Could U.S.A. Mean ‘United States of Africa'?
Reasons for Hope
Africa Could be worst economic casualty “ of the so-called ‘War on Terrorism” claimed a World Bank report that was dutifully trumpeted, albeit falsely, in a Financial Times of London headline shortly following the September 11th attack. Among other prognostications, said one author of the World Bank report speaking at a Southern Africa Financial Markets conference, commodity prices on world markets would collapse, thus disparately impacting Africa; and that Foreign Direct Investment (FDI), and foreign aid flows from developed nations into Africa would become increasingly anemic, thereby stunting Africa's hard-won growth during the previous few years. To add insult to injury, the major industrial powers¸ acting through multi-lateral organizations they already control such as the IMF, the World Bank, and the EBRD among others, have consistently pledged debt relief and direct foreign aid to African nations only to take back those concessions through subsidization of domestic industries (e.g., agriculture, textiles, et al) that directly compete with African exports, and that greatly contribute to depressing world commodity prices – exports from which commodity rich Africa is heavily dependent.
But remarkably, and unlike many other developing regions in the world following the aftermath of the World Trade Center attack, growth in trade and economic development indicators by many countries in the African subcontinent have remained stable on a relative basis, and some have posted admirable growth – of the kind American economist might envy given current U.S. market conditions and economic outlook.
For instance, the Economic Freedom Network, an organization that supports and advocates for a more thoughtful and coherent route in the World's march to ward “globalization,” published a well-received Spring 2002 report titled “Economic Freedom in the World.” The report rates 123 of the world's countries in five categories: legal infrastructure, a reliable banking system, accessible & transparent capital markets, an educated & productive labor pool, and private sector development. The report is interesting in its revelation that nothing accounts for economic prosperity more than the rule of law. Countries with the most economic freedom turn out to have one important factor in common: a trusted, transparent legal system where private property rights are respected and enforced.
Impressively several sub-Saharan African nations rank much higher than many so-called free and “democratic” states among industrialized nations. Botswana, for example, ranks 38th equally with France, South Korea and others; and South Africa ranks 47th – well ahead of Mexico (66th), Argentina (81st), China (101) and Russia (116). Even more interestingly, these are just two of the same 17 sub-Saharan African nations that through the 1990's have made impressive gains according to World development indicators, and have shown remarkable economic resilience in the face of declining global markets despite the post-bubble market volatility and global economic uncertainty.
But there are also other encouraging signs on the horizon that portend a brighter near-term future for sub-Saharan Africa.
Recognizing the inadequacy of the Organization of African Unity (OAU), African leaders earlier this year launched three impressive, if not hope inspiring initiatives. First, the African Union (AU), a continent-wide 53 nation political union chaired by South Africa's Thebo Mbeki, whose long-term objective is the political and economic integration of Africa -- like the European Union from which it was modeled -- into a common economic and global power block. According to its charter, the AU will be very different from the OAU. Among other things, the AU will have:
· Peacekeeping force (see PSC below), whereas the OAU stressed non-interference in the internal affairs of member-states;
· Its own central bank and court of justice and will work towards creating a single market and currency;
· It will also have what is being referred to as “a Marshall Plan for Africa” -- an integrated Economic Development agenda embodied within the mission of NEPAD (see third initiative below).
Second, the Peace & Security Council (PSC), which renounces the concept of non-intervention, and confers member states the right to intervene militarily in national or regional conflicts that threaten peace and stability of the union by empowering the PSC – like the UN's Security Council – with the commensurate legal and enforcement mechanisms to engender the collective will.
And lastly, the New Partnership for Africa's Development (NePAD) - which pledges improved economic and political governance for the people of Africa through a series of goals and proposals that may, in aggregate, positively impact the economic development and integration of Africa into the Global economy. Some proposals call for better efforts of self-governance, transparent legal structures, and the end to endemic corruption recognizing the severe and negative impact that corruption can have on capital markets such as the recent U.S. corporate corruption scandals. Other proposals call for debt forgiveness, increased bi-lateral aid, increased trade, and calls on developed nations – often the leading proponents of “free & open trade” – to lift the tariffs, subsidies (i.e., corporate and industry welfare) and trade barriers on agriculture, textiles and steel products from developing nations which often enjoy better competitive advantages to domestically produced, but subsidized, goods & services.
Using conventional thinking, African pessimists, would argue, like the OAU of old, that this is yet another of Africa's so-called “old dictators club,” and will inevitably be doomed to failure. But African optimists, myself among them, would counter that however ambitious these new initiatives may seem, Africa has as its exemplar that a mere 50 years ago, the so-called enlightened Western powers (the U.S., Europe, Australia and Canada) were themselves successfully emerging from chaos and catastrophe not much different – some would say even worse -- than the malaise in which Africa now finds itself. If there was hope for Europe, there certainly is even more hope for Africa.
These developments seem compelling in itself, however, as an American, the neo-realist in me requires a more compelling self-interestedness to justify the hope I see in Africa. On that note, the U.S. and Africa, as I've argued before, also share two important commonalities that ought to be leveraged to exploit our nation's interests in Africa.
· Heritage-based U.S. Foreign Policy toward Africa: The first commonality is one of heritage. Black Americans with as much, if not deeper, roots in America than most other Americans, perceive as much relevance in Africa to U.S. national interests, as most white Americans see in Western Europe. In this context, my first recommendation is to begin a top-down re-definition of U.S. foreign policy interests in Africa that truly reflects “e pluribus unum.” -- that is, the pluralism of our nation. And no legitimate re-definition, can exclude the interests that Black Americans – traditionally the nation's largest minority group, and politically, historically and culturally, the most influential -- hold in Africa, however dormant that interest might be presently. Simply stated Africa's Diaspora in the United States, the Caribbean & Latin America can play a central role -- if properly leveraged to the advantage of their respective host countries -- in the development and integration of Africa in Global Economics and World Affairs.
In this heritage-based context, I believe African Americans, and Black Americans of all origins could and should play a greater role in strategically identifying and pursuing common areas of interest between their domestic agenda, and those of economic development, trade and finance in Africa (e.g., economic empowerment, "cultural capital," trade & commerce, small business contracting, import-export opportunities, etc). Why, for example, can't Rep. Charles Rangel or Russell Simmons develop an "African foreign policy" that is in the best interest of Harlem and Russell Simmons Enterprises, respectively, and that achieves in one stroke through bi-lateral initiatives the dual purpose of the economic development of Black Americans and their communities, and aids the economic development of Africa. Wouldn't such heritage-based efforts help to drive and define the greater American foreign policy toward Africa with mutual benefit?
· Religious-based Foreign Policy toward Africa: The second commonality we share with Africa is that Islam is the fastest growing religion in Africa, as well as in the United States. And considering the complexities we are now experiencing in the Middle-East, we can exploit this trend to great benefit in terms of international relations with Islamic nations and Islamic interests world-wide, not unlike the role that the American Jewish community has played in strengthening bi-lateral relations with Israel to far less benefit to America that stronger alliances with Islamic nations might serve.
Terrorism's Relevance to African Trade & Economic Development
Asked by the Foreign Policy Association in the aftermath of the September 11th terrorist attack – a day certain to live in ignominy – to make a submission to the website with some relevance between the exquisitely executed, yet murderous terrorist assault and African Trade, Investment & Finance, I found myself deeply, even profoundly in a state of mental and emotional numbness. On day one, ground zero, I felt nothing: not anger nor sadness, neither shock nor rage. I felt nothing. I was simply at a loss for words. And that is unusual only because I am not a person usually known for lacking an opinion about anything.
I could neither make sense of the attack, much less establish its 'relevance' to anything. At least to anything human, for it was an inhuman act. One that the more I allow myself to contemplate, the further the magnitude and gravity of its implications seem to recede from my capacity to rationally conceive it. However, having had time, space and distance to ponder its implications and connection to African Trade, Investment and Finance, I now offer several thoughts.
First, the fundamental lesson that ought to be taken away from this incident is the need for the nation to remain engaged in global affairs – particularly in areas that threaten regional stability such as the Middle East. Americans – all Americans, not just our political leaders – need to recognize the importance and the need for developing a thoughtful, coherent foreign policy that recognizes the nation's unique role in international affairs as a superpower, as well as a global political, economic and military leader. That means developing a fuller understanding of other regions of the world, their histories, and more importantly, why some circles, including Europe and Asia, maintain profoundly distrustful and condescending opinions of America's disengagement from it's central role in international relations. Along these lines, Henry Kissinger in his new book, "Does America Need a Foreign Policy?" raises a number of issues that appropriately question such views widely held among many Americans. Similarly, Chalmers Johnson , in a far more interesting analysis of the cost and consequences of American hegemony provides a provocative look at present day manifestations of unintended consequences of past U.S. foreign policy faux pas.
Second, a survey of African news sources reveal, much like Europeans, that in vaguely defining "terrorism" as our new enemy, Mr. Bush did not speak directly to the issues that many – especially in the Middle East – suspect is at the crux of the problem: namely, the question of Israel, the dislocation and systematic oppression of Palestinians in the West Bank and Gaza, and the U.S. military presence in Saudi Arabia, home to Islam's holiest city. Patrick Tyler of the New York Times in a recent analysis noted, our allies believe that an extended military and police assault on terrorism will succeed only if the United States returns energetically to a leadership role in finding solutions to conflicts that have incited hate and terror in the Middle-East: the Arab-Israeli dispute, the economic strangulation of Iraq, the conflict in Kashmir that risks war between Pakistan and India — and the problems of Afghanistan under the Taliban, who rose from the anarchy that followed American diplomatic withdrawal from the region. Clearly, the Bush administration's policy of being a disinterested mediator – though at times conveying partiality toward the Israelis – may have added impetus and motivation to already demented terrorist minds. Afterall, how many of you found it insultingly disingenuous that some spinmeisters – notably those sympathetic to the Israeli agenda – used the incident, at the height of national mourning and anger, to flame anti-Islamic sentiment with cynical "now you know how it feels" diatribes?
I certainly did.
Third, having confronted the horrors of terrorism on its own soil in the Kenya and Tanzania embassy bombings, and the attack on the USS Cole in Yemen, African's leaders across the continent urge caution, according to one CNN Worldbeat report by Charlayne Hunter-Gault a respected African Affairs journalist. One way to keep African sentiment in line with American interest in fighting global terrorism is to ensure that the scourge of poverty and disenfranchisement does not create the kind of anti-West and anti-capitalist (or anti-Americanism, which encompasses both) environment where recruitment for radical Islamic causes is seen by otherwise unwilling minds as a way out of misery and hopelessness. Ironically, and perhaps as a portent of the future absent greater U.S. involvement, Islam is the fastest growing religion both in the U.S. as well as in sub-Saharan Africa.
Fourth, the best way, it seems to me, to avoid the aforementioned outcome is to make tangible efforts to ensure that (1) the U.S. develops a seamless African foreign policy that defines diplomatic relations with key Africa nations in both geo-strategic and national interests; and (2) that Africa's economic development is integrated into the global economy. To this end, I offer, in broad terms, the following prescriptions:
- Free Trade for Africa- The U.S., as the global leader in free trade markets, needs to take the lead in persuading global allies to eliminate trade barriers that prevent more competitive African mineral, agricultural and textile products and resources from entering more developed markets. The U.S. took a step in the right direction last year with the passage of the African Growth and Opportunity Act (AGOA) which can serve as a useful paradigm. Such initiatives need to be expanded and strengthened among European, Latin American and Asian allies, and should be formalized under WTO provisions.
- Debt Forgiveness – In 1996, the IMF and World Bank devised a plan to help what they called Highly Indebted Poor Countries (HIPCs) to encourage debt relief. The HIPC initiative was the first comprehensive effort to eliminate the unsustainable $220 billion debt in 41 of the world's poorest countries. Most Third World debt is owed to Western governments — known as bilateral debt — and about a third is multilateral debt owed to the World Bank and the IMF. About 10% percent is owed to private banks. Nations in sub-Saharan Africa, for example, spend more on annual debt repayments than they do on education and health combined. In Zimbabwe, real incomes have fallen 37 percent since 1991, 25 percent of the country's population has HIV/AIDS while a fourth of its national income goes to pay off debts. The United States should back this HIPC initiative because it encourages economic reform, maintains the strongest safeguards against corruption, and the plan can diminish the possible moral hazard effect of debt forgiveness. Moreover, contrary to an otherwise eloquent piece by my colleague Chris Johnson, the Africa Forum Guide, in almost every quarter of global finance and development circles there is consensus that well-planned, wisely implemented debt forgiveness schemes can work in Africa and other HIPC's. The World Bank and IMF, and more recently, President George W. Bush have endorsed conditional direct foreign aid grants that include mitigating provisions to curb corruption and the unintended use of funds. Such provisions include programmatic funding to NGO's and other aid organizations that pursue health and education programs in HIPC's. Note: Next post on this page will address Debt forgiveness in Africa.
- Infrastructure Finance & Development- International development projects that assist in modernizing the continent with transportation (roads, bridges, marine and airports), telecommunication, dam projects, power plants, rural electrification infrastructure financed through Privatization initiatives, Project Finance, FDI and private equity will greatly facilitate the economic development and integration of the continent.
- Investment in Human Capital- mainly in primary education, adult literacy and basic health care – above and beyond just the West's obsession with AIDS/HIV issues. As important as those issues may be, it represents a small part of the overall issues negatively impacting the development and integration of Africa into the world economy.
- Closer Military & Economic Ties with Key African Nations-Chief among these Nigeria, South Africa, Kenya, Ghana, Botswana and an emergent Uganda and Tanzania. This requires a hard look by the U.S. military and national security apparatus to re-define African alliances in terms of national interests as mentioned earlier. For instance, during the 2000 presidential campaign, George W. commenting on U.S foreign policy toward Africa claimed, “Africa is important, but it is not a priority” for most Americans. To that, TransAfrica , a leading public policy organization advocating U.S. foreign policy interests in Africa and the Caribbean on behalf of Black Americans, asked insightfully, “Does this man seek to represent America, or just white Americans? Because there are 36 million Black Americans with as much, if not deeper, roots in America than Mr. Bush who politely beg to differ; and who perceive as much relevance in Africa to U.S. national interests, as most white Americans see in Western Europe.” It's a matter of perspective. In this context, the first recommendation is to begin a top-down re-definition of U.S. foreign policy interests in Africa that truly reflects e pluribus unum, that is, the pluralism of our nation. And no reasonable definition – let alone a re-definition – can exclude the interests that Black Americans – traditionally the nation's largest minority group, and politically, historically as well as culturally, the most influential -- hold in Africa, however dormant that interest might be presently.
Hyperlinks
1. Does American Need a Foreign Policy? Henry Kissinger describes a United States that is militarily and economically ascendant, uninterested in foreign policy, directed by domestic concerns . . . yet drawn into a central role in global affairs – a role that the national character of our nation seems to make us resist. What should we be doing? The book is takes a look at the historical foreign policy issues, current situation, and potential future economic and security concerns of the United States. Kissinger systematically analyzes each global region and the challenges that the United States faces in developing a coherent foreign policy towards each. He covers Europe, Asia, the Americas, the Middle East, and (though somewhat grudgingly) Africa.,
2. Blowback: The Costs and Consequences of American Empire by Chalmers Johnson, Henry Holt, 2000
4. Global Terrorism: African Overview
5. USIA Report on Bi-Partisan support for Anti-terrorism
7. Weekly Arab perspective web-zine
8. Federal government resources
Growth Trend in FDI and Private Equity: Africa's Reason for Hope
Investment, particularly in health, education and infrastructure, is a key factor in economic growth and development. However, developing nations often lack an adequate private sector, banking system, capital markets and sufficient domestic savings to spur lending and investments. As a result, many developing nations must attract foreign direct investment and private equity (e.g., venture capital, equity funds, TNC's, etc.) from outside investors to help spur economic activity. To that end, many African nations in recent years, assisted by new trade pacts with developed nations and recalibrated World Bank & IMF structural reforms, having been implementing reforms to help attract greater investor interests in African projects (see Harvard Business School Current Research Summaries series: "Private Equity in Developing Countries" ). These reforms have included strengthening courts & legal framework to give investors reliable venues of legal recourse, lowering foreign investment barriers, reducing corruption and enhancing transparency in governance, and developing a viable private sector and financial system, privatization and other efforts. While there is still much work to be done, these efforts are beginning to prove fruitful.
For instance, William Rhodes (among the few, rare 'Afro-optimists' I've come across recently), an executive at CitiGroup, a transnational corporation (TNC) with substantial interests in Africa, wrote recently in The Financial Times (London) that after decades of stagnant growth and ineffectual economic policies, Africa experienced annual growth of above 4 percent. Rhodes also noted insightfully that at the recent World Economic Forum's conference on Africa there was a general sense of optimism about prospects for Africa among global business and economic leaders, and a pervasive sense that the continent is experiencing an economic renaissance. Along these lines, according to World Bank figures, 13 sub-Sahara African nations experienced GDP growth rates of 5 percent or more in the five-year period closing the 20th century. Coincidently, these economic growth rates exceeded their respective population growth rates for the first time in decades – an important development indicator. Furthermore, the last several years has witnessed a boom in private equity investing in developing nations based largely on the perception that investment opportunities in developed nations are mature – meaning the greatest risk-reward opportunities are to be found in newly emerging markets. Herein lies Africa's vast, untapped potential for development.
But perhaps the most convincing evidence of this 'African renaissance' is the growth, and performance, of private equity investments flows into Africa from other regions of the world. In 1999 alone foreign direct investment (FDI) almost doubled from the previous year with the largest concentration in the energy and mining sectors. Similarly, while FDI in developing nations surged from $43 to $239 billion in the ten-year period 1989-99, a growth of over 400 percent. During the same period, FDI in Africa ballooned from about $2.3 to $19.6 billion (including grants and investment fund flows) – a growth of over 700 percent! And while Africa still lags other developing regions of the world in FDI flows, the growth in confidence, and the higher-than-historical averages in FDI into Africa as a viable investment destination by private investors is both compelling and unmistakable. Further still, a comparison of repatriated earnings on investments among all developing regions indicates that foreign investors enjoy significantly higher returns on their investments in Africa, compared to alternatives investments in their domestic country or other developing regions. According to the UN's 1999 World Investment Report, between 1991 and 1997, foreign investors in Africa accrued an annual average of 75.25% return on repatriated assets compared to Asia & Pacifica (36.7%), Latin America & the Caribbean (33%), Central & Eastern Europe (5.6%), and even the developed nations (42.3%) -- the second only to Africa. The point here is that there are many reasons for private investors to be bullish on Africa.
To be sure, there will be some who argue that repatriated assets (a net outflow of returns on investments back to country of origin) add no benefit to Africa's economic infrastructure. However, they miss the point that for every dollar of outflow in repatriated earnings Africa enjoyed three dollars of FDI inflows. Moreover, the economic activity from nearly $20 billion (in 1999 alone) in private equity helped to spur skills training and knowledge transfer, government revenues in the form of tax receipts and fees (thus funding domestic social spending), and, yes, jobs – the one thing that enable Africans to put food on the table, and provides the hope that will inevitably continue to uplift the continent.
Combatting "Afro-Pessimism"
Despite raging conflagrations that have consumed much of Central Africa for the last three years, endemic crime in South Africa, the political instability of several West African nations, and a heated land expropriation dispute in Zimbabwe, the latest annual World Investment report indicates that Foreign Direct Investment (FDI) in Sub-Saharan Africa has managed a robust 4.5% average growth rate over the last decade. Similarly, some may be surprised by World Bank studies whose findings indicate that eight out of 20 of the fastest growing emerging market economies in the world are in Sub-Saharan Africa; and that the total market capitalization of all Sub-Saharan African stock markets (14) have grown from a mere $430 in 1986, to more than $3.2 billion in 1996 -- a phenomenal 1300% growth. And while some may argue such performance figures are still anemic compared to developed or developing markets, these trends are no less cogent in substantiating a basis for privatizing state enterprises in Sub-Saharan Africa.
Despite such promising signs for an emergent 21st century Africa, it seems at times that any discussion on Sub-Saharan invariably centers on a form of 'Afro-pessimism' that has become conventional thinking toward Africa – a cacophony of social and political pathologies, ethnic conflict, war, famine and oppressive poverty. However, contrary to conventional wisdom, recent trends and developments in Sub-Saharan Africa – such as democratization, foreign direct investment (FDI), and international capital flows into African markets, large scale development projects, economic performance, and the development of liberalized trade and free market regimes--indicate a ripe environment for widespread trade, investment, privatization and project finance opportunities that will abound in an emergent 21st century Africa.
Using available data highlighting these recent economic trends, along with financial and developmental indicators, this forum will make the case that much of Sub-Saharan Africa is ripe with opportunities for successful trade and investment projects that may help in re-thinking conventional thinking toward Africa. Further, recent trade missions to Africa by the U.S. Commerce Department, greater attention by former President Clinton, the passage of the African Growth and Opportunity Act (AGOA) by the U.S Congress and the recent fine-tuning of IMF and World Bank policy toward Africa all promise to facilitate Africa's integration into the global economic community. This guide page will first spell out “conventional wisdom” on investment and privatization opportunities in Sub-Saharan Africa using existing literature, investment sources and prevailing political and foreign policy orthodoxy toward Africa.
Secondly, this forum will present an unorthodox perspective in that it will outline recent positive business, trade, investment and economic performance trends and developments in Sub-Saharan Africa. This guide page will demonstrate that Sub Saharan Africa is already attractive for trade, finance and investment initiatives, and is becoming ever more so. Lastly, the forum will be supported by case study outcomes of recent Sub-Saharan African private sector initiatives and hyperlinks to related websites.
Faced with deepening socio-economic crises in the 1970's and 1980's, many African nations implemented comprehensive and structural adjustments and economic reforms, while initiating private sector development initiatives – often with IMF and World Bank support and direction. Yet, although Sub-Saharan Africa has made substantial strides in all these areas, it is rarely considered either by investors, academics, or privatization architects as a pipeline for investment opportunities. It is my objective, with this page, to show the contrary.
Useful Links:
World Bank African region investment initiatives