Sub-Saharan Africa is poised for renewed private sector growth: commitment to free enterprise was reaffirmed in 1992 - 1993 World Trade Outlook

Sub-Saharan Africa's commitment to free institutions was severely tested in 1992, as famine, civil war, and continued economic stagnation pushed many nations to the limit. Yet most countries continue to cling to the dream of democratic freedom and free enterprise prosperity. Even in nations ravaged by the region's worst drought in decades, governments have largely rejected pressures to revert to their previous state-directed economic philosophy. With the drought having broken, U.S. exporters and investors are now poised to profit from renewed African economic growth and the resumption of efforts to rebuild the region's basic infrastructure.

Africa's quiet but persistent evolution toward democratic government has been overshadowed recently by gripping human tragedies in Somalia, Liberia, Zaire, and Angola. In those unfortunate countries, unstable authoritarian regimes have given way to anarchy and violence rather than representative rule. Amid horrifying images of war, famine, disease, and starvation, we tend to lose sight of the determination with which most African countries are striving to reform their political and economic systems in favor of pluralism and free enterprise. The democratization process has developed strong roots in Sub-Saharan Africa, and is now spreading and flowering throughout the region.

Within the last three years alone, more than 15 countries have held multi-party elections, some for the first time. This year and next promise a genuine watershed for African reform, as South Africa and Nigeria--the region's most populous countries and largest economies--join the democratization movement. Adding Africa's two giants to the democracy rolls will give new impetus to the process throughout Africa, and could open new commercial opportunities in the region's dominant economies.

U.S. exports 1992--$5.4 billion U.S. imports 1992--$12.0 billion

South Africa will soon establish its first multi-racial executive body, and set a date for election of a constituent assembly to write a new democratic constitution. The African National Congress will then call for the lifting of most remaining foreign economic sanctions against South Africa, including state and local regulations that discourage American firms from trading or investing there. Repeal of these sanctions will remove the major remaining impediment to full participation by U.S. companies in Africa's largest and most dynamic market. Post-apartheid South Africa will provide a regional hub for exporting and investing throughout Sub-Saharan Africa.

Nigeria, home to one of every four Africans, will elect its first civilian government after nearly a decade of military rule. An appointed civilian Transitional Council is already performing many day-to-day government functions. The council is now working to outline an economic program for the elected government that emphasizes sustainable growth, fiscal discipline, and accountability.

Although the transformation to pluralistic systems is often disruptive in the short term, democratic institutions are essential to sustainable, equitable economic development. Democracy brings predictability, accountability, and the rule of law, which are indispensable in building domestic and foreign business confidence.

Democratic transformation in Africa has been accompanied by economic structural reform based on principles of the free market. In the last decade, some 30 countries have instituted adjustment programs aimed at liberalizing their economies and building free enterprise. These programs typically involve measures to increase fiscal discipline, cut internal subsidies, devalue national currencies, divest state-owned enterprises, and liberalize trade and investment regulations.

The results of Africa's economic reform decade are clear. A World Bank survey found that African nations pursuing reforms have experienced accelerated GDP growth rates, lowered inflation, declining fiscal deficits, and expanding exports. As the accompanying articles illustrate, structural adjustment also has led to new market opportunities and a revitalization of economic activity throughout the region.

U.S. Firms Reap Benefits

U.S. firms continue to share in the benefits of Africa's new political and economic freedom. U.S. exports to Sub-Saharan Africa expanded 12 percent in 1992 to $5.4 billion, the highest total in a decade. Led by corn and wheat, food grains registered the biggest increases, due in large measure to the devastating drought in East and Southern Africa. Overall, agricultural sales accounted for 20 percent of total U.S. shipments to Africa, double the proportion of a year earlier.

U.S. suppliers also registered strong sales of aircraft and parts, oil and gas field equipment, construction machinery, motor vehicles, computers, electric generators, telecommunications equipment, industrial chemicals, and farm machinery. In view of Africa's drought-induced need for increased food imports, it is encouraging that U.S. capital equipment sales continued to perform well. These shipments indicate that U.S. suppliers are not merely helping the region to cope with its emergency needs, but are also making invaluable contributions to Africa's long-term productive capacity. As African countries strive to develop their infrastructures, exports of U.S. capital goods should show continued strength, along with medical equipment and pharmaceuticals, fertilizers and pesticides, paper, and used apparel. Long a prominent sales category, used textiles and apparel registered nearly 40 percent growth last year.

Several factors are working to boost U.S. exports to Sub-Saharan Africa. Much needed rains have finally broken the drought, and agricultural prospects have improved accordingly. This will free up scarce foreign exchange for the purchase of sorely needed capital equipment. American products enjoy a respected reputation in the region, and favorable exchange rates enhance their competitiveness against Japanese and European products. At the same time, the U.S. economy has strengthened, which could help spur demand for Africa's primary commodity exports. U.S. purchases from Africa, dominated by crude oil and nonferrous metals, totaled just over $12 billion in 1992. The United States buys 15 to 20 percent of Sub-Saharan Africa's total exports, and a vibrant U.S. economy is essential to African growth prospects.

U.S. government policy toward Africa further boosts American commercial interests. Federal agencies undertook a review of U.S. policy in the region during 1992, in light of the new circumstances of the post-Cold War world. The resulting policy places added emphasis on commercial concerns, by insisting that U.S. firms be given equal access to Africa's commercial opportunities. In light of U.S. interest in expanding private sector relationships with the region, the policy emphasizes the need for open markets, non-discriminatory treatment, and sincere efforts by African countries to liberalize trade and investment rules.

The United States pursues these objectives bilaterally with the African nations, and multilaterally through the World Bank and the African Development Bank. Both banks are major sources of finance for African infrastructure development projects, and the Department of Commerce has assigned representatives to the banks to ensure that U.S. companies participate more fully in project procurements.

The outlook for African prosperity--as well as U.S. participation in achieving it--is not free of obstacles, however. Ensuring growing markets for Africa's exports is the best guarantee that the region will share in world prosperity, but global economic circumstances give cause for concern. Even as the U.S. recovery spurs demand for African exports, recession in Europe and Japan offsets some of Africa's gain. The dollar's low exchange rate boosts U.S. sales but limits the growth of African export revenues, since most of its exportable commodities are dollar-denominated in world markets.

Africa's future prosperity is further threatened by continued deadlock in the GATT Uruguay Round. Several key issues in the Round--trade in agricultural goods, tropical and natural resource-based products, and textiles--are matters of intense interest to African exporters. A successful Round is important to ensure Africa's continued access to its traditional markets in the developed world. Without an agreement, global economic progress will be slowed, and Africa could be harmed by increased protectionism.

With the end of the Cold War, Africa is no longer a contested venue between rival ideologies. However, the opening of new markets in the former Soviet Union and Eastern Europe, and new opportunities arising from the proposed North American Free Trade Agreement (NAFTA), have sharpened competition with Africa's efforts to attract American business. President Clinton has referred to the U.S. economy as the world's strongest engine of growth and progress. Nowhere is the strength of that engine more sorely needed than in Africa. Precisely because Africa's needs are so vast, the U.S. private sector can make a unique contribution to the region in its efforts to build free enterprise prosperity.

COPYRIGHT 1993 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group