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TRADE-AFRICA: ‘‘Exports Are the Best Way to Develop’’

Stephanie Nieuwoudt

CAPE TOWN, Aug 4 2008 (IPS) - Lack of export orientation in the past has caused economic failures in African countries, which is why these countries should focus on exports to build industries.

This is the view of Dr Thandika Mkandawire, director of the UN Research Institute (UNRISD). IPS interviewed him after he delivered the opening paper at the Guy Mhone Memorial Conference held in Lusaka, Zambia, at the end of last month. Guy Mhone was an academic highly regarded for his writing on governance and others issues.

Mkandawire pointed out that there have been a number of incorrect readings of African economic history over the years. After colonisation there were high rates of economic growth between 1960 and 1975. Africa’s share in the global industry rose from seven to eight percent.

However, African economies were based on import substitution instead of export-oriented industrialisation.

Countries did not invest in manufacturing plants – for example the motor industry, heavy machinery and mining. Instead the focus was on reducing imports and producing primary commodities such as tobacco or manufactured goods such as beverage and clothing and leather products. Import substitution led to ‘‘shallow industrialisation’’.

There was also no cohesion of industrial projects and a failure to deepen import-substitution industrialisation through regional integration.

Mkandawire said that countries in sub-Saharan Africa have largely failed to extend their markets through income distribution. When the oil crises and other market failures hit the world in the 1970s, Africa had no solid economic foundation.

The economies of the developing countries in sub-Saharan Africa not only stagnated but actually declined. De-industrialisation took place and led to the demise of institutions and capacity.

The harmful legacy of a lack of export-driven industrialisation is again becoming apparent in the current global economic climate. Although the World Bank cited an increase of exports from 5.7 billion dollars in 1990 to 12.5 billion dollars in 2005, there is a false optimism as the exports were mainly in the form of raw products by multinational companies whose headquarters are elsewhere.

Unset diamonds, for instance, accounted for exports of USD5.5 billion in 2005.

Export industries are also under-diversified. For example, clothing and textiles accounted for a combined total of 53 percent of all ‘‘narrow manufacture’’ exports from sub-Saharan Africa.

Mkandawire argued that although there has been growth in certain areas, it stems from improved productivities and efficiencies after privatisation and not from investment in new manufacturing activities.

‘‘Africa has not had industrial policies for the last 20 years,’’ he told IPS. ‘‘The way forward is to look at where the continent is compared to the rest of the world and to identify areas in which to diversify industries in order to create a strong export base.’’

According to him the role of industrialisation in the development process has been hugely downplayed to the detriment of developing countries. In a report in 1993 the World Bank even went so far as to say, ‘‘our assessment is that promotion of specific industries generally did not work and therefore holds little promise for other developing countries.’’

There is also an argument that manufacturing does not play such a leading role in economic growth in the new economy. Some analysts argue that the services industry – e.g. communication technology and tourism – is more important than the manufacturing industry.

But, according to Mkandawire, there has to be investment in both kinds of industries.

Corruption has also been identified as a hurdle to growth and development in Africa. There are many cases where top government officials hold on to goods meant for export or import at ports and airports until they get paid graft money. It is well known that certain multinational companies calculate bribe money into their budgets before they put in tenders for lucrative contracts.

Mkandawire said that although one can make a moral case against corruption, its economic impact is less clear-cut. ‘‘In Asia corruption, or rent seeking and rent creation, is rampant.

‘‘But in these countries rents were achievable through activities which served national interests and the realisation of rents was related to performance standards. In other words, money from corruption was kept in the country, which benefited the national economy.

‘‘In contrast many leaders in Africa have used graft money to open Swiss bank accounts, which does not benefit their countries.”

Mkandawire is not making a case for corruption. He strongly argues for coordination and combining forces in the quest for development and growth. ‘‘Africa needs development coalitions, which might consist of state actors, business partners and workers, that share some ideological position on development and collectively have the capacity and will to push the development agenda,’’ he told IPS.

‘‘Africa has to rethink regional cooperation. Early ideas of regional integration assumed planned national economies that somehow allocated activities among themselves in a planned way. This failed.

‘‘Current regional integration policies assume that the markets in neoliberal member states will grow if the state provides infrastructure and some regional regulatory bodies. However, this is not working, hence the need for a rethink.’’

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