Club rescheduling.Under the terms of that rescheduling, the country'sdebt-service ratio will fall from 130 per cent to 38per cent. This is still wildly in excess of what it canrealistically pay, since meeting the new targetwould require $135m, or three times the repaymentlevel in 1991. Moreover, since 1991 M ozam bique'seconomy has stagnated (with growth rates of lessthan 1 per cent), and its balance of payments hasdeteriorated because of the effects on exports ofdrought and the civil war.One of the problems with the Paris Clubapproach for Mozambique is its failure to addressproblems associated with bilateral debt owed toother creditors. In Mozambique's case, aroundthree-quarters of long-term bilateral credit has beenobtained from non-Paris Club sources, chiefly theformer Soviet Union and Comecon countries. Muchof Ethiopia's long-term debt originates from thesame source. In both cases, real debt relief willrequire measures to reduce repayment obligationsto the new governments of the former Soviet Unionand Eastern Europe. Paris Club creditors couldfacilitate this by making part of their aid to thesegovernments conditional on the provision of debtrelief for Africa.Multilateral debtPerhaps the most serious failing of current debtinitiatives has been their failure to reducemultilateral debt payments, which are occupying anincreasingly prominent place in sub-SaharanAfrica's debt profile. In 1991, multilateral agencies -mainly the W orld Bank and the IMF - accounted for36 per cent of debt-service payments; and for anumber of countries these payments are a large andburdensome part of their repayment obligations.They account for more than 10 per cent of exportearnings for eight countries, including Ghana,Kenya, and Madagascar, and for over a third ofexport earnings in the case of Uganda and Zambia.

In Uganda's case, bilateral debt accounts for onlyarou nd a quarter of total stock, with the W orld Bankaccounting for a further 62 per cent and the IMF 12 'per cent. It follows that there will be no majorreduction in Uga nda's crushing debt burden , unlessits payments to these institutions can be lowered.Despite the concessional nature of the greaterpart of World Bank credit in sub-Saharan Africa, in1992 the Bank received over $2bn in repayments.These transfers contributed to a sharp drop in nettransfers, and there is now a strong case for usingthe Bank's own reserve funds - which total over$13bn - to reduce its dem ands on the region.Debt owed to the IMF presents a moreintractable problem, for two reasons. Firstly, incontrast to the World Bank, the IMF has beendraining Africa of financial resources since the early1980s. Between 1983 and 1990, it received a nettransfer of over $3bn, as repayments outstrippednew loans. (See Table 6.) In practice, this means thatdevelopment resources provided by Westerngovernments are being diverted to the Fund.Concessional lending from the World Bank's soft-loan arm, the International Development Assoc-iation (IDA), which oug ht to be financing recovery,is being recycled in similar fashion, making theshort trip across 19th Street in Washington into theaccounts of the IMF. Secondly, several countries -including Z amb ia, Sierra Leone, Zaire, and Liberia -have built up substantial arrears with the Fund.These arrears jeopardise the access of debtors toother, more concessional forms of finance needed tosupport recovery.The International Monetary FundThe IMF's increasingly damaging role in sub-Saharan Africa is a direct consequence of policymistakes in the early 1980s. At that time, the Fundtreated what was a problem of insolvency as one ofshort-term liquidity, extending short-term loans(repayable over 18 months) at high interest rates tocover structural trade and budget deficits. As aresult, the Fund embarked on financing what wasbound to be a slow process of adjustment andrecovery with the wrong resources and the wrongapproach. Africa has been paying the price eversince.

During the latter half of the 1980s, the IMFintroduced two new facilities - the StructuralAdjustment Facility (SAF) and Enhanced StructuralAdjustment Facility (ESAF) - to provide finance onmore concessional terms. However, these have hadlimited success. This was followed in 1990 by theintroduction of a mechanism - known as the 'rights


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Table 6: Africa's IMF Debt and Debt Service (1980-1992)

Use of IMF creditIMF purchases(capital inflows)IMF repurchases(capital outflows)IMF charges(interest payments)Net transfers

19803.01.2

0.30 .1

0.8

19856.70.7

0.7

0.4

- 0 . 4

19867.00.7

1.2

0.4

- 1 . 9

19877.50.6

1.2

0.3

- 0 . 4

19887.01.0

1.2

0.2

- 0 . 4

19896.30.8

1.3

0.2

- 0 . 7

19906.60.7

0.9

0.2

- 0 . 4

1 9 9 16.60.5

0.6

0.2

- 0 . 3

1992*6.80. 3

0.3

0 .1

- 0 . 1Source: World Bank: World Bank Debt Tables, 1992-93 (Washington: World Bank)* estimate

accumulation approach' - to assist countries whichhad built up arrears. However, neither initiative hassucceeded in resolving the underlying problem ofinadequate financing associated with IMFoperations. Six years after the ESAF was created,only $2.3bn has been disbursed out of an originallending target of $8.7bn, and only 14 of the 40African governments eligible for ESAF loans hadagreed terms by the en d of 1992. Were it not for thefact that the maintenance of an IMF programme is acondition for Paris Club debt relief for manycountries, ESAF loans would have been even lesswidely used.

One. reason for the slow take -up ra te for ESAFloans is that repayment terms, concessional as theyare by comparison with the IMF's higher-interestcredits, are less favourable than for other facilities.The fact that ESAF programmes run for only threeyears, and that repayments start after five years(rather than twelve years in the case of IDA loans)makes them inappropriate to African conditions.Another, more serious, problem is that govern-ments have been unwilling to subject themselves tothe disciplines associated with ESAF lending. Thesetypically fix targets, monitored on a qu arterly basis,for reducing budget deficits (principally by cuttinggovernment spending), cutting trade deficits, andsqueezing inflation by increasing interest rates andrestricting money supply. The problem is not thatthese objectives are wrong in themselves; but thatthe macro-economic targets fixed by the IMF arepursued at a pace which threatens long-termrecove ry, as well- as social welfare. In Z amb ia, forexample, the sharp rise in interest rates whichfollowed the adoption of an IMF stabilisationpackage in 1992 has seriously hampered investmentin local industry, and the provision of credit (vitalfor post-drought recovery) to rural producers.

Similarly, in Tanzania, IMF balance-of-paymentstargets have resulted in reductions of imports vitalfor agricultural and industrial recovery. Both casesillustrate the triumph of macro-economic targetingover long-term development needs, which can betraced to the IMF's continued adherence to theanachronistic view that Africa's economic crisis isreversible through repeated doses of deflation andbelt-tightening.Efforts by the IMF to deal with the problem ofarrears through the 'rights approach' programmehave also been seriously flawed. Essentially, thatprogramme involves freezing arrears, with thedebtor country meeting interest charges remainingcurrent on other obligations, and adhering to anIMF-monitored financial p rogram me. Each year, thecountry accumulates 'rights' to IMF concessionalfunds, which by the end of a stipulated periodshould be sufficient to clear arrears.The disadvantage is that, apart from bearing theburden of large-scale interest payments to the Fund,countries in desperate need of support for theirbalance of payments are not eligible for newlending until their arrears are cleared. In effect,therefore, the arrears-clearance programme rein-forces the process through which the resources ofother don ors are used to finance IMF debt servicing.Take the case of Zambia, where mismanagement bythe government of Kenneth Kaunda during the1980s led to the accumulation of $1.2bn in IMFarrears - the largest in Africa. Last September, thenewly-elected government of Frederick Chilubawas presented with a bill for $123m towardsclearing these arrears. Because it will receive no newmoney from the IMF, resource transfers will remainnegative for the duration of the programme, andeven when arrears have been cleared, there is noguarantee of fresh concessional finance.


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Towards real reformIt is difficult to avoid being struck by the contrastbetween the urgency with which Westerngovernments have responded to the financialproblems of Eastern Europe and Russia, and theirneglect, for more than a decade, of Africa's fardeeper problems. Over recent years, Oxfam hasfrequently been told by these governments thatinternational shortages of capital and domesticrecession prevent them from undertaking a majorinitiative to write off Africa's debts. Yet they haveagreed in principle to an $18bn recovery packagefor the former Soviet Union, created a EuropeanBank for Reconstruction and Development, andimplemented generous debt write-offs for Polandand Egypt. What appears to be lacking in theAfrican context is one vital ingredient: namely,political will.

Oxfam believes that after almost a decade ofmismanaging the debt crisis, it is time for Northerngovernments to adopt a new approach. Thatapproach must start from a recognition that Africais suffering not from a temporary problem ofliquidity, but from bankruptcy; and it must placedebtors' ability to pay above the claims of creditors.African governments must not be put in a positionwhere 'creditworthiness' can be achieved only bydeepening the poverty of their citizens, and byjeopardising p rospects for recovery.

As we have seen, much of what currently passesfor rescheduling in the Paris Club is, in fact, a merepantomime, bearing little relation to the real needsof debtor countries. Adoption of the originalTrinidad Terms would be a step in the rightdirection, and the British government, as thearchitect of that proposal, should take the lead inpressing for its adoption by the Group of Sevenindustrialised countries. Having, with justice, takenconsiderable credit for proposing the TrinidadTerms, the British g

africa make or break: action for recovery

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