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The State of Development Financing in AfricaBy L. Muthoni Wanyeki Presentation at Africa Action’s first Annual Baraza IntroductionThank you for inviting me to speak with you today. I was asked to speak about the state of Africa—which is a huge task. So I have decided to focus on the state of development financing in Africa because that is where I think the links between your advocacy work here and our’s on the continent can most fruitfully be made. But I will first go through some of the key challenges faced by Africa and how, at a regional level, African states are trying to respond to these challenges Key challenges At the 5 year review of implementation of the Beijing Platform for Action
(PFA), the African women’s movement identified five priority areas
for action
ResponsesOf course, the levels of action at the national level on these issues varies from state to state within Africa, depending in no small part on the immense efforts of African civil society organisations within these states. But what I want to talk about today is the levels of action at the regional level, where there is some cause for hope. As you are no doubt aware, efforts at regionalisation have intensified over the past few years—partly in response to the coming into being of more democratic states in Africa, but also in recognition of the impossibility of continued engagement with global governance institutions on an individual, state by state basis In May 2001, the African Union (AU) replaced the former Organisation of African Unity (OAU) when the Constitutive Act Establishing the AU first adopted in Lome, Togo in July 2000 came into force. The AU was launched in Durban, South Africa in July 2002 With respect to political participation, a key difference between the OAU and the AU is that while the OAU was a union of African leadership of Africa, the AU is conceived as a union of African peoples. The AU’s Constitutive Act thus includes mechanisms for peoples’ participation beyond national Executives, such as the pan-African Parliament and the Economic, Social and Cultural Council (ECOSOCC). The AU’s Protocol to the Treaty Establishing the African Economic Community The AU also departs from the OAU with respect to human rights. The principles of the AU include the “promotion of gender equality, respect for democratic principles, human rights, the rule of law and good governance” as well as “respect for the sanctity of life.” The Constitutive Act thus provides that the AU shall “promote and protect human and peoples’ rights in accordance with the African Charter on Human and Peoples’ Rights and other relevant human rights instruments.” The AU’s Summit in Maputo, Mozambique this July thus adopted the Protocol to the African Charter on the Rights of African Women and the Protocol of the Court of Justice of the AU. It also ensured that the appointment of five of the ten Commissioners were appointments of African women and approved the creation of a Gender Promotion Directorate in the Office of the Chairperson to coordinate all activities and programmes of the Commission With respect to armed conflicts, the AU Summit in July 2002 established the Peace and Security Council (PSC) as the decision-making organ for the prevention, management and resolution of conflicts. The Protocol acknowledges the need to assist the vulnerable, including women and children, in states adversely affected by conflict and encourages African CSOs, including African women’s organizations, to participate in efforts to promote peace, security and stability in Africa Finally, with respect to globalisation, the AU Summit in July 2002 adopted the Declaration on the Implementation of the New Partnership for Africa’s Development (NEPAD) as an AU programme for action on Africa's development. African CSOs, including African women’s organizations, remain concerned that the NEPAD’s macro-economic proposals fail to depart from neo-liberal tenets and lack gender-responsiveness. But, the NEPAD’s African Peer Review Mechanism (APRM) is now complete and its Panel of Experts to oversee implementation of regional and international agreements on good governance, human rights gender is now in place. Financing for DevelopmentAs you may be aware, the NEPAD was essentially to be an exchange between Africa and the rest of the world—Africa would address good governance in exchange for additional financing for development. As the above shows, African states are beginning to address our side of the bargain. The question is whether the rest of the world is doing the same.To answer that question, I want to speak to the structural and systemic issues underlying capital transfers between the north and the south. The United Nation’s 2001 Financing for Development Conference in Monterrey was heralded by African CSOs, including African women’s organizations as a necessary attempt for the UN, including the International Labour Organisation (ILO) and the UN Commission on Trade and Development (UNCTAD) to reclaim the development agenda from the Bretton Woods institutions and the World Trade Organisation (WTO). The Monterrey Consensus focused on six main areas related to financing for development: the mobilisation of domestic resources; the mobilisation of international resources; trade; overseas development assistance; debt; and systemic issues. I will quickly go through each area. Overseas Development Assistance (ODA)With respect to the quantities of ODA, it is a fact that ODA levels continue to fall, particularly in terms of Africa. The UN has estimated that meeting the Millennium Development Goal (MDG) of halving poverty by the year 2015 will require USD50 billion per year—this was the figure that overdeveloped states committed to reaching in terms of ODA in Monterrey. Sounds good, no? But consider that Oxfam estimates that the United Kingdom and the United States spent USD70 billion in one month in their illegal war against Iraq and the amount begins to sound less exciting. It is even more so when we consider that this amounts to less than half of what the overdeveloped states committed to during the 1970s—spending 0.7% of their Gross Domestic Product on ODA. Currently, the Group of Eight spends less than 0.3% of its GDP on ODA, despite the recent fanfare about the United States’ new line of funding for HIV/AIDS. As a little footnote, in Monterrey, the overdeveloped states essentially dismissed this earlier target, saying that it amounted to granting ODA on the basis of supply rather than demand—this dismissal will seem rather cynical when we come to Foreign Direct Investment (FDI) A second concern with ODA is that it continues to be tied by many of the overdeveloped states—that is, granted on condition that significant proportions of it are spent on goods and services from the granting state. During the 1980s, for example, 80% of Canadian ODA was tied. Tying ODA not only prevents us from seeking out the best deals for a required good or service. It amounts to a form of subsidisation of the granting states’ economy. A third concern with ODA is that it is increasingly used to impose not only economic, but also political conditionalities on our states. In recognition of the outcry around conditionalities, the International Monetary Fund (IMF) and the World Bank (WB) as well as most bilaterals have recently made poverty reduction rather than structural reform their priority conditionalities. But, while we ourselves have often made use of this fact in our own advocacy for reform on the national front, we have to question whether our implicit support of conditionalities is good in all cases The fourth and final concern about ODA is that the manner in which it is referred implies dependency, that we are getting something for nothing. The fact is that ODA, as mentioned above, is granted on the basis of a commitment by overdeveloped states in recognition of the fact that Africa is actually a net exporter of capital. UNCTAD, for example, has estimated that for every USD1 that flows into sub-Saharan Africa, USD1.06 flows out—30 cents in reserve build-ups and capital outflows, 51 cents in trade losses and 25 cents in debt servicing and profit remittances. With respect to gender, ODA has differential impacts on women as compared to men. This came through clearly in the results of the contentious and disputed Poverty Reduction Strategy Process in Africa—mooted by the Bank and the Fund as a means of targeting government expenditure in the national budget for three years. The priorities put forward by the Africa women’s movement differed substantially from those eventually incorporated in the PRSP. More fundamentally, gender concerns were totally excluded from the fundamental basis of the national budget—the macroeconomic framework. All of the above is quite apart from the fact that the commitments of the overdeveloped world to various aspects of development have yet to be resourced. DebtOnly a minute proportion of ODA is, of course, received in the form of grants. What we commonly refer to as ‘aid’ is therefore not only a misnomer in the senses referred to above. The majority of ‘aid,’ particularly from multilaterals is received in the form of loans. Debt accrued on the basis of these loans is the primary means by which African capital and other resources are externalised To clarify this point, here is a little, paradoxical statistic. Africa has paid its debts paid three times over during the last ten years. And yet, Africa is now more than three times in debt for what it has already paid Monterrey saw the overdeveloped states block all proposals for innovative ways of debt re-structuring, beyond the discredited Highly Indebted Poor Countries initiative, which has essentially re-packaged Structural Adjustment Programmes (SAPS). UNCTAD’s proposals for a debt standstill were ignored. And in April this year, the even the Fund’s proposed Sovereign Debt Restructuring Mechanism—essentially a bankruptcy process for states—was blocked by the United States (US) We must therefore continue to support calls for the cancellation of all illegitimate debt as a means of freeing up African capital and resources for development purposes Mobilising Domestic ResourcesThe decreasing levels of ODA and the refusal to deal with debt have been obscured by called for underdeveloped states, including African states, to explore other sources of financing for development. The virtues of micro-credit and finance as a means out of impoverishment, particularly for African women. The position of the African women’s movement is that although micro-credit and finance may provide practical, short-term options for African women, they are not sufficient solutions. For they essentially ensure the re-distribution of resources among the impoverished, rather than address re-distribution from the enriched to the impoverished, both within and between states A bigger question is to ensure the latter kind of re-distribution at the national level through gender budgeting—including a gender analysis and review of the macroeconomic framework and at the international level by questioning how domestic savings can be conserved and utilised rather than externalised. Africa’s domestic savings rates are relatively high—the problem is, as explained above, that Africa is a net exporter of capital and resources (referred to as dividends, interest on loans, debt repayments and so on) Mobilising International ResourcesWorse are the attempts to obscure failures with respect to ODA and debt by calling for the mobilisation of international resources through FDI FDI is presented as an opportunity for Africa. The implication is that those African states who fail to attract FDI are themselves to blame—because they are too corrupt, too protective or undemocratic. Many—in fact most African states—are indeed corrupt and protective and undemocratic. But that is not the issue here—again, we need to distinguish between issues which we ourselves have to resolve and the use of these issues to obscure responsibility. The argument above presents FDI as though it is demand-driven. While no African state would say it does not want FDI, the fact is that FDI is supply-driven. To drive this point home, note the fact that all African states have bent over backwards to do the necessary to attract FDI. African economies are the most liberalised in the world. And yet, only 4% of FDI came to sub-Saharan Africa in 2002—the majority of which went to (of all places) Angola, which can hardly be said to be going by the book in terms of the standard exhortations around creating a favourable investment environment. The example of Angola proves the point. As does the less stark experience of Tanzania with the privatisation of its parastatals. The fundamental aim of FDI is to increase the asset holdings of transnational corporations in our states—to make profit, to use local resources (including both skilled and unskilled labour) and to capture local markets (against both foreign and local competitors). African CSOs, including African women’s organizations, have repeatedly raised what is now being experienced as the negative consequences of FDI in terms of gender and labour standards, environmental standards, income distribution and the externalisation of African capital and resources. What is needed is an understanding of FDI as consisting of more than capital—FDI is a bundle including capital, contacts, management and technology. To make FDI work for us, nationally determined conditions and performance requirements for each aspect of this bundle must be in place so as to provide a basis for negotiating the entry of FDI into African states. Such conditions and requirements must, of course, be gendered, including conditions on the specific needs of women with respect to technology transfer and mandatory codes of conduct for TNCs with respect to African women (for example, on harassment, discrimination, day care and maternal and other reproductive rights) All of the above need to be taken into account in the on-going negotiations
around paragraph 20 of the Doha Declaration on multilateral investment
standards following the failed WTO Ministerial in Cancun, Mexico
Systemic IssuesIn conclusion, there is clearly need for a popular deconstruction of the myths around ‘aid’ and the ‘dependent’ relationship of Africa with the rest of the world
Further, there is need for:
I thank you. L. Muthoni Wanyeki is the Executive Director of the African Women’s Development and Communication Network
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The State of Africa <
