Africa undergoes political, economic transformation in relative obscurity

AFRICA UNDERGOES POLITICAL, ECONOMIC TRANSFORMATION IN RELATIVE OBSCURITY

Africa is undergoing truly historic change as the decade of the nineties unfolds. Namibia has gained its independence, as part of a U.S.-brokered peace plan for Southern Africa. The new nation holds promise for a multi-party political system and a mixed economy. South Africa is moving inexorably toward the dismantling of its apartheid system, ushering in a new era of social and economic equity. Throughout the region, countries have implemented programs of economic restructuring based on free enterprise policies. Forces are aligning in favor of renewed economic expansion and growing markets.

While the revolutionary political and economic transformation of Eastern Europe has captured the world's imagination. Africa has undergone a similar transformation in relative obscurity. Africa's movement away from state-centralized economic control and toward the free market has been in progress for five years or more, but in many ways it has been as radical as that of Eastern Europe.

The economic policy changes now under way in more than 30 African countries are laying the foundation for long-term growth. These changes aim to remove policy and structural bottlenecks that prevent countries from responding to the world's constantly changing economic environment. They include such measures as lowering overvalued exchange rates, raising producer prices, reducing government controls, eliminating costly subsidies, tightening fiscal discipline, and liberalizing markets to promote greater competition. As the process of economic restructuring continues. African countries are gradually awakening the free enterprise initiative which has been suppressed by their previous extensive state control of the economy.

The early 1990s hold potential for moderate growth in U.S. exports to Sub-Saharan Africa, as the region continues to recover from its downward economic spiral of the 1980s. Recent economic gains remain fragile, however, and could be reversed by unfavorable weather, insect infestation, civil unrest, or a host of other challenges. Africa's most pressing need in the new decade is to enlist private investment capital to help finance the recovery effort, and in doing so, to broaden and reinforce the movement toward free enterprise development.

U.S. exports to Africa grew only 2 percent in 1989 to $3.8 billion as a stronger dollar curtailed the sales upsurge experienced during 1987-88. The sudden slowing of U.S. shipments points out the fragility of Africa's growing market. This year, like 1989, will likely be a year of adjustment between the strong sales of the recent past and a more moderate growth pace ahead. During the course of 1990. U.S. exports will continue to meet stiff competition in Africa's price-sensitive markets, where liberal financing terms are a key to export success.

Despite the flat performance of U.S. sales in 1989, particular product lines performed well, and these items should continue to sell briskly this year. Aircraft and associated parts, pumps and drilling machinery for the oil industry, computer equipment, and materials handling machinery offer bright prospects, as Africa continues to rebuild its deteriorated infrastructure and weakened export base. Earthmovers and telecommunications equipment may also find strong potential, provided they can meet the price competition of European and Japanese suppliers. Sales of wheat and rice continue to hold their own despite a general decline in U.S. farm exports to Africa.

The Department of Commerce will help to facilitate sales at a number of African trade promotion events this year. Last February, the Department sponsored a pavilion at the International Fair in Kaduna. Nigeria, East Africa Expo, the first major U.S. solo exhibition ever attempted in East Africa, is scheduled for Nairobi in May. The same month a Computer. Telecommunications, and Office Equipment Exhibition will be held in Lagos, to be followed by a Medical Equipment show in September, and the Lagos International Trade Fair in November U.S. Embassies in Africa may also organize representation at selected local fairs throughout the region.

Results of Economic Reforms

African countries have followed differing paths to renewed economic growth and experienced varying results. Yet many have enjoyed at least the beginnings of expansion, as a result of economic structural adjustment. In most countries which have implemented economic reforms, the agricultural sector has shown the greatest response. Overall, agricultural production has grwon twice as fast in countries under reform programs as in other countries. Assisted by more favorable weather, annual growth in Africa's agricultural production was three times as high during the years 1985-88 than during the preceding 15 years. By 1988, African farm production grew faster than population for the first time since 1970. In Ghana, economic reforms now in their sixth year helped yield an unexpectedly large cocoa harvest, which partially offset a sharp decline in world prices. Guinea's reform program has brought gains in agricultural output and employment in the informal sector, thus benefiting small farmers and the poor. Reforms implemented in Uganda have resulted in economic growth of 4 percent each year since 1987, compared to stagnation and negative growth in earlier years. The accompanying articles explain how reforms are reinvigorating the economies of several other African countries.

The reform lesson has not been lost even on Africa's formerly hard-line socialist countries. The Congo has implemented economic liberalization, and recently concluded a Bilateral Investment Treaty with the United States which guarantees the sanctity of private ownership. Last February, Benin announced a major restructuring of its economy in favor of the free market. Even Ethiopia, which formally declared itself a Marxist-Leninist state in 1987, recently announced plans to replace its Soviet-style economic system with a mixed economy, including private ownership of productive assets and land.

Economic reform in Africa has not come without pain. Structural adjustment was undertaken in most cases only after countries had fallen into deep crisis, with large trade and budget deficits and growing debt. Therefore, reform could not focus solely on growth-oriented changes, but first had to bring spending into line with the productive base of the economies, through forced austerity and rigid belt-tightening. Those countries which have faced the rigors of adjustment and courageously stayed the course now hope to attract private investment capital to make economic growth self-sustaining.

The African Business Round Table, a private sector advisory group to the African Development Bank, recently carried the message to the United States on an important four-city visit. The Round Table, comprised of 31 of Africa's most prominent business leaders, represents the future of Africa's private enterprise movement. During their U.S. trip the Round Table members worked to increase awareness of the potential for profitable business with Africa's private sector and official lending institutions, while they discussed transactions with prospective American business partners.

With Africa's own financial resources severely limited by depressed export prices and high foreign debt, multilateral development bank operations such as those of the African Development Bank assume added significance. The Bank's proposed $2 billion lending program is a vital source of development project capital for Africa, and its operations provide sales opportunities for U.S. suppliers of goods and services.

The U.S. Government is also taking direct action to assist African countries efforts to marshal capital for development. The United States has implemented a program to forgive all economic assistance debt owed to it by low-income African countries which adhere to internationally sanctioned reform programs. The U.S. program, which could result in the write-off of more than $800 million owed to the U.S. Government, parallels the debt forgiveness options extended by other donor nations.

Africa's recovery will not occur overnight, but as the reform process gains momentum more lucrative business opportunities will emerge. U.S. firms which take advantage of these opportunities will also strike a blow for free enterprise development.

COPYRIGHT 1990 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group