|The Courier N° 127 May - June 1991- Dossier 'New' ACP Export Products - Country Reports Cape Verde - Namibia (EC Courier, 1991, 104 p.)|
Africa has to regain its economic relevance
There is hardly an African Head of State or Minister of Finance who has not had an in-depth policy discussion with Edward Kim Jaycox over the past few years. They may not always have come to an agreement on all issues, yet his views will certainly become very clear to them. Indeed, he is not known to mince his words, and has a way of bringing forward his ideas in a no-nonsense, open and frank way, throwing in the odd punch line, and often using humour to convey bitter realities. Even those who disagree with him, will, however, have to admit he has got Africa under his skin and it is not unusual to catch him saying we, the Africans.... Not surprisingly he is usually referred to as the Mr. Africa of the World Bank, which he joined in 1964. Within the Banks operations, his department has been allocated 855 professional staff-years, out of a total of 2646, achieving with an annual budget of $119 million, a lending turnover of $4.2 billion to 47 countries. In this interview with the Courier, he puts a few sacred cows - such as regional cooperation or the deterioration of the terms of trade - into their real perspective. He also comments on the current state of the structural adjustment process, and declares that the situation in Africa looks much better today than it has in a long time ...
· Mr Jaycox, both the World Bank and the EEC seem to feel the need to reaffirm their continued commitment to the development of Africa. Are their statements aimed at combatting the current trend of afro-pessimism, as it is sometimes called?
- We take every opportunity to work against what we think are inadequate or inaccurate pictures of reality and to combat this so-called afro-pessimism. In fact, I think the situation in Africa looks much better today than it has in a long time. I am not talking here about commodity prices or yet about the results on first consequences, may not he perceived in the same manner by the general public: in their view Africa is still very badly off, worse than most other developing continents. They hear the outcry from the African countries who fee! neglected vis-is aid for other parts of the world, or who feel neglected in the Gulf crisis.
- I think they should be very thankful they are not involved in the Gulf crisis. Indeed, my overall assessment is a positive one, although I dont necessarily expect the man in the street to appreciate it fully because the real business is to measure the difference between where the ground, but about the fact that they are today where they might have African leadershup has taken a grip on its been, or certainly would have been, if own problems as never before. They are better informed and they are using more of their own resources - human resources and knowledge. They have been able to appreciate the problems they face and have managed to get a lot more support externally than they thought feasible a few years ago. So we - meaning the Africans, the donors and everybody working on Africa - have managed to turn a vicious circle of declining performance and declining support into a virtuous one of improving performance and increasing support. That is why afro-pessimism is wrong.
· What amounts virtually to your assessment of structural adjustment and its they had not entered into structural adjustment. I normally explain this by using what has now unfortunately become known as the Jaycox curve. If you look at countries in structural adjustment, most of them were in free fall for several years before they entered into such a programme. They didnt enter into it enthusiastically, they entered into it because they were desperate and when they did so there were no goods on the shelves, no spare parts, no trucks, no batteries and no tyres. Industries were operating at 10% of their capacity, there were no drugs in the clinics, no chalk in the schools, no books, etc... All that had disappeared before the countries accepted that they had a crisis that they had to deal with by doing the extreme things that were necessary, i.e. getting into a structural adjustment programme with the World Bank. Now, if you look at that dotted line which they did not follow, it represents an almost vertical drop. By going into structural adjustment, almost immediately they received enough of an influx of aid to avoid this path towards that drop. Their course is still unsatisfactory. We thought it would go up a lot faster than it has, and I am not telling you anything secret when I say I am very disappointed in how long this is taking and how painful it is. But at the same time, I am not discouraged because in fact, every day there is improvement and finally a turnaround. So generally they stopped their steep vertical drop although they are not back to where they were when they decided to go into structural adjustment. But it is not appropriate to blame all of this on structural adjustment. It is really the momentum of the previous period that is still playing through. Of course, people have not experienced the real benefit that has accrued to the economy, i.e. the difference between where they are and where they would have been, so no politician can sell that. Can you imagine Dr Kaunda going on television and explaining how much better off Africa is today than it was before? Still, the fact of the matter is that something is happening in Africa. That is pretty important and we have not seen such a phenomenon in Africa for 15 years,
· But you talk in general terms of Africa. Where has structural adjustment concretely worked and why has it worked?
- I think it has certainly worked in Guinea, in Ghana, in Togo, in Nigeria, in the CAR. I believe it is doing quite well also in Uganda, Tanzania, Madagascar, and Malawi. Zambia has been on and off and now its back on again, Zimbabwe is going into structural adjustment, Rwanda is just going in, Burundi has done quite well. You can see the impact of structural adjustment in that whole scenario. Some countries have only been in structural adjustment a year or so, so its hard to measure their results yet, but even there, there are spare parts and the necessities of life that have suddenly appeared. But it is not just imports; food production has been boosted. By-and-large, the peasant has really been the first and largest beneficiary of structural adjustment because one of the first things to do is to increase producer prices, so that the farmer gets adequate remuneration for his labour and he starts producing surpluses. But there are losers in structural adjustment. In the first instance, they are the civil service and the urban formal sector wage earners who see that their wages are too big or they are too numerous. Parastatals have too many employees for the amount of work they do, the government has too many civil servants and so they have to be let go. They may or may not be compensated adequately for this loss of career and employment, but in any case it is very disruptive and these are the most vocal political forces in the country. I hear the criticism of structural adjustment from outside saying its the poor people that suffer but I dont believe that for a minute. I am sure they are not benefiting enormously but the peasant is benefiting and he is usually one of the poorest members of society. On the other hand, the ones who are being hurt are really civil servants and formal wage employees who are losing their employment. Mostly established in the capital, they will in a very vocal way establish their impression of structural adjustment and whether they merit this attention or not, you have to judge. But the idea that it is all women, children and poor people that are suffering is not quite accurate and it is the not-so-poor who are protesting the loudest.
· But parallel to this movement of structural adjustment which indeed has brought about positive results in a number of countries, virtually all of these countries are suffering from a very serious deterioration of their terms of trade.
- Yes, that is true compared to the mid-1970s but not compared to the mid-1960s. There has been a steady and sectoral decline in some areas, in some minerals and some crops, and indeed African exports should be diversified, but what strikes me even more importantly is that the volumes of exports have gone down. Its not just the price, its the volumes and who has picked up this volume? Do you think that the coffee market of the world has shrunk? Africas share of the coffee market has shrunk from over 30% to less than 20% while its share of the cocoa market fell from nearly 70% to less than 40%. The global market has not shrunk. Malaysia, Brazil, Indonesia and others have picked up palm oil, rubber, coconuts - you name it. Why has it gone from Africa? The reason is that the other countries invest in these crops, in the higher yield varieties. They invest in the infrastructure to make sure they can transport them at low cost. What did Africa do? Unrealistic exchange rates, milking the system with too many employees in the government marketing boards. These are the reasons why they lose their markets. Our estimate is that if the market shares of non-oil commodity exports had been maintained, the additional earnings would be roughly equivalent on an annual basis to the entire net foreign aid (ODA disbursements) flowing towards Africa. Africa has systematically cut its links with the rest of the world economy. Africas share of world trade is a fraction of what it used to be. It has become so marginal for the rest of the world that the only rationale we have for foreign assistance to Africa now is humanitarian. Whereas it used at least to have some economic rationale. Now Africa has to regain its economic relevance. They have got to get this competitiveness back. They have got to reestablish their links to the world economy.
· The end of tile first decade of structural adjustment is virtually coinciding with a global change in the African political scene, with what is referred to by some as the second independence of Africa. That is going to have a political and economic cost. Who is going to pay that and what could be the effects on their development?
- I think that most of this is very positive for Africa. Africa should be weaning itself off foreign dependency in financial terms and I believe Africa can certainly benefit from a rebirth of freedom. I believe its time and certainly African people think it is time.
· Would you say that development is not possible without democracy?
- No, I absolutely dont believe that. I think there is no historical link whatsoever. However, I think democracy becomes inevitable if you have development, which involves the private sector moving forward. Just look at the problems in Korea and China. They have to have some democracy and they have to meet peoples expectations because the economy is really demanding it. The other way around, I dont see the link. I would say that more important than democracy, is the link which obviously exists between government and development. This has to do with more fundamental issues such as accountability transparency, the rule of law, the sanctity of contracts and the predictability of policy. All of this serves to avoid capital flight, massive corruption and complete arbitrariness in the economy which make people unable to invest or even work hard towards their objectives.
· Where does the Bank strike a balance between the structural adjustment exercise and its more long term investment?
- Whats happening right now is that we are putting foreign exchange into these economies by lending it to governments. They are putting it into the central bank and then the private sector comes and buys it, so there is no debt created domestically, certainly not foreign exchange debt. They buy foreign exchange and they import what they need for their business and their machinery, and we may have either price or other restrictions that limit non-luxury goods and so on. So what is happening right now is the largest infusion of official aid to the private sector in Africa we have ever seen. That is what is happening under structural adjustment. Most of the money is going to the private sector.
· That is contrary to what most people think.
- Its because they dont understand how markets work and in fact we in the aid business have not thought about how markets work for a long, long time. I think the Bank has pioneered this: we have talked all of these aid agencies into moving away from highly directed credit, administered with respect to where it lands in the country, as if we were second-guessing the market. Will the market produce those things if we just give free foreign exchange? I think that this is OK up to a points this free foreign exchange made available with all the activities that it implies, but without some external agency sticking its nose into the investment decisions of the private sector, which I think would be a big mistake. So I think we are doing the right thing now, and anyway they need balance of pay meets support. But then what about schools, roads - the basic investments, where the state has a natural monopoly or at least a responsibility that nobody else can take away from it. I think we have to get back to adequate public expenditure and public investment programmes in these infrastructure areas. What is needed is a reinfusion of new investment in what is currently the rehabilitation stage. But when we get to the post-rehabilitation state, we have to move on and what I am afraid of is that everybody will become addicted to this form of aid. I dont think we should ever go back to where we were before this crisis, because with these small projects scattered over the country in specific sectors, it is too easy to ignore the macroeconomic environment and the real constraints on development. We ought to stay with systems, the roads system as a whole, infrastructure maintenance across the board, the school system and the agricultural research -system, making sure that these are strengthened, rather than pick out a specific geographical area or a specific crop or a specific city and try to make things right in that small area. I think it would be a big mistake to get myopic again. We should go for the macro policy dialogue on overall systems.
· There has been a whole variety of development models applied ranging from a very liberal approach to a straightforward interventionist approach. The current trend seems to be based on the socio-cultural implications and commitment of the local populations. What is your-feeling on this?
- I think that is right, although culture is a very fast moving thing. I can say that from experience, as I worked in Korea, Thailand and Taiwan. Culture is important, but it changes too - very rapidly and there are some things that are changing and have changed in Africa very rapidly. I dont like these models that take the culture as given, because the purists in this field would try to stop all change: then of course you dont get development. Development involves cultural change and structural change in the economy. What we try to encourage is development from an agrarian society to one that is more differentiated, has a division of labour, has urban aspects, has specialisation. You dont get productivity without these changes. So those who want a higher per capita income have to become competitive in the world economy and are going to have to go through cultural and structural change.
· Another slogan which you often hear concerns the more efficient use of the available resources. When you talk to Africans, however, many of them say we are very surprised at the amount of resources mobilised left, right and centre for Eastern Europe, for the Gulf crisis, and so on, and we seem to be left out. It is all very well for you, the donors, to talk about increased efficiency hut its merely an excuse for not giving more.
- There is still a lot of scepticism. We know what drives aid. First of all it is not easy to raise it: this Gulf crisis for instance is seen by those controlling resources as a critical thing, much more critical than any issue in Africa appears to them. There is no point in weeping about that point of view. What we have to do is to go out there and raise the money and we have done it. We have raised a lot of money in the last few years, and this money gives us a solid foundation to help Africa in the early 1990s. Our most recent projections show that all donors together - the EEC, the World Bank, the IMF, donor countries - may disburse as much as $6-7 billion a year to sub-Saharan African countries to support their adjustment efforts. On top of this, we expect creditors, notably through the Paris Club, to provide debt relief of more than $10 billion a year - often on highly concessional terms. These resources directly support adjustment. In addition, we expect donors and lenders to disburse as much as $10 billion a year for project investments, and there will continue to be several billion dollars worth of technical assistance grants. All of these resources may not be enough, but theyre a lot, and more than Africa has received before.
Africa doesnt want to be dependent on aid any more than you or I would. What they need is to use the aid to get out of the trap of aid dependency so we dont want to make that trap too deep either.
· What is your own thinking on regional cooperation in Africa? One gets the feeling on the side of the donors that not everybody is putting his money where his mouth is and on the other hand that there is a lot of talk on regional cooperation, and very little effectively happening in the field.
- I think we are a long way from real effectiveness there. We have a terrible reputation on regional integration in the Bank because basically we have been approached to finance projects that happened to go across borders but in many cases these projects have nothing to do with national priorities. They are just a device to get additional money because there is something sexy about a regional project. But we dont have any extra money. We have just got all this money for Africa and it either goes to national programmes or to very few regional projects because nobody really wants them. In any case the projects themselves often dont make a lot of sense because the frameworks are still not there. Political lip service has been paid, but it doesnt in fact amount to much. There have been too many experiences where we have approved a road across a border only to see the trucks still spending two weeks at that border before they can cross because nobody has bothered to harmonise insurance policies, or traffic regulations or somebody has to be paid off or all the goods have to be off-loaded and then reloaded, destroying the economics of the improved road. So we are very sceptical about this. Now I set the challenge out in my discussions with certain agencies, that if they came up with a real cooperation framework,: we would support them. We have now a regional structural adjustment operation in the making for the central African franc-zone area comprising Congo Brazzaville, Cameroon, Chad, Gabon, CAR and Equatorial Guinea. They basically have to implement what they already agreed on a long time ago: harmonising tax policies, transportation policies, tariffs and the rules that govern the transfer of goods over the border. If they do that, they are going to get an additional amount of money from us.
· This brings us to a sensitive point which is the increased rate of conditionality of aid. Do you have a feeling that this trend of making aid conditional on certain changes in the country is rising?
- Yes, I do, I think it arises out of frustration but it does not necessarily have to be so. There is a countervailing trend at the same time and that is, as countries really get committed to structural adjustment and to reforming their economies, I think you can actually reduce the amount of codified conditionality. It is better if you can wait until people do things and then give them the money, rather than forcing them to agree in writing. The latter approach is not only onerous, but also demeaning and has political repercussions because people dont like to see their governments submit - in writing especially - to some kind of outside conditionality. However, when they go ahead and make needed reforms, and then receive support from the World Bank or the EEC, people do not see this as a big interference.
· An almost philosophical problem that some donors have is the conflict they think exists between their own individual approach based on private initiative and the usually accepted sense of a collective approach to the solution of problems in Africa.
- We should have a little humility, I agree with that. I am not at all sure that these formulations that people think have been successful in the West would work in Africa. I think we need much more tentativeness on that front and we have to listen more. It is important to understand African societies and also to recognise that there are variations in societal approaches to problems therein as a result of ethnic pluralism; and, of course, between the different countries. Adequate understanding and appreciation of the problems should help us working together in partnership with the Africans to come up with strategic approaches that are situational and relevant to achieving tangible results.
· You mentioned the capacity building scheme and one cannot fail but be struck by the huge human resources problem, education in particular. What is the Bank planning to do about this?
- Of course, we have a tremendous emphasis on education and human resource development, but I am taking that for granted. I think we have to step that up, foreseeing in the long-term, at least a doubling, as share of GDP, of expenditure on human resource issues. I am concerned about the need to develop professionally skilled Africans to manage development, a higher level of local capacity in Africa. Africa faces what I would call world class economic problems. If you can put yourself in the shoes of somebody who has to manage an African economy; it may be small but it certainly is not simple. The vulnerability of the economy to changes on the outside, the whole lack of strength internally to roll with the punches mean a lot of issues. but Africa really has very weak human resources for managing these situations. Since we have helped create this tremendous demand for high level management by focusing on structural adjustment, we did have an obligation in the Bank to try to mobilise resources to do something about the lack of local capacity to manage the process, and so we did. We got together with the African Development Bank and UNDP and launched this initiative, a very interesting one because its basically private. We were concerned that if we really wanted to create capacity for economic management and policy analysis, it could take some 25 years to really get it up to strength. It did not seem to us that any of the existing organisations had that kind of commitment to long-term objectives, and most aid agencies cannot cope with long-term objectives. If countries dont pay the World Bank, we stop lending so there is a vulnerability there. On the other hand the Africans have an obvious lack of political consensus on regional integration and cant yet afford to have all universities in Africa with first class masters programmes in economics. So we created an institution, the African Capacity Building Foundation, that can rise above donor and agency politics, can rise above African politics and do its own thing strategically focusing on developing orps of first class economic managers and policy analysts in Africa, and making sure that they get used by African governments and private sectors. That is what this initiative is about. We raised $100 m and we have a Board of Directors with nobody representing a government; all are there in their own professional capacities to give direction to this outfit. It should become operational on April I and will be located in Harare. It has an African Director, Dr Jonathan Frimpong-Ansah, and a majority of Africans on the Board of Directors and we expect big things from it. After they have used the $100 m, they should have a track record and hopefully it will be good enough so that we can get this thing endowed, cut it free from all government contributions and the World Bank, etc.
· You have very strong feelings on the issue of demography. What do you think about its evolution?
- The fact of the matter is that, even with AIDS and all the uncertainties about what is going to happen, the African people face a real choice: they have got about 70 years before they lose this choice. If they dont do anything between now and 70 years from now then they wont have any more choices to make, because by then Africa will begin the stabilisation of its population at a very high level. It will do that because it will experience a kind of natural stabilisation. Nobody says that Africa will not be full of people because it certainly will be. Nor is anyone saying that it will not grow; it will grow, for sure. The question is how fast. If it grows as fast as now, it will be full with people in about 70 years and all of the recommendations we are now making about population will in fact come through by mortality and other natural interventions, not quite Malthusian but almost so. In any case, the place will be filled with very poor people, without education, without jobs, maybe undernourished and in fact they will be the poorest people on earth and there will be over three billion of them. That is the choice. Now they could slow this down, if they were able to just cut their growth rate in half - cut their present growth rate of 3.2% to something just a little less than 2% per annum growth. They would then be able to have a much higher level of education, a much better chance of having everybody employed and being able to feed them all, otherwise there will be quite a difference in the next 70 years. When we explain this to heads of state and others - I dont know how much they normally think about the next generation given all the crises they have to face on a current basis - I must say it is very impressive: they do get the message. People concentrate on the issues. Over the past few years I have seen some forward movement. Now some 20 countries have population policies instead of only 10, and the commitment is growing. We have increased our attention to this and we have also increased our professionalism. We have brought more people and a better mixing of skills into the Bank to deal with these issues. We have developed computer models to allow Ministers of Health, Prime Ministers and Presidents to play with the variables and see what kind of outcome they get: how many houses are they going to have to build, how many schools are they going to need and how many of those schools did they build in the last 25 years. When they see what they are going to have to build in the next 10 years - perhaps six or seven times as many as they built in the last 25, then they are impressed and they get the picture pretty fast. I think as far as changing family behaviour is concerned, that it is already happening in countries with good programmes. In Kenya, Zimbabwe and a few other places, the rate of use of contraception has gone up in the urban population and by the way, not just condoms, not just the anti-AIDS remedies, I am talking about the whole range of pills and everything else so we are pretty confident that there is nothing Africa-specific standing in the way of doing something about family planning.
Interview by Roger DE BACKER