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close this bookExporting Africa: Technology, Trade and Industrialization in Sub-Saharan Africa (UNU, 1995, 434 pages)
close this folderPart I. Exporting Africa: an analysis
close this folder1. Introduction
View the documentBackground
View the documentThe position of Africa in world trade
View the documentIndustrialization and economic transformation
View the documentResearch questions
View the documentOrganization of this book

Background

The economic crisis which has hit Africa in the past decade is raising questions about future prospects for the continent. Questions have been raised about the future position of Africa in world trade and whether Africa has any chance of developing a competitive industrial structure. This book is a modest attempt to address these questions. The stance taken is that there are lessons to be drawn from firms which have been exporting and are continuing to export manufactured products from Africa. A study of such firms can provide useful insights into the process by which they have been maintaining their position in the world market in spite of the general crisis conditions. Some exporting firms have been losing or changing their positions in world trade. Useful lessons can also be derived from the experience of these firms. This book brings insights from the experience of 55 exporting firms from six countries in Africa and draws out some policy implications regarding the prospects of restructuring for export orientation.

In the 1970s, and especially in the 1980s, many countries in Africa experienced economic crises of varying severity. Their economies have been characterized by weak growth in the productive sectors' with the initial spurt of industrial growth faltering, by poor export performance, reflected in the falling share of African exports in world trade and the unchanged export structure, and by increasing debt, a deteriorating economic and social infrastructure and increasing environmental degradation. This crisis has important implications for the prospects of transforming African economies, as envisaged by African governments (e.g. in the Lagos Plan of Action of 1980). The crisis has implications in two policy areas of particular relevance to the theme of this book: the previous import-substitution approach to industrialization as a means of economic transformation, and the position of Africa in world trade.

Debates on the causes of the crisis have centred on two categories of factors. The first category comprises exogenous factors such as bad weather, deteriorating terms of trade, fluctuating international interest rates and reduced inflows of foreign aid. The second category of explanations emphasizes endogenous factors such as inappropriate domestic policies, including incentive structures, and the mismanagement of public resources. The first line of argument, emphasizing exogenous factors, has largely been heard from governments in Africa and the UN Economic Commission for Africa (UNECA). Particular emphasis has been placed on the vulnerability of the performance of African economies to the vagaries of weather and to the unfavorable international environment, in particular to primary commodity prices, resource flows and debt conditions (UNECA, 1988).1 The second category of explanation, emphasizing the domestic policy inadequacies, has been argued by the Bretton Woods Institutions, as formulated in the Berg report (World Bank, 1981).²

One response to these crises has been the adoption of economic reforms. Most economic reforms have been implemented under the influence of multilateral financial institutions, notably the International Monetary Fund and the World Bank (IMF).³ According to these institutions, the rationale of these reforms is that Africa's slowness to respond to changing circumstances basically reflects domestic policy inadequacies, and it is these policy inadequacies that need to be addressed. In order to realize economic recovery, stabilization of the macro balance has been accorded high priority in policy-making. The conditions attached to external support have primarily been concerned with macroeconomic policy variables.

The nature and content of economic reforms carried out in various countries in Africa have varied in terms of coverage and emphasis. However, the main elements of economic reform have been liberalization of internal and external trade, greater reliance on market forces (i.e. price liberalization, devaluations and interest rate adjustments), tight monetary policies, mainly in the form of credit squeezes, and tight fiscal policy in the form of budget cuts and public sector reforms. These policies have primarily been designed to restore equilibrium, especially in the balance of payments and the fiscal and monetary variables. The policies followed in the structural adjustment programmes (SAPs) have succeeded in addressing the two policy areas which are relevant to the main theme of this book: improving the position of Africa in world trade and enhancing the role of industrialization in economic transformation.