Sub-Saharan Africa adjustments brighten the commercial outlook; six-year decline in U.S.-African trade may cease in 1987

SUb-SAHARAN AFRICA ADJUSTMENTS BRIGHTEN THE COMMERCIAL OUTLOOK Economic policy reform is sweeping Africa and bringing with it increased opportunities for U.S. business. The reform process should help to reverse the steady decline that U.S.-African trade has suffered in recent years.

U.S. exports to Africa plunged 25 percent in 1986, to $2.8 billion, as the residual effect f the high dollar continued to cost U.S. exporters market share. Agricultural exports fell by nearly half from 1985 levels, reflecting Africa's recovery from the prolonged killer drought, and sales of manufactured goods could not take up the slack. U.S. imports from Africa were down 10 percent, to just under $9 billion, mainly due to lower oil purchases. Total trade between Africa and the United States has plummeted by nearly $12 billion since 1980, but the falling dollar and higher oil prices should help to halt the downward spiral in 1987.

Africa's prolonged economic crisis persists, even after the return of the good rains and bumper harvests. The rains caused massive hatching of locusts and grasshoppers, which threaten food crops in a dozen countries. The battle against these pests is continuing.

Africa's food production woes go beyond drought and insect infestation. The problems are caused or aggravated by poor economic policies, including overvalued currencies, bloated bureaucracies, expensive internal subsidies, inefficient state-owned enterprises, restrictive trade regimes, and other measures which stifle private enterprise and initiative.

The results of these policies are clear. By virtually every measurement, Africa's economic situation is worse today than it was five, ten, or even 20 years ago. Per capita income and food production are well below their levels of the mid-1960s. The value of the region's exports has fallen 20 percent in the last five years, while the collective current-account deficit has grown to more than $60 billion.

Fortunately, most African countries have begun to reform their economic policies in line with free enterprise principles. Under the auspices of the World Bank, the International Monetary Fund, and bilateral donors such as the United States, they are opening previously closed sectors to new competition, rationalizing their state-owned sectors, adjusting their exchange rates, and tightening budgetary controls. Some are liberalizing their trade regimes and adopting more open investment policies. In the process they are opening new business opportunities for foreign suppliers and investors.

President Reagan recently announced a new initiative to help end hunger in Africa. Key elements of the initiative are African policy reform and private sector development.

As the accompanying articles illustrate, the economic adjustments being undertaken by the African countries offer a potential new avenue to penetrate the region's marketplace.

COPYRIGHT 1987 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group