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All the countries in Africa are experiencing in one fashion or another the
Structural Adjustment Programme (SAP). Sketched out in this DOSSIER are
some general and specific terms regarding the meaning of SAP, why it has
come to the continent of Africa, what its consequences are for the African
people, and finally some economic and ethical challenges to be raised. All
of this is in order to help us answer the question: are there alternatives
to SAP?
Most African countries gained independence by the mid 1960s. At the time,
there was great hope of future prosperity and well-being for all the
African people. But today, 30 years later, African countries are amongst
the poorest countries of the world. In terms of the rest of the world,
Africa is a continent that sometimes has been described as a lost continent
or a disappeared continent or a forgotten continent.
This DOSSIER shares some reflections about this African drama, but it does
so with a certain reluctance. Several years ago, a young Tanzanian told me:
"You know, one of our problems is that people outside of Africa have such a
very negative image of Africa". Often the image communicated by the media
is of a continent of disasters. The first thing to say is that there are
many disasters on the continent, but it is not a continent of disasters! It
is a continent of great resources. It is a continent of rich cultures,
immense energies, and all kinds of possibilities and potential.
But we do know that there is great suffering in Africa, caused by political
and military action and also by economic structures.
In Africa, the 1980's are frequently referred to as the "lost decade". The
economic and social indicators of well-being; production levels, health and
education statistics, etc., - were all lower at the beginning of the 1990's
than they had been a decade earlier.
For example, towards the middle of the 1980's Zambia had a life expectancy
of about 54 years. Today it has reduced to 44 years.
The life expectancy in Africa is around 52 years. (In the United States, it
is about 77 years).
"They are.."
The situation of poverty is indeed critical throughout Africa, and it is
clear the continent needs some serious economic reform. But the question
is: why did this serious economic decline come about?
Why, of the United Nation's 40 poorest countries, are 30 on the continent
of Africa? I have heard two different responses to that question in recent
years. One says that Africa's poverty is all the fault of the Africans:
they are corrupt, lazy, not intelligent! The other says it is all the fault
of the colonialists of yesterday and the imperialists of today, like the
World Bank, IMF, transnational corporations, etc.!
Two very diverse explanations: Every problem of Africa is due to the
Africans; or every problem of Africa is due to non-Africans. Surely the
true picture needs more sophisticated analysis than that! I will argue here
that the more serious causes are non-African. But I believe that in honesty
we must also look at the African causes for the current plight.
I want to suggest three causes of the current economic decline on the
continent of Africa. A hard look at each will show they are interrelated
and will also point to the need to address them more comprehensively than
through the current SAP approach.
Colonial Heritage
The first cause that cannot be avoided in any effort to explain why Africa
is poor and struggling today is the impact of the colonial heritage. That
heritage does not explain everything, but the situation cannot be
understood at all without referring to colonialism. Prior to the colonial
period, of course, a major block to the normal development of the African
economy was put in place through the practice of the slave trade. Millions
of Africans were ripped from families and from productive enterprises by
the greed and cruelty of Westerners and Arabs. Then when the slaves were no
longer taken, the natural resources of the continent were taken through
colonial exploitation.
It must be acknowledged that the colonial era did provide some benefits for
Africa.
For example, the colonialists brought roads and transportation,
communications, resource development, and educational and health
facilities. However, the important thing to remember is that the colonial
motivation for all of this was not primarily to develop Africa for the
Africans. The colonial powers did not go to an area primarily to develop
that area for the people who lived there, but to develop the resources for
the benefit of their homeland.
Thus, many of the economies which became independent in the 1960's were
already significantly structured in ways that were not for the benefit of
the Africans. And that had very serious consequences and still does so to
this day.
Let us take the example of the colonial model of development in Zambia, a
case that can be repeated in many other parts of Africa. Because of its
copper industry, Zambia was one of the richest African countries at the
time of its independence in 1964. It certainly appeared to be prosperous.
But its prosperity was deceptive, because of several structural weaknesses.
Zambia at independence could be described as a big table set for a feast,
heaped up with plenty of delicious food. But unfortunately, it was a table
that had four very shaky legs! These were the legs of its colonial
heritage.
The first shaky leg that affected Zambia and many other countries in Africa
is what is called a "mono-culture". This means that the productive economy
was dominated by only one item, in the case of Zambia, copper. For another
country it was cotton, coffee, cocoa, etc. This product was developed for
export purposes to earn a profit for the colonial powers. Zambia was
prosperous as long as the price of copper stayed high. But the table of
Zambia's feast was already shaky. Its economy was structurally weak because
Zambia had no control over the price of copper. The price of Africa's
export products are set by buyers outside Africa.
Secondly, the economy of Zambia inherited an integration into the world
capitalist market economy through exports and imports. The country's wealth
was heavily dependent on exports of its one product, copper. (Other African
countries had similar dependence; for example, Tanzania, sisal; Kenya,
coffee; Ghana, cocoa).
The other part of the equation is imports. Zambia imported petrol,
machinery, medicines, cars, etc. Thus Zambia was integrated into the world
economy. As long as export prices stayed high and import prices remained
low, there were no problems. When these changed, there were problems,
because neither Zambia nor any other African country had control of imports
and exports. This was the second shaky leg of the development model
inherited from the colonials.
Third, a major structural weakness of the colonial model was the neglect in
Zambia and in many other African countries of agricultural development to
feed the people. This food agriculture would provide sustenance for the
people. But agriculture was largely oriented in most areas for cash crops
for export purposes to earn money for the colonial powers. This meant a
very shaky leg in the overall development structure.
Finally, the fourth shaky leg found throughout the continent under the
colonial development model was the systematic exclusion of Africans from
training, education, employment, and management advancements. In Zambia at
the time of independence there were less than 100 Zambians who had any
tertiary education. There were only two secondary schools providing
education for Zambians. The future economic prosperity of Zambia and other
African countries was considerably weakened by this discrimination.
In summary, something is very evident when we analyse the history of the
colonial model of development. We can realise that while the economy might
have seemed prosperous when it was handed over to the newly independent
States, in reality it was like a fancy-looking table with four very shaky
legs! Thus, one of the reasons for subsequent decline in the African
economy is that the economy had been structured not for the benefit of
Africans, but for the benefit of the colonial powers. This does not explain
everything. We can not simply say that today Africa is poor because of the
colonialists. But we also can not ignore the influence to this day of the
colonial heritage.
Internal Reasons
The second major explanation for the situation of extreme poverty in Africa
today can be found in internal reasons. When political independence was
achieved, economic independence was not complete. But by a large, the
management of the economy was taken over by Africans. And in one national
economy after another, serious mistakes were made. Many of these mistakes
were simply honest mistakes. To develop newly independent countries in an
integrated global market was an enormous challenge. Some of the mistakes
were made by the Africans who were put in charge; others were made by the
numerous foreign advisers who came from donor countries or international
financial institutions.
These mistakes were often compounded by corruption, a second internal
factor.
Greedy people got into positions of authority and used their power to take
money for themselves, their families and their friends. There are many very
rich persons in Africa, frequently holders of key political positions.
Often the corruption has been promoted by external powers seeking their own
interests. (Think of the long-lasting stay of President Mobutu of Zaire).
Corruption of course is not unique or endemic to Africa - it certainly
flourishes in the rich countries of the North! But rich countries like the
United States or France or Japan or Italy can absorb a certain amount of
corruption. But a small struggling economy can be crippled by corruption,
and that is what has happened in many African States.
Thirdly, the economy was politicised, coming under the control of more
narrow political interests or ideologies. Many States adopted a socialist
or command economy model. Such political decisions might have been made for
the best of reasons, e.g., to share more equally the national wealth. But
it did not always work out that way. Political motives then governed what
happened in the economy. Someone would make a mistake as the head of a
parastatal - a large State cooperation - and since they were a key person
in the party, they were only reprimanded and moved on to head another
parastatal. In the one-party regimes existing in most African States,
criticism and suggestions of alternatives were simply not allowed.
Then there was the impact of military actions. An extravagant amount of
the scarce resources of African countries was spent on military purposes.
These expenditures were encouraged by the international arms merchants.
Africa (outside of South Africa and Egypt) is not a producer of arms. But
it is a very large consumer and consequently a very favoured customer of
the arms producers.
Military expenditures were made by the president for life or by the
military dictator, or by the ruler of one party, in order to stay in power.
Moreover, the East-West conflict was often played out on the African
continent, with tragic results in places like Ethiopia, Somalia, Angola and
Mozambique. The destabilisation efforts of South Africa's apartheid regime
also caused military spending in the Southern African States. The military
actions in some States of the continent contributed to the flood of
refugees into neighbouring States and the large numbers of internally
displaced citizens Ž facts that also have had disastrous economic
consequences.
Another internal reason affecting the economic situation is the demographic
factor.
Population is growing very rapidly in Africa. Africa is a very large
continent with plenty of space to absorb more people. But the current rate
of growth of 3 per cent a year means that the population is doubling every
25 years. Kenya and Zambia have over a 3.5 per cent annual growth rate
which means the population doubles every 18 years. This rapid population
growth has a negative impact on the economic situation if the rate of food
production does not go up, if employment opportunities, education and
housing availability do not go up.
The last internal factor to mention is simply the consequences of natural
disasters: droughts, pestilences, all kinds of ecological problems. Any one
of these difficulties could befall a country and it might be able to
struggle forward. But the repetition of droughts for several consecutive
years, such as has occurred in the Horn of Africa and in the Southern part
of Africa, wipes out the potentials of a struggling economy.
These are the internal reasons for Africa's current economic problems. They
must be honestly acknowledged as we look forward to solutions in the
future.
External Structures
What about the external structures that have had an influence on the
economic decline of Africa? This is a point that deserves special emphasis,
particularly because it leads into the basic economic points raised in our
discussion of SAP. Let one thing be made very clear at the outset: even if
African States, over the past 20 to 30 years since independence, had made
no mistakes whatsoever, had been completely honest and without any
corruption, had had no political interference in the way the economy
operated, had not wasted any of their money on military spending, had
maintained good demographic growth rates, and had not suffered from
drought, even if all those internal factors had been positive, Africa would
still be poor. Why? Because of the external structures that operate against
the best economic interests of the continent.
The study of macro-economics helps us understand that externally a country
is affected by three major economic structures: (1) trade - exports and
imports; (2) capital flow - money in the form of loans and donations,
technology transfer, technical assistance, investments, etc.; and (3) debt
and debt repayment.
These external structures are factors over which an African country or the
continent as a whole have very little say. First, let us look at trade. If
a country exports a hundred dollars a year worth of products, and imports a
hundred a year worth of products, it can be considered as doing very well.
It has a healthy balance of trade. But another country exports 90 dollars a
year and imports 120 dollars a year. It is in trouble because it has an
imbalance of trade.
What happened in Africa is that the prices of exports that would earn the
money for the imports all declined in the 1970's and 1980's. In the 1980's
prices of the basic commodities declined by 50 per cent. Copper prices
collapsed and this was one of the major factors affecting Zambia's
struggling economy. The commodity prices of coffee, cocoa, sisal, cotton,
tea all went down. African countries have no say about these prices. They
did not bind themselves together to bargain like the oil countries did with
OPEC.
The price of petrol doubled in the early 1970's and doubled again later in
the decade. The increased price of petrol had consequences throughout the
industrialised world. The products which were sold to Africa began rising
in price. Again, this was not something over which African countries had
any control. Africa was paying more for its imports, while it was earning
less for its exports. And as a result of this structural difficulty, the
nations of the continent fell into a significant imbalance of trade.
The influence of a second factor now grew, as Africa was perceived as being
less than a favourable environment for outside involvements. The imbalance
of trade led to a re-evaluation of the capital flows that would come into
Africa. Aid packages, investments, technology transfers, and other capital
flows began declining. As the industrialised countries themselves
experienced economic problems, interest in Africa became strained and the
capital flows were less than favourable.
Imbalance of trade and slow down of capital flows brought about a situation
in Africa similar to that of many of the developing countries. When you are
not earning money from exports, and are not receiving fresh funds from
outside, and when you need more money for local needs, what do you do? You
borrow, and borrow again, and go into debt!
There is nothing wrong with going into debt, if you stand a chance of
getting out of it. But throughout the developing world, nations were going
deeper and deeper into debt. African States were unable to pay back their
debts. One developing nation after another would then say: "We cannot even
pay the interest on our debts". What happened? The friendly Banks and
donors that loaned money told the African nations: "That is okay, we will
loan you some new money so that you can at least pay us the interest that
you owe us". Of course new loans meant deeper debts. This is the
re-scheduling of debt that drew the continent into what is called the "debt
trap", as these figures of total sub-Saharan debt dramatically demonstrate:
1980, US$ 56 billion; 1985 US$ 98 billion; 1990, US$ 172 billion; 1995, an
estimated 190 billion.
These external structures of trade, capital flows and debt all have
influenced the poverty problems of Africa today. Combined with internal
reasons and the lingering consequences of the colonial heritage, these
influences put the continent in a very precarious situation. It is in this
situation that the proposal is made to reform the economies according to
the strict formula of the Structural Adjustment Programme. The aim of this
proposal is to stabilise and restructure the national economies to enable
them to become more credit worthy, that is, to enable them to at least
continue paying interest on their debts.
The Purpose of SAP
Some people think that the SAP is primarily a conspiracy developed by the
United States CIA, or by some evil British bankers, as a master-plan to
enslave the poor of the world. It might be that, but I do not believe that
the strongest evidence supports that view. Rather, the evidence suggests
that SAP is an economic theory or model developed by people who believe
very strongly in certain classical econ-omic principles. These are the
principles of neo-liberal capitalism, the free market, the primacy of
private control of capital, and the minimal role of the State. Holding to
these principles, these people believe that the SAP is the best way to help
the poor countries of Africa. But it should be recognised that "help" here
primarily means to get the economies to the point where they can be
credit-worthy, at least paying the interest on their debt.
SAP is applied to countries where the economy is in serious trouble: the
national budget is not being balanced, the value of the national currency
is over-rated, inflation is running very high, industrial production is
low, and there is no new investment coming into the country. This
description fits African countries, other countries in the developing
world, and countries that formed part of the former Soviet bloc. In this
situation, the World Bank and the International Monetary Fund (IMF) propose
an economic reform package called the Structural Adjustment Programme.
The World Bank and the International Monetary Fund are international
financial institutions set up following the Bretton Woods agreement after
World War II.
Their purpose was to help the European countries and Japan to recover from
the destruction of their economies during the war. It was only in the late
1950's and early 1960's that the IMF and the World Bank turned their
attention to the developing countries.
Both of these institutions view development primarily as economic growth,
according to a neo-liberal model that emphasises the primacy of the free
market and privatisation.
For countries in Africa to be eligible for loans from Banks and donor
countries, they must follow the strict SAP "conditionalities" laid down by
these two institutions.
The SAP is a two-pronged approach to economic reform. First comes the
stabilisation of the country's economy. The aim here is to calm things down
by curbing high inflation rates and curtailing the enormous budget
deficits.
Second comes the restructuring of the country's economy. The aim here is to
make the economy more efficient through market operations, privatisation
and liberalisation.
Stabilisation
To stabilise the economy of a country, there are monetary measures that a
Government must take. The first action in stabilisation is the devaluation
of the currency. This makes the exports more attractive because a merchant
can get more local currency for each dollar. On the other hand, imports
will slow down because it will take more local currency to purchase dollars
used to buy imports. Devalu-ation is an attempt to balance imports and
exports and to make the local currency more realistic in terms of its
value.
Moreover, interest rates are increased, encouraging people to keep money in
savings that can lead to better investments within the country. Capital
flight to other countries will thus be slowed. For example, last year a
savings account in Zambia was earning 89 per cent per year.
These high interest rates help to stabilise the currency flow. Of course,
if interest rates are higher on saving, they are also higher on loans. That
then means that there is less money around, thereby reducing the inflation
rate.
A second approach to stabilising a national economy is to deal with the
national budget. Many developing countries in Africa were spending much
more than they were earning. If a Government spent all its money and still
had bills to pay, it would go to the Central Bank and tell them to print
more money. This approach to handling the situation is inefficient and
inflationary. The approach of SAP is to reduce the budget by eliminating
free services, charging, for example, for education and health care.
Another budgetary measure is to privatise the State companies (the
para-statals) in an effort to increase efficiency and productivity.
Moreover, retrenchment of workers in the civil service and in the
para-statals is called for. When there are too many workers doing too
little work, the country looses money. One of the Government ministers in
Zambia was heard to say: "I do not need four women to make my cup of tea
every morning, just one women will be enough!" So three women were
dismissed.
Restructuring
The monetary measures and the budget controls may work to stabilise the
economy, but these measures alone are insufficient if the economy is not
restructured. According to the SAP formula, restructuring requires that the
Government withdraw from involvement in the operation of the economy.
The free market system becomes supreme. Price controls must be removed.
The Government will no longer tell vendors how much a tube of toothpaste or
a set of spare parts will cost. Instead the market will establish the
prices. Even though prices are allowed to find their value in the market,
it is considered necessary to restrain wages. If wages go up the same as
prices, then the economy is into the spiral of inflation.
One of the most painful aspects of restructuring is the removal of
subsidies on basic necessities such as food, fertiliser, transport, etc. In
Zambia, for example, maize meal, the basic food of the people, was heavily
subsidised, as you might buy a bag of maize meal for 100 kwacha whereas it
cost 200 kwacha to produce. The market prices were left to dictate the new
prices.
The last way a Government restructures the economy under SAP is to
liberalise trade. Tariff and quota barriers to trade are eliminated and
products are freely allowed to come in from other countries in Africa and
from Europe, Asia and the Americas. At the same time, exports are promoted
in order to earn much-needed foreign exchange. The Government should also
actively invite foreign investments, creating a liberal environment where
new investments can grow.
This brief description of the stabilisation and restructuring elements of
SAP demonstrates the purposes and goals of economic reform. But serious
questions arise when the programme is evaluated.
Will it really achieve the kind of equitable and sustainable economic
development that Africa so desperately needs?
Evaluation of SAP
Is there anything missing from the approach of SAP? Is anything not being
paid attention to in the economic reform guided by SAP? In fact, people are
missing! And this is indeed a remarkable absence.
A good definition of the economy is women and men cooperating with each
other and with the earth to meet basic needs. A healthy, prospering economy
is one where women and men work together as equals, where the environmental
needs are recognised, and where food, shelter, clothing, education, health
care and other basic needs are provided for. Economic indicators of
production, increases in Gross National Product, new technologies, etc., do
not really tell us if the economy is in good shape or not. We have to ask:
what is happening to people, especially to poor people?
In the orthodox neo-liberal economic model proposed and imposed by the
World Bank and the IMF, people are forgotten. With SAP, people, the women,
men and children of the African nations - are not the prime focus of
attention.
They are there, but only as persons who are experiencing some difficult
times because of this programme. This leads us directly into the criticism
directed at SAP.
The first thing to say is that African economies have had to restructure.
Many of them are almost bankrupt; others are grossly inefficient and are
not producing as much as their potential merits. Thus few if any of the
critics of SAP want to go back to the "bad old days" of the economic
management and objectives of the 1970's and 1980's. The real question is
whether or not the strict formula of SAP as currently being administered in
Africa is the solution to the continent's problems. Is it the only or the
best approach to equitable and sustainable development?
The criticism of SAP is two-fold. First, SAP is not good economics, and
secondly, SAP is ethically unacceptable. What is meant by these two
critical challenges to the dominant economic approach on the continent
today?
End of the Part 1.