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Note: This document is from the archive of the Africa Policy E-Journal, published by the Africa Policy Information Center (APIC) from 1995 to 2001 and by Africa Action from 2001 to 2003. APIC was merged into Africa Action in 2001. Please note that many outdated links in this archived document may not work.


Africa: UNCTAD Documents

Africa: UNCTAD Documents, 2
Date distributed (ymd): 971125
Document reposted by APIC

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
At its October meeting, the UN Conference on Trade and Development (UNCTAD) considered recommendations on ways to sustain Africa's fragile recent economic progress. The recommendations stressed the need for a significant increase in public investment in physical and human infrastructure, export promotion in non-traditional sectors, and a balanced agricultural policy.

+++++++++++++++++end profile++++++++++++++++++++++++++++++

For additional information on UNCTAD and UNCTAD studies related to African development, see
http://www.unctad.org/en/enhome.htm or contact: Office of Secretary of the Board
Tel: +4122-907-4815
Fax: +4122-907-0056
E-mail: awni.behnam@unctad.org

Press Release
TAD/INF/2727 21 October 1997

UNCTAD SECRETARY-GENERAL CALLS FOR ACTION TO SUSTAIN AFRICAN ECONOMIC RECOVERY

Is the current recovery in Africa sustainable? What are the prerequisites? These questions are being addressed, yesterday and today, at the intergovernmental level, by the UNCTAD Trade and Development Board which is holding its annual session in Geneva from 13 to 24 October.

After many years of stagnation and decline, Africa has registered three successive years of improved economic performance, beginning in 1994, engendering much optimism. But caution rather than complacency is warranted, the UNCTAD Secretary-General, Mr. Rubens Ricupero, warned in an address to the Board today, as cyclical and transitory factors had been important in the recent economic upturn. There was no reason to underrate the amount of difficulties still laying ahead. He saw a need for a balanced approach both in assessments and solutions to Africa's economic problems.

Agricultural development was a key component of the solution to development in the continent. But, the green revolution for instance which had helped in bringing about food security in other regions, could not easily be replicated in the African continent due to problems related to climate and soil. It was already anticipated that after a few years of improved weather conditions, agriculture could suffer a setback this year, especially in sub-Saharan Africa, owing to "El Nino". Similarly, because of its geographic location, African countries had not benefitted from the 'flying geese' pattern, as had Asian developing countries from spill-overs from rapidly growing neighbouring economies.

Mr. Ricupero saw a growing willingness to take up the challenge of African development, demonstrated by initiatives taken within the United Nations, by the European Union, Japan, the United States, and political commitments as expressed by the G7 at the Denver Summit. These various initiatives directed towards African countries needed appropriate coordination.

The call for non-complacency was shared by Ambassador Agnes Yahan Aggrey-Orleans of Ghana, who is chairing the debate, within the Board's Sessional Committee II. Africa's recovery was fragile and prone to the vicissitudes of the weather and commodity markets. "Now that Africa seems to be on the way to recovery, it would indeed be regrettable", she stated, "if the international community were to miss the opportunity of placing growth and development on a firm footing in Africa."

The view emerged clearly from statements made, not only by African countries, but also from other developing and developed countries, that a long-term recovery in Africa would be within reach only if there was a significant reduction of the debt burden which absorbed funds that would otherwise be available for investing in productive capacity. Much emphasis was placed also on the need for vertical and horizontal diversification in the commodity sector. It was also stressed that for African countries, Official Development Assistance (ODA) needed to be increased, as foreign direct investment (FDI) was not a substitute but only a complement to ODA.

Presenting a report to the Board on "African economic performance, prospects and policy issues" (TD/B/44/12 -- a version in Wordperfect is available at http://www.unctad.org/en/special/pdfs/tb44d12.exe), Mr. Kamran Kousari, UNCTAD Coordinator for Africa, attributed the improvement in external indicators to growth in export revenues and a reduction in current account and trade deficits. Export growth went from -4.2 per cent in 1993 to 3.3 per cent in 1994 and 16.2 per cent in 1995. This was largely due to higher prices for commodity exports, improved weather conditions and better management of national economies. However, investment ratios appeared to have fallen in more than half of the countries in which export earnings increased between 1993 and 1995, representing only 17 per cent of GDP for sub-Saharan Africa as a whole.

The report puts forward three main conclusions on policies to be pursued for sustaining growth in African countries.

The first calls for a significant increase in public investment in physical and human infrastructure. This would, through spillovers if accompanied by the right policies, help lay the basis for recovery of private investment and a process of diversification.

The report explains that investment in infrastructure has been constrained by balance-of-payments considerations, which have been negatively affected by the servicing of external debt which is a major burden for the economies of sub-Saharan Africa (SSA). SSA's debt represents 10 per cent of the total debt owed by developing countries to official creditors, but the region has the highest debt-to-exports ratio of any developing region: 270 per cent! There is a huge stock of debt arrears which is the fundamental problem underlying SSA's debt overhang. Only through a major debt relief and an increase in ODA could resources needed for investment in physical and social infrastructure be released, the report stresses. In the context of the IMF/World Bank Initiative for the highly indebted poor countries (HIPCs), added flexibility in eligibility criteria, time frame and interim financing is required.

The second policy recommendation aims at export promotion in non-traditional sectors through increased competitiveness and exchange rate stability. The possibility for the adoption of selective and temporary incentives for exports in non-traditional sectors should be considered.

Many African countries have virtually eliminated, or reduced, their non-tariff barriers, and many have also reduced their tariff rates. However, the report notes, rapid import liberalization will create difficulty in enhancing productivity when the industrial structure is weak. Furthermore, with respect to Africa's competitiveness, there are significant financial and foreign exchange constraints impeding capacity-building and raising productivity of the existing capacity. Real wages have already been considerably depressed. Hence there is little scope for reducing wages in the interest of competitiveness. Finally, the scope for an active exchange rate policy is being narrowed by financial liberalization.

The third policy recommendation focuses on agriculture: a balance should be struck between food self-sufficiency, surplus extraction, price incentives and income security for producers. Policy instruments and institutions should be reformed rather than dismantled to achieve these objectives. Agriculture requires substantial investment in, and maintenance of, infrastructure, which cannot be undertaken by the private sector.

On agricultural price policies, while world terms of trade for food and agricultural raw materials have fallen, domestic terms of trade in SSA countries have generally improved. However, contrary to expectations, UNCTAD findings suggest that in recent years, farmers in countries where the liberalization of prices and marketing institutions has been slower have, in general, fared better than farmers in countries where agricultural markets have been liberalized. Policies designed to remove price distortions appear to be insufficient to provide greater incentives. In short, any benefits accrued have been to the benefit of traders as price-based reforms have left untouched severe market imperfections and shortcomings.

Delegations also heard the views from experts invited to speak on the subject: Mr. Rashad Cassim, Director, Trade and Industrial Policy Secretariat, International Development Research Center (IDRC), South Africa; Mr. Louis Amedee Darga, StraConsult, Mauritius; and, Mr. Gerry Helleiner of the University of Toronto, Canada.

Informal discussions on Africa will continue today in preparation for the Board's High-Level Segment on "Globalization, Competition, Competitiveness and Development", which will be held on Thursday 23 October (see TAD/INF/2722). Ambassador Aggrey-Orleans will report the outcome of these discussions to the High-Level Segment. (The afternoon of the High-Level Segment will be an interactive session through video-conferencing with the Second Committee of the United Nations General Assembly.)

For more information, please contact: Kamran Kousari, UNCTAD Coordinator for Africa, Telephone: +41 22 917 5800, Fax: +41 22 907 0043, e-mail: kamran.kousari@unctad.org or Carine Richard-Van Maele, Press Officer of UNCTAD Telephone: +41 22 917 5816/28, Fax: +41 22 907 0043, e-mail: press@unctad.org


This material is being reposted for wider distribution by the Africa Policy Information Center (APIC), the educational affiliate of the Washington Office on Africa. APIC's primary objective is to widen the policy debate in the United States around African issues and the U.S. role in Africa, by concentrating on providing accessible policy-relevant information and analysis usable by a wide range of groups and individuals.


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