Globalization and Africa

8/6/2019 Globalization and Africa

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GLOBALIZATION AND

AFRICA


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Introduction

The term Globalization means differentthings to different people. It is capable of anynumber of conflicting and sometimes,contradictory interpretations, particularly of aqualitative value-laden nature

It has numerous implications for trade,investment, politics, culture, human rights andother areas

However, our preoccupation in this session isessentially with the economic aspects


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Introduction

It is characterized by an intensification ofcross-border trade and increased foreigndirect investment (FDI) flows, promoted byrapid liberalization and advances ininformation technology

While globalization holds out to someparticipants the promise of growth in tradeand international investments, and therefore,prosperity, it heightens for others the risks ofinstability and marginalization, especially insub-Saharan Africa


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Introduction

This session examines:

Issues of development and Africa,

focusing on Sub-Saharan Africa (SSA);Whether Africa can avoid globalization;

The avenues of globalization as well as

its impact; andThe means for maximizing the benefitsof globalization


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Development and Africa

In conceptualizing development, it isconvenient to adopt a needs approach,

which emphasizes the ability of a country orregion to provide basic needs of food, shelter,clothing, etc to its citizens.

We therefore characterize Africa along the

universally accepted indices of developmentWhat are the characteristics of Sub-SaharanAfrica?


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Stunted Growth: The region grew atbetween 1.8 2.0 percent only in the period1981-90 and 1991-99 respectively. Judgedagainst the population growth rate, it is lowcompared to other regions of the world (e.g8.0 for East Asia)

While there has been an increase in realoutput growth in recent times (e.g 4.3 and 4.6percent in 2003 and 2004 respectively), thislies below the about 6 to 7 percent needed toreduce poverty.


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Low Economic Integration: SSA is the leastintegrated sub-continent compared to others.

What obtains is the proliferation of manyeconomic groupings, often with overlappingfunctions e.g in West Africa, there isECOWAS, The Manu River Union (MRU),and The Francophone Union, all oftencompeting rather than cooperating. There arealso about five such groups in East andSouthern Africa


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Excessive Debt Burden: In 1990, SSAowed a total of $176.8b, which

increased to $230.1b by 1998.Recent debt relief granted to someAfrican countries have reduced the debt

burden, but reports have it that some ofthe countries have started to pile upfresh debts


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Excessive Debt Burden: In 1990, SSAowed a total of $176.8b, which

increased to $230.1b by 1998.Recent debt relief granted to someAfrican countries have reduced the debt

burden, but reports have it that some ofthe countries have started to pile upfresh debts


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SSA is a poor region: In 2000, of 34countries indicated by the World Bank to be

poor, 28 were in SSA.In 1999, SSAs GNP at PPP dollars was$929.3b, East Asia and the Pacific $6423.8band MENAs $1337.5b

SSAs per capita GDP was $1450, EastAsias $3500; Europes $3500 and MENAs$4600


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SSA is a poor region: Even when onelooks at the UNDPs Human

Development Index (HDI), the continentstill does not fare well. It is the poorestcontinent in the world


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Inadequate Infrastructure: General dearthof infrastructure, both social and economic

The information superhighway relies almostexclusively on telecommunications. AlthoughGSM has brought about improvement, accessto telephone (fixed and mobile), personalcomputers and internet in SSA remains thelowest in the world.

A similar picture obtains for otherinfrastructure


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Concentration in Primary Products: SSA isessentially a primary producer.

These products are subject to declining termsof trade, price volatility and thus, unstableearnings.

Between 1990 and 99, SSAs domestic valueadded from manufacturing was 17%compared to East Asia and Pacifics 28%


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What Explains Africas

Poor Performance?Adverse geographic and demographicconditions

Terms of trade and other external shocksMacroeconomic policy weaknesses

Structural policy failures

Weaknesses in governance, notably poormanagement of resources

Political instability


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Can Africa Avoid

Globalization?According to Ahassane Quattara, a pastdeputy managing director of the IMF, Africa

cannot escape globalization, and they shouldnot try to avoid it.

Africa needs to join, but in joining, shouldprepare itself for it.

He advises that Africa can proceed to theinternational community via strong regionalcooperation


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Avenues of Globalization

International Trade: Africas share of worldtrade has been declining as a result ofrestrictive trade regimes, slow income growth,high transport costs and distance frominternational markets

Capital Flows: What Africa had beenexperiencing was capital flight. Althoughthere has been some increase in FDI flows inthe late 90s and 2000s, Africa has beenworse off

Net official flows of aid or ODA has also fallensignificantly


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Avenues of Globalization

Human Migration

Advances in Telecommunications and

transportationSpread of knowledge and technology

Economic Integration

International Organizations (IMF, World Bank,

WTO): Africa has often been a passiveparticipant in most of these organizations.They are not adequately represented


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Impacts of Globalization

Increased prosperity and reducedpoverty for some countries, particularly

in East AsiaMarginalization of Africa in sense thataid has reduced rather than increased

Other potential impacts are:


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Impacts of Globalization

More efficient utilization of resources

Greater specialization among nations and,

thus, increased welfareIncrease in output and trade throughliberalization

Higher quality products and lower prices

through competitionExposure to new ideas, technology andculture


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Requirements for

Maximizing the Benefits

of GlobalizationPolicy Reform

Liberalization of trade regimes

Pursuit of programme of integrationInvesting in people and building capacity

Improving infrastructure and spurring agric

developmentPromoting a sound banking and financialdevelopment


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Requirements for


of GlobalizationEncouraging private investment throughliberal incentives

Reducing the size of the public sectorthrough privatization

Reform of the regulatory framework

Transparency in governanceSimplicity of procedures

Fight against corruption


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Requirements for


of GlobalizationResponsibility of officials and rule of law

Individual freedom and collective expression

Independence of legal systemReduction of dependence on primarycommodities and improvement inmanufacturing value-added

Reducing poverty and increasing savings


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Requirements for


of GlobalizationFacilitating market access through activeparticipation and advocacy in WTO

Encouraging private capital flowsSupplementing debt relief with increased newlevel of financial support

Need for a strong international monetary and

financial system patterned to solving theproblems of Africa

More and better debt relief


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Conclusion

Admittedly, some of these are structuralreforms which take time and involve

substantial `learning from experience'.Building institutions is much more difficultthan changing policies, so Nigeria and otherAfrican countries may have to rely more on

the trade channel in the short and mediumterm as their major means of reaping thebenefits of globalization


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Thanks for listening

Globalization and Africa

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