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Kenya's Crisis  · Poverty  · ...Stop the Bleeding

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It will suffice to stop the bleeding

by Charles Abugre


Charles Abugre sees Africa as a beautiful, welcoming and sharing person. But that person also has a wound that is still festering, has scars around its edges and is constantly poked by external factors and by the self. Abugre traces the history of this wound and the path to healing, in the process laying out a vision of what a healthy African state might look like.


Thanks to the recent incredibly successful mobilisation by the Make Poverty History (MPH) coalition, never before has Africa been so much in the public conscience in the United Kingdom. But as what? Tony Blair’s imagery of Africa is that of a scar on the conscience of the rich world. A scar is an ugly tissue left after a wound has healed or is healing. It acts as a reminder of a past painful experience. If the sight of it abhors you, look away or otherwise help to make- it-over in one form or the other to improve the aesthetic effect.


There are some that feel strongly that the imagery of Africa presented through our airwaves and TV screens, and the justification that the pundits make for action under the MPH agenda is one of making-over an otherwise ugly, disturbing blemish that is also an unwelcome reminder of the past. My eight year old, who has not been back in Ghana in three years, asked me, “Dad, why are all Africans so poor and so miserable?” Her conscious has clearly been touched!


I do not suggest that the MPH’s agenda of debt cancellation, more and better aid, and trade justice is driven by make-over objectives. I believe that for the majority in the MPH coalition, it is about redressing injustice. If it is, then imagery and analysis matters.


My image of Africa is a beautiful, welcoming and sharing person bearing a gaping and bleeding wound that threatens her/his happiness and life. Africa’s wound is old (historically rooted) and still festering. There are scars around its edges suggesting partial but superficial healing. The wound is constantly poked both by external objects as well as self. As a result, it is still gashing.


Stopping the bleeding is a first aid priority to protect life, before healing is possible. To heal, we must get the diagnosis right and recognise the age of the wound, how it was caused and what continues to exacerbate it.

We must help Africa to stop bleeding, first and foremost. Africa is presented as a continent with insufficient resources to feed itself, to treat itself, to exchange abroad and to pay its debt. This is true. But did you know that over the past 30 years Africa has been a net capital exporter (creditor) - transferring more capital abroad than received in aid loans and foreign direct investment? Some estimates suggest that Africa’s accumulated stock of capital transferred abroad between 1970 and 2000 amounted to over $280 billion through balance of payment financing, debt servicing, official reserves held abroad and trade mis-invoicing.


Debt, a phenomenon of the 1980s (brought about by Structural adjustment Programmes imposed by the IMF, the World Bank and rich countries) was particularly debilitating. Some estimates suggest that of every one dollar received in loans, 80 cents went right back out the same year in debt servicing. The remaining 20 cents will induce outflows equivalent to about a further 40 cents. Debt became a means of inducing capital flight and sucking out more resources than was originally provided. Further it was an instrument for making African countries implement policies prescribed my rich countries against the will of many African people.


Africa bled and continues to bleed from two further mechanisms: tax avoidance and tax competition and import penetration. A favourite policy of the aid providers over the past 20 years has been to encourage poor countries to reduce tax obligations on foreign investors. Consequently, across Africa, governments offered mining companies tax holidays ranging from 20-35 years. Ghana’s Ango-Ashanti will not pay tax for over 25 years. In addition, they are allowed to hold as much as 80% of the foreign exchange earning abroad in their own accounts, thereby denying Africans the foreign exchange earned by these companies. Sadly, much of this capital ends up in tax havens. The Tax Justice Network suggests that the stock of capital held by tax havens, a large part of which is from developing countries, exceeds 11 trillion dollars. If the returns to this capital were to be taxed at an average of 30%, they suggest that every year, this could generate well over $250 billion.

Losses from declining terms of trade have been regularly documented by UNCTAD, often amounting annually to tens of billions of dollars. What has not been estimated until recently are the losses that African countries have incurred simply by opening up their markets. Africa was made to cut down their rates of protection at a pace three times as fast as the countries of the OECD. This has left the continent too open and too dependent and with an ever declining share of international trade. Christian Aid recently calculated that over the past two decades, Africa lost in income terms and accumulated value well over $270bn from the negative growth effects of trade liberalization. This amount alone more than matches the accumulated value of grants, loans and net FDI into the continent.


To stop the bleeding, we should stop pushing African countries to reduce taxation on foreign companies, especially in the area of natural resources and financial services. We should address the issue of commodity pricing and commodity terms of trade and we should tighten the rules regulating the operation of companies to tackle trade mis-invoicing. Finally, we should stop encouraging or forcing African countries to open up their markets even further. We need to make it clear to the G8 that Africa is too open for the size and structure of its economy and probably needs to reverse the situation, especially in manufacturing and some agricultural products, to have any chance at all of recovering.


The media answer to the cause of Africa’s poverty is bad governance, by which is meant either corruption, or the lack of visionary leadership or caring leadership. All these are a part. The problem goes deeper than that. Africa has not lacked visionary leadership and Africa’s leaders have not always been corrupt. Visionary leaders became victims of cold war reprisals. Did you know that in the first 10 years of Africa’s independence 27 leaders were removed by military coups and other violent means? Kwame Nkrumah of Ghana and Patrice Lumumba of the Congo were notable visionaries. Africa did not at the time know about coups. Most were orchestrated by Western intelligence. Removing leaders by coup d’etat became implanted early in Africa’s post-colonial experience.


But the current crisis of governance is rooted not simply in corruption but the increasing irrelevance of the state to citizens. In the first 20 years of independence the relevance of the African state was clears to its citizens – build unity around a nationalist project; deliver improvement in wellbeing through investing in health, education and production. Consequently Africa experienced its greatest economic and social progress in the 1960s and 1970s before the intervention of structural adjustment. Economic growth in SSA averaged 2.4% in the 60s and 4.0% in the 70s, compared to post structural adjustment growth of 1.4% in the 1980s and 2.1% in the 1990s. The same is true in basic social services. The attempt to transform the state into a facilitator (getting the environment and prices right) rather than an interventionist has led to massive inequality, exclusion and conflict. Rapid market opening has exacerbated these contradictions by displacing basic local production.


To address governance, governments have to first be relevant to the aspirations of its poorest - which means mobilising taxes from the rich and investing them in economic and social development. It means not just building roads and ports but providing teachers, extension services, price and storage support to producers and investment and R&D to help promote science in the interest of production. Budget tracking and transparency is useful only in the context of citizens seeking to defend resources for themselves. Such a state will look completely different from what the IMF, the World Bank and DFID have in mind and might look quite similar to what it was in the 60s and 70s. At least we have lessons of China and India to go by.


This new form of state and new form of accountability cannot happen when aid agencies and powerful governments use any excuse to direct and dominate decision-making in Africa. Aid-directed governance leads to reverse (de facto) accountability where governments account to donors rather than their own citizens. That is why we should oppose conditionality, including governance conditionality. They either don’t work (according to the World Bank's evaluation department) or they dominate and over-ride domestic politics which is the same as the neo-colonialism named by Kwame Nkrumah.


Charles Abugre is currently the head of policy and advocacy at Christian Aid. He has been a development activist in Ghana and many parts of Africa and Asia. He writes in a personal capacity.

Reprinted with permission.


Posted  August 02, 2005

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