Contents - Previous - Next

This is the old United Nations University website. Visit the new site at http://unu.edu

Economic autonomy and progress: A mirage?

The economies inherited by African countries at independence imposed considerable constraints on policy choices. Exports were overwhelmingly of raw materials and agricultural products (93 per cent from SSA in 1965 - World Bank, 1992, p. 249), most economies depended on fewer than three products for over three-quarters of their export earnings, rendering economies very vulnerable to fluctuations in world commodity prices, and trade was often monopolized by large European companies. In SSA, industry accounted for only 9 per cent of GDP in 1965 and manufactured exports were unimportant. Trade was largely with the colonial powers, an industrial base was almost non-existent except in some of the settler economies, and education and training had been exceptionally poor.

The favoured development strategy during the independence decade was based on modernization, industrialization, economic diversification, and indigenization of the economy. Given the heavy reliance on imported manufactures - both consumer goods and capital equipment (76 per cent of SSA imports in 1965; World Bank, 1992, p. 247) - the logical place to start was with import substitution. Given the obstacles (inadequate infrastructure oriented mostly towards colonial trade, absence of an industrial workforce, small domestic markets, dearth of indigenous capital), high levels of protection, a substantial role for the state, and a search for external assistance were inevitable.

External assistance was obtained mostly from transnational corporations (TNCs). The colonial trading and mining companies were international firms. However, the search within capitalism for increased rates of profit results in tendencies for monopoly, vertical integration, expansion, and concentration. These forces, and the role of developments in telecommunications and transport technology in facilitating central control and coordination of worldwide operations, have led to growth in the scale, reach, and significance in the world economy of TNCs (Jenkins, 1987). Said to offer scarce capital, technology and know-how, employment creation, tax revenue, and access to export markets, their share of mining and manufacturing investment and world trade was increasing. Although foreign direct investment (FDI) underestimates the role of TNCs, much of whose investment is financed from local profits and borrowing, published data refer to it.

FDI in Africa grew in the 1960s, and by the mid-1970s was concentrated in Nigeria, Liberia, Zaire, Gabon, Kenya, and the Côte d'Ivoire. Although starting from a small base, investment in countries such as Botswana, the Gambia, Niger, Tanzania, and Malawi grew rapidly in the decade. In 1972, 20.7 per cent of all FDI was in Africa (excluding South Africa, for which information was not available), but by 1975 still over half (52.2 per cent) of all the FDI stock in Africa (excluding South Africa) was invested in the primary sector compared with 26.5 per cent of FDI in all developing areas, and only a third (32.3 per cent) in the secondary sector compared with 53.2 per cent overall (Cantwell, 1991, p. 188). In practice, TNC investment in manufacturing had a number of disadvantages: restrictive practices often prohibited local subsidiaries from production for export, to prevent them from competing with other subsidiaries of the same TNC; the use of capital-intensive techniques generated relatively few jobs; and the goods produced were often considered to be inappropriate for local markets, using advertising to promote luxury items and imported brand names over local products. Despite increasing insistence on local public or private sector participation, import substitution industrialization did not live up to its promise. It proved to be import intensive, because capital equipment, components, and spare parts had to be imported; quasi-monopolistic behind protective walls and thus inefficient, resistant to reducing protection, and unable to compete in export markets; high cost and thus discriminatory against other economic sectors dependent on it for inputs and a drain on what local capital was available for investment. Policies associated with import substitution industrialization included an overvalued exchange rate, inefficient public ownership, and inappropriate choice of industries and technologies (Chazan et al., 1988). Although increases in manufacturing output and urban employment were recorded for the continent as a whole, economic diversification based on industrialization proved elusive, especially in SSA.

The capital requirements of mineral extraction were clearly beyond indigenous entrepreneurs or most of the smaller African governments and so mining was dominated by TNCs. From its traditional base in South Africa, multinational investment in mining rapidly grew after independence. US-based TNCs, for example, invested in copper in Zaire, bauxite in Guinea and Ghana, iron in Gabon, and copper nickel in Botswana, increasing the American share in total FDI and challenging the older colonial-based interests, such as copper in Zaire and Zambia (ROAPE, 1975). Soon the disadvantages of TNC operations - repatriation of profits and reluctance to develop in-country processing - were seen to outweigh the supply of capital, technology, and export outlets. The only alternative open to governments appeared to be nationalization, either by expropriation or by acquisition of majority shareholdings. By no means discomfited by such moves, TNCs have maintained a high degree of control by licensing agreements, management contracts, provision of refining and manufacturing facilities, and overseas marketing.

Chazan et al. (1988) argue that SSA's agriculture at independence was relatively healthy. Cash crop production was widespread, in most places it had not been established at the expense of food crops, and there was scope for increased production of both. However, the slow rise in agricultural production combined with rapid population growth turned a food surplus into a deficit by the mid-1970s. Explanations for the poor performance of the agricultural sector were complex: they included environmental constraints, as well as anti-agriculture government policies aimed at extracting surplus as taxes and subsidizing urban food. Exacerbating these were lack of recognition of the strengths of peasant agriculture, leading to disastrous and wasteful experiments with large-scale mechanized state farms, bias in favour of plantation agriculture in research and development, allocation of inputs, and extension, and failure to develop adequate infrastructure (Chazan et al., 1988). Declining per capita food production led to increased dependence on food imports and, even more damagingly, food aid.

Overall, the real value of many significant exports, such as cotton, iron, and cocoa, did not rise as rapidly as that of imported manufactured goods. In addition, reliance on one or two exports rendered countries particularly vulnerable to price fluctuations, for commodities such as copper, and Northern protectionism, for crops such as sugar. The pattern of development in most newly independent countries was regarded as "neo-colonialism," signifying the impossibility of formulating and implementing development policy based on local resources when economic growth depended so heavily on external conditions of demand and foreign capital (Amin, 1971; Williams, 1981; Jamal and Weeks, 1993). Within this overall perspective, however, views differ on both the scope for indigenous industrial development and the extent to which incipient national bourgeosies played and continue to play a comprador role with respect to foreign capitalist interests (Bell, 1986).

Rapid urbanization

At the beginning of the 1960s less than a fifth of Africa's population lived in urban areas (table 2.1). Although the proportion of southern Africa's population that was urban was twice this (42 per cent) and levels of urbanization were also relatively high in North Africa (30 per cent), the remainder of African countries, with few exceptions, had very low levels of urbanization. In East Africa, Somalia and Zambia were relatively highly urbanized, with 17 per cent of their populations in urban areas, while Zimbabwe had 12 per cent, compared with the regional average of 7 per cent and the predominantly rural nature of the two countries with the largest populations in the region, Ethiopia (6 per cent) and Tanzania (5 per cent). In Middle Africa, 31 per cent of Congo's population was urban, nearly double the regional average. In North Africa, levels of urbanization varied from 10 per cent in the Sudan to 38 per cent in Egypt; while, in West Africa, Ghana (with 23 per cent) and Senegal (with 32 per cent) far exceeded the regional average, the latter heavily influenced by the most populous country, Nigeria (14 per cent). Despite the extractive nature of colonial economies, the limited development of manufacturing, and attempts at influx control, however, urban areas had been growing at between 4 per cent and 6 per cent per annum in the 1950s, except in southern Africa.

The rate of urban growth, which had been accelerating prior to the main wave of countries attaining independence, continued to do so. Although rates of natural increase also steadily increased, reaching 2.5 per cent per annum for Africa as a whole in the early 1960s, 2.6 per cent per annum later in the decade, and 2.7 per cent per annum in the early 1970s, the urban growth rate was nearly double this (UN, 1993). The most marked increases in urban growth rates occurred, on the whole, in the least urbanized countries, including those that attained independence without significant urban centres, such as Mauritania (which was previously governed from Senegal) and Rwanda (previously administered from Burundi). In contrast, slower rates of urban growth were experienced in some countries that inherited oversized capitals, for example Congo and Senegal, where Brazzaville and Dakar had been the administrative centres for the whole of French Equatorial and West Africa, respectively (O'Connor, 1983). In the later 1960s urban growth rates reached 8 per cent per annum or more in Uganda, Tanzania, Zambia, Libya, Botswana, Lesotho, Swaziland, Benin, and Mauritania. By the early 1970s these had been joined by, for example, Kenya, Mozambique, Cameroon, and Gabon. In the eight, mostly francophone, countries of West Africa examined by Zachariah and Condé (1981), almost half the urban growth between the mid-1960s and the mid-1970s came from migration, mostly from the rural areas, but some from smaller urban centres and some international. The anticipated inhibiting effect of urban residence on fertility was outweighed by the relatively young age profile of migrants, the lower mortality rates in urban areas, and the increase in family migration (Standing, 1984; Salau, 1990).

Table 2.1 Urbanization in Africa

Source: UN (1993), p. 74.

In 1950, there were only two cities in Africa with more than 1 million inhabitants (Cairo and Alexandria). By 1960, Casablanca and Johannesburg had also reached 1 million, while by 1970 there were eight cities of this size - four in north Africa, two in South Africa, and only two elsewhere in the continent: Lagos and Kinshasa, which had grown, insofar as it was possible to tell in the absence of reliable census results, at about 10 per cent per annum consistently throughout the 1950s and 1960s. Other large cities with particularly rapid rates of growth (10+ per cent per annum) in the 1960s and early 1970s included Abidjan, Conakry, and Tripoli, and Dar es Salaam after 1965, along with many of the smaller capital cities. A pattern of increased concentration of rural-urban migration in the largest city within a country was widely evident (Zachariah and Condé, 1981).

Early migration theories suggested that the volume of migration was related to urban-rural income differentials. Faced with continued rapid migration in the face of increasing unemployment and the inability of formal sector job creation to keep up with growth of the urban labour force, the model was modified to consider not only urban wages but also the probability of obtaining a formal sector job. This theory underlay the belief that urban bias in investment and policy, backed by a politically powerful elite and wage labour force paid above market wages, discriminated against agriculture and rural areas, thus encouraging out-migration (Lipton, 1977). The assumptions underlying these theories have been subjected to serious criticism by Jamal and Weeks (1993), amongst others.

Migration is an extremely complex process, comprising a variety of different patterns of migration movement (see chap. 13) and influenced by underlying structural causes, immediate explanations for household and individual behaviour, and the presence of facilitating conditions. Any explanation of the rapid rates of urbanization and urban growth observed in African countries must take into account a wide range of structural factors. Incorporation of the African peasantry into the national and international economy started in the mercantilist era, was consolidated in the colonial era, and was desired both by governments reliant on extracting foreign exchange and revenue from cash crop exports and food for their urban populations from food crop surpluses and by farmers, who had become used to and dependent on cash purchases. The role of subsistence agriculture in meeting part of the costs of reproduction, as a way of maintaining low wages for colonial enterprises, has already been mentioned. As long as migrants retain rural ties, they can remain permanently in the urban areas, but the effect, it is suggested, is to withdraw surplus from the rural economy to maintain the urban labour force. Eventually the effect is to reduce rural incomes to the point that out-migration occurs despite a lack of urban opportunities (Standing, 1984). In some areas, population growth and environmental deterioration placed pressure on land and other means of production, while increasing life expectancy and larger families reduced the prospects of access to land. Although migration was not the only response, it was a common one (Gugler and Flanagan, 1978; Standing, 1984). While there are examples of unemployment rates being decreased by out-migration, it may also have an impact on the productivity of the household unit, forcing other members to enter the wage labour market and even creating a labour shortage (Standing, 1985). An example of the latter is amongst the Mossi in Burkina Faso, where out-migration to the Côte d'Ivoire and Ghana forced all adults to work in collective fields, with the result that individual fields, weaving cloth, and capital formation such as the digging of wells were neglected (Gregory and Piché, 1982). In some areas, commercialization of agriculture and changes to tenure led to increased differentiation and landlessness, although this was not widespread in the years under discussion (Oberai and Bilsborrow, 1984). Elsewhere the rural economy broke down because of civil strife, for example in Zaire, where the urban population rose from 1.2 million in 1955 to nearly 6 million in 1975, while numbers in Kinshasa rose by 350,000 to 1.7 million (O'Connor, 1983; see chap. 7). Finally, it was suggested that government policies reduced producer prices in the interests of exports and cheap urban food, reducing the returns to agriculture.

All cities yield economies of agglomeration for secondary and tertiary economic activities, producing growth and increased concentration in the largest cities, as illustrated in the continued growth of already well-established cities in the continent. In African countries, a number of changes associated with independence in the 1950s and 1960s increased the attraction of cities. The growth of civil services, attempts to industrialize, and the abandonment of remaining relics of influx control gave a boost to rural-urban migration. The centralization of politics and bureacracy formed a further attraction to investors who needed access to the state machinery. The process of decolonization resulted in the emergence of many new states, each generating a new or enlarged national bureaucracy. Thus the former colony of French West Africa, for example, was dissolved into eight new states (Standing, 1984). What urban centres there were became the locus of power and investment and new states invested heavily in infrastructure and amenities in their capitals because of their international and national visibility (Gugler and Flanagan, 1978; Mehretu, 1983; Skinner, 1986). The creation of additional subnational units (states) in Nigeria gave rise to a further impetus to develop state capitals, while construction of the first of the new capitals was started in this period. Nigerian National Development Plans in the 1970s, for example, devoted over 80 per cent of non-agricultural public capital investment to urban areas (Salau, 1990, p. 163). The exploitation of new resources led to new growth in cities such as Port Harcourt, centre of Nigeria's oil industry, while other mining centres declined in relative terms, for example in Zaire and Zambia (Rakodi, 1992a).

Both Todaro's migration model (1994, p. 268) and the belief that urban bias accounts for the perpetuation of poverty rest on the concept of a labour aristocracy, paid above-market wages in a substantial formal sector. In some countries, for example Kenya, Zimbabwe, Zambia, Morocco, and Tunisia, the large-scale sector dominated urban employment and the availability of wage jobs attracted migrants. In others, however, small and intermediate enterprise accounted for a large proportion of urban employment even at independence, for example Kumasi with 60 per cent and Accra with 45 per cent in 1960, Kaduna with 44 per cent in 1967, Abidjan with 44 per cent and Brazzaville with 37 per cent in 1974 (O'Connor, 1983, p. 143). In addition, despite the concentration of a large proportion of all manufacturing in countries' capital cities (one-third in Accra and Lagos, half in Conakry, two-thirds in Abidjan, three-quarters in Freetown, 87 per cent in Dakar, and 100 per cent in Banjul and Monrovia - O'Connor, 1983), the empirical evidence that wages were higher and employment more secure than in the informal sector was said to be scarce (O'Connor, 1991; Jamal and Weeks, 1993). Where colonial labour policies had resulted in an urban age-sex structure dominated by men of working age, the trend toward convergence with national age-sex structures that had begun with labour stabilization policies 20 or more years before intensified, as increasing numbers of women either joined their husbands in the cities or migrated in their own right. In South Africa, however, apartheid policies and the use of migrant labour from surrounding countries maintained a relatively slow rate of urban growth and a gender imbalance. A secondary attraction in some places was the better access to social and educational facilities available in town, while transport improvements and greater awareness of opportunities because of better access to education and the media facilitated the process. Remittances by urban migrants to rural areas were significant and complicated the relatively simple picture portrayed by Todaro (1994, p. 268) and Lipton (1977).

The inherited philosophy, legal and financial basis, and institutional system for planning and managing urban development changed only incrementally in most countries in the early years after independence. The balance between continuity and change, Simon (1992) suggests, was influenced by the nature of the anti-colonial struggle; the fate of the ax-colonial elite; the policies pursued by the new elite with respect to national integration and relations with the world economy; national modes of production and means of social reproduction; and the extent to which urban legislative change was instituted. Governments were preoccupied with national political and economic issues and generally paid relatively little attention to urban administration. Where centralized structures existed, these persisted, especially in francophone Africa (Stren, 1989a). Where urban local government on the British model had been established, apart from a rapidly enlarged franchise at independence, it was retained more or less intact. However, the scope of urban local government functions was reduced before independence in some cases by the establishment of separate statutory bodies. In other cases, previously local functions were taken on by central government after independence for ideological and practical reasons, particularly education and the police (Rakodi, 1986a). The potential contradiction inherent in central-local government relations led to the erosion of local government autonomy in most post-colonial societies (although the extent to which this occurred and the form it took varied between and even within countries). This erosion was exacerbated by the lack of administrative capacity at the local level. The inherited British ideology of impartial officials guided by notions of technical rationality, advising elected councillors who viewed the exercise of power as a moral non-political activity - a poor description of the authoritarian and self-interested reality even in colonial times - was particularly inappropriate in a post-independence situation in which political office was used to fulfil traditional social obligations, further personal interests, and increase popular support and power bases (Rakodi, 1986b).

Local institutional systems were designed to facilitate accumulation by capital, much of which was in foreign hands, by ensuring an environment conducive to business and the maintenance of lifestyles for European residents. This was achieved by infrastructure provision; by land-use planning in the parts of the settlement used for trade, administration, and European residence (and sometimes manufacturing); and also, in many settlements, by the public sector provision of housing for African residents. The urban spatial structure and built environment that resulted reflected the underlying ideology of separate development, based on racially segregated residential areas and radically different standards of service provision and construction. The imported land administration system survived independence, but the speed of urban growth far outpaced its capacity to cope, and the years after independence were marked by a proliferation of unauthorized residential development. The problems arising from the superimposition of an imported system on indigenous tenure systems, its role in producing the segregated colonial built environment, its considerable administrative and skill requirements, and its function as one of the main bases for local revenue generation, were not resolved. The system of private individualized land tenure, with the opportunities it presented for accumulation, was extended on independence to many more indigenous urban residents, entrenching their interest in maintaining and extending private property ownership. These issues are taken up and analysed in more detail in chapter 11.

The extension of unauthorized development, central government expenditure constraints, and the lack of a buoyant local revenue base together resulted in infrastructure provision and maintenance falling further and further behind demand. Even where inherited administrative structures were changed after independence, as, for example, in the nationalization of the British private monopoly company that ran the public transport system in Dar es Salaam, the change more often led to a deterioration than to an improvement in services. The philosophy underlying colonial housing policy in some countries, that of providing housing for temporary urban residents (Africans and, in many countries, Europeans too), which had led to a system of contractor-built tied subsidized rental housing, was apparently not reconsidered. Most post-independence housing policies were based on similar assumptions; they proved to a greater or lesser extent unable to keep pace with the housing needs of the growing urban population and rapidly gave rise to vested interests in their continuation (Rakodi, 1986a; Stren, 1989b). In the countries where pre-colonial settlements existed, and elsewhere, the public sector had much less of a role, and private sector construction was relied upon to a greater extent to provide houses for low-income residents, for example in Zaire, Uganda, the Sudan, and Nigeria until the mid-1970s (Stren, 1989b). In these, as in the former cases, the continuation of spatial planning as a technical/regulatory activity undertaken by a section of the bureaucratic elite and/or foreign consultants and the failure to reconsider land administration meant that a large proportion of urban development occurred without reference to any guiding framework. Resources that were available for investment in infrastructure, service provision, and regulatory activities, to produce basic environmental standards for all urban residents rather than high standards for a few, were not used to best effect.

Global forces in the past two decades of African development

It has been important to sketch the history of African globalization because the impress of mercantilist trade and above all of colonial control left an enduring political, economic, and spatial legacy which not only determined countries' room to manoeuvre on their attainment of independence but also, as seen in the recent history of the continent, is far from spent. The global forces that impact upon African countries and cities today have their origins in the historical relationship between the continent and the world economic system. However, the character of globalization has continued to evolve and its differential effects have become more marked. In this section we will explore how Africa is situated with respect to these global economic forces, before concluding the chapter with a more detailed examination of their implications for urban development and urban management.

Trade

The nature of Africa's continued integration into the world trading system was revealed by a number of incidents and trends in the 1970s, above all the deteriorating terms of trade for primary commodities and the oil price increases of 1973/74 and 1979. In 1965, 93 per cent of SSA's merchandise exports were primary commodities. By 1990, this was unchanged, although the range of primary products from which export earnings were derived had changed (see also Adedeji, 1993; Husain, 1993): 91 per cent of export earnings were still from primary products, although fuels, metals, and minerals accounted for two-thirds of this compared with a quarter in 1965. Unlike low- and middle-income countries elsewhere in the world, therefore, which had increased the share of manufacturing in their export earnings from 26 per cent to 50 per cent, and had increased their share of world trade, Africa remained marginal to the world trade system. Africa's marginal position was not, as often implied by the IMF, for want of effort - export volumes from SSA grew at 6.1 per cent per annum between 1965 and 1980 and 0.2 per cent per annum in the 1980s (World Bank, 1992) and from Africa as a whole by 1.9 per cent per annum between 1971 and 1993 (IMF, 1993, p. 70) - but because demand for primary commodities has weakened in developed countries. Because of deteriorating terms of trade, the volume of imports that can be purchased with the earnings has decreased. Even the IMF admits that the terms of trade for African countries as a whole deteriorated in six out of the eight years between 1984 and 1992 (IMF, 1993).

Imports to SSA countries were, inevitably, dominated by manufactured goods in 1965 (76 per cent), much as imports of low- and middle-income countries as a whole were (66 per cent) and this continued to be the case in 1990. However, despite Africa's position as an exporter of agricultural products, food continues to constitute 16 per cent of imports (World Bank, 1992). Exports grew at a faster rate (6.1 per cent per annum) than imports (5.6 per cent per annum) between 1965 and 1980, but during the 1980s, while exports continued to grow slowly, imports fell by -4.3 per cent per annum (World Bank, 1992). The slow growth of export earnings resulted in reduced capacity to import and this in turn resulted in under-utilization of manufacturing capacity and constraints on economic growth and economic diversification throughout the later 1970s and 1980s, with adverse effects on urban employment opportunities (IMF, 1993).

Perhaps the most crucial incidents affecting Africa's trading position have been associated with oil prices. The fourfold increase in oil prices in 1973/74 and further increases in the later 1970s, which resulted in an overall real price increase of over threefold between 1973 and 1980, had differential effects: the terms of trade of the only high-income oil-exporting country, Libya, improved by 241 per cent in the seven years after 1973 and those of the other oil exporters (including Algeria, Egypt, Nigeria, and Cameroon) by 195 per cent, whereas those of the great majority of countries, which were oil importers, declined to 85 per cent of 1973 levels (Nafziger, 1990, p. 52). The immediate impact on transport, energy, and agriculture forced countries to borrow to foot the increase in import bills. At the time, the massive influx of petrodollars into the world financial system was resulting in negative real interest rates and the strategy seemed both necessary and rational.

The OPEC countries used about three-quarters of the oil revenue for imports, but were also determined to use the wealth to finance their own industrialization, again with differential results. Libya increased its manufacturing production from 3 per cent of GDP in 1965 by 13.7 per cent per annum in the following 15 years (World Bank, 1992). The Middle Eastern countries had insufficient indigenous labour for industry and construction and so imported between 40 and 85 per cent of their labour forces, mostly from the Indian subcontinent, parts of East Asia, and North Africa. Remittances constituted a major flow of capital, much of which was invested in urban property. In 1986, for example, workers' remittances were equivalent to over half the earnings from merchandise exports in Morocco and Egypt (Nafziger, 1990, p. 360), or 6.0 per cent and 13.1 per cent of GNP in 1989, respectively, as well as 3.7 per cent of GNP in the Sudan and 4.8 per cent in Tunisia (UNDP, 1992). Significant impacts on urban property markets followed (see also chaps. 4 and 11). However, these flows proved vulnerable when later oil price falls and world recession led to labour shedding.

Nigeria benefited from increased oil prices and its economy grew by 7.0 per cent per annum between 1965 and 1975. The boom, however, stimulated extravagant investment and the use of the state machinery by the elite, civil servants, and intermediaries for foreign capital to further their own interests. The naira was allowed to appreciate, leading to a decline in the volume and relative significance of agricultural exports, so that, when the oil-based boom came to an end at the end of the 1970s, not only did Nigeria have little other than increased inequalities, increased concentration of activity in the south of the country including Lagos (see chap. 6), and wasteful prestige projects to show for it, but also alternative sources of export earnings had not been developed. As a result, Nigeria rapidly entered the slow-growth group of economies and its GDP actually fell by 2.5 per cent per annum between 1975 and 1986. Cameroon, although a smaller producer, was equally dependent on oil exports. Better-managed economic policies, however, enabled it to avoid the worst effects of the oil price falls (Nafziger, 1990).

Debt

For the majority of African countries, their additional borrowing in 1973/74 was to have adverse effects in the longer term, because real interest rate increases coincided with yet higher oil prices at the end of the decade, producing the debt crisis of the early 1980s. By world standards, Africa is not a major borrower. By 1986, Egypt was the seventh-largest debtor country, Nigeria the fourteenth, and Algeria the eighteenth amongst less-developed countries (LDCs), with the Côte d'Ivoire not far behind (Nafziger, 1990). A few countries, including Nigeria, Gabon, and the Congo, have been the main commercial borrowers, mainly for oil exploitation. Another reason for borrowing has been to cover current account deficits (which for Africa as a whole averaged between 4.5 and 5.4 per cent of GDP between 1985 and 1988, although they have, under IMF and World Bank pressure, been steadily reduced since then, to 3.5 per cent of GDP in 1992 - IMF, 1993, p. 154).

By 1992, Africa's debt: GDP ratio was over 70 per cent and its debt: export ratio over 400 per cent. Its debt service ratio had, as a result, doubled as a proportion of GDP from 2 per cent in 1980/81 to 4.5 per cent in 1990/91, and repayments consistently absorbed 25 per cent of export earnings between 1985 and 1992, even though 67 per cent of the debt in 1992 (excluding IMF loans) was owed to official, mostly bilateral, concessional creditors and only 33 per cent to commercial lenders. In SSA, official debt formed an even larger proportion of the debt overhang (78 per cent) and commercial bank debt (13 per cent) was even less significant (IMF, 1993, p. 187; see also Husain, 1993). The burdensome nature of this debt to the countries concerned is illustrated by comparing SSA, which had outstanding debt equal to 324 per cent of exports of goods and services and 109 per cent of GNP in 1990, with East Asia and the Pacific (91 per cent and 27 per cent, respectively) or Latin America and the Caribbean (257 per cent and 42 per cent) (World Bank, 1992).

Africa's indebtedness is variously a result of necessity, extravagance, and the opportunities offered, as noted above, by its strategic importance. In the poorest countries, heavy reliance on aid has been unavoidable. However, much of the money has been squandered, especially in countries such as Zaire, Ghana, and Nigeria (Nafziger, 1990). Growing aid dependence and its implications will be discussed below. Most African countries have not been able to borrow at all extensively from commercial banks since the early 1980s, because they have been unable to repay debts incurred earlier. The extent to which the continent's earlier share of FDI has been maintained since the mid-1980s will be examined in the next section.

Continue

Contents - Previous - Next