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Africa: Growth Slowing
Africa: Growth Slowing
Date distributed (ymd): 010219
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
Just before a week-long joint trip by World Bank and IMF leaders
to Africa, the World Bank released its new African Development
Indicators 2001, showing overall declines in foreign aid as well as
direct investment. The full report, with updated statistics on a
wide variety of indicators through 1999, is available on a section
of the World Bank site available to journalists who register with
the site (http://media.worldbank.org).
The two institution heads are meeting with African leaders at minisummits
in Mali and in Tanzania, with additional stops in Nigeria
and Kenya. Initial press reports from the BBC
(http://news.bbc.co.uk/hi/english/world/africa) indicate they face
considerable skepticism on their trip, and were met in Bamako by
demonstrators calling for debt cancellation.
On debt, a table in African Development Indicators 2001 records a
slight decrease in the continent's total external debt from $324
billion in 1998 to $319 billion in 1999 (with sub-Saharan Africa's
debt declining from $230 billion in 1998 to $228 billion in 1999).
Also below, an article from Jubilee Plus documenting the
limitations of the creditors' latest debt relief measures for
Cameroon. The article concludes that 'the country will still pay
more this year in debt service than for health and education
combined, and will need to borrow money even to deal with its AIDS
epidemic.'
In a related posting also sent out today, Joseph Hanlon reports on
IMF/World Bank concessions on export policy for Mozambique's
cashews and sugar.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
The World Bank Group
News Release No. 2001/23/S
Less Foreign Aid And Poor Trade Terms Hurt Africa's Economies - But
Some Countries Register Solid Growth
New report shows foreign aid continues to fall as well as foreign
direct investment
WASHINGTON, February 15, 2001 - On the eve of a joint trip to
Africa by World Bank President James Wolfensohn and IMF Managing
Director Horst Koehler to meet many of the continent's
heads-of-state, a new World Bank statistical report on Africa shows
that growth in the region slowed significantly after 1998, with
average per capita GDP falling by almost 1 percent in 1998-99. The
report also shows how official aid to Sub-Saharan Africa has been
falling from US$32 per head in 1990 to US$19 by 1998 despite
evidence of its effective development results in those countries
with sound social and economic policies.
Social indicators show mixed progress with a welcome rise in
literacy and school enrollments for girls on one hand, but
declining immunizations for children, and a widening HIV/AIDS
epidemic across the region, on the other.
According to the latest edition of African Development Indicators
2001 - an annual World Bank compilation of key African social and
economic data for the period 1970-99, covering indicators such as
trade and external debt, communications, and aid flows - the
slowdown in growth was the result of regional and civil wars, poor
governance in some countries, and serious external shocks such as
the rapid hike in oil prices at the same time that export earnings
from primary commodities collapsed. Moreover, the report warns that
growth is below the 5 percent annual level needed to prevent a rise
in the numbers of poor people on the continent.
While growth trends for the region as a whole remain depressed,
some African countries are doing well. Fourteen countries have
grown on average by 4 percent a year during the 1990s, with rising
annual incomes of 2-3 percent and even higher, with another 10
countries following close behind with growth rates above 3 percent
a year. Some countries have grown at 7 percent a year or higher
(Mozambique, 7 percent, and Uganda, 7.1 percent).
"These figures show us that economic reforms over recent years have
slowly but surely improved growth in many African countries and
allowed the private sector to take root," says Alan Gelb, Chief
Economist of the World Bank's Africa region. "However, despite this
rising trend, countries are still vulnerable to conflict and
external shocks in world markets, such as the recent rapid increase
in oil prices and fallout from the East Asia crisis. These two
forces have together produced highly unfavorable terms of trade for
oil importers."
In late December, the World Bank gave US$155 million in credits to
help seven African countries - Madagascar, Mali, Mauritania, Niger,
Rwanda, Zambia, and Uganda - cope with an unexpected surge in oil
prices and other losses in their terms of trade. These factors were
causing serious hardship for the poor in terms of rising energy and
transportation costs, which in turn were jeopardizing the success
of the countries' reform programs.
Civil war hurts growth and social progress
The new report also shows how civil conflict in the region has
blunted and reversed growth prospects for war-torn countries. While
the trend for many African countries during the 1990s was one of
slow but steady economic improvement, those in conflict suffered
negative growth and an alarming deterioration in basic conditions
(Angola -0.2 percent, Burundi -2.4 percent, Democratic Republic of
Congo, -4.6 percent, Rwanda, -2.1 percent, Sierra Leone, -4.6
percent).
Africans living in countries beset by conflict were also more
likely to have shorter life expectancy at birth and have higher
infant mortality rates than other more stable countries. Sierra
Leone is a striking illustration of this trend with the region's
lowest life expectancy rate at just 37 years, and its highest
infant mortality rate at 169 deaths per one thousand.
Foreign direct investment and official aid levels fall
According to African Development Indicators 2001, two important
sources of finance, foreign direct investment (FDI) and official
aid, are also declining in size, and tend to favor those countries
with lucrative mining and oil industries in the case of FDI, or
countries with sound social and economic policies in the case of
aid.
Of the US$2.52 billion in FDI that flowed into Sub-Saharan Africa
during the last decade, just three countries accounted for much of
that total - Angola, US$626 million, Lesotho, US$170 million, and
Nigeria, US$876 million. If South Africa is excluded (as both a
recipient and source of FDI), five other countries accounted for
another US$576 million - Republic of Congo, Cote D'Ivoire,
Equatorial Guinea, Namibia, and Sudan - leaving the remaining 40
countries of Sub-Saharan Africa to compete for just $US275 million
in annual FDI flows.
Official aid has followed a similarly selective trend over the same
period, and falling in terms of total volumes. Aid levels in 1999,
for example, were US$10.8 billion compared to US$ 17.9 billion in
1992 when development assistance to Sub-Saharan Africa reached its
highest-ever levels.
The new report shows that during the 1990s the region attracted an
annual average of US$15.8 billion dollars in aid (nominal). As in
keeping with FDI flows, most of this development assistance went to
a small number of countries which bilateral and multilateral donors
considered to have adopted modern economic and social policies and
were performing well. These included Cameroon, Cote D'Ivoire,
Ethiopia, Ghana, Kenya, Mozambique, Senegal, Tanzania, Uganda, and
Zambia, all of which received well over US$500 million a year.
Tanzania was the leading recipient of official assistance during
the period with more than US$1 billion a year.
"During the 1990s, aid to Africa became more focused on poor
countries with reasonable policies, and as a result it became more
effective in reducing poverty, but this message did not get through
to OECD electorates," says Paul Collier, Research Director for the
World Bank's Development Economics department, and co-author of the
upcoming book 'Aid and Reform in Africa: A Report from Ten
Countries.' "OECD governments were cutting aid budgets to Africa
during precisely the period when it started to work really well.
Millions of Africans are in poverty today partly because of these
cuts, which occurred at a time of unprecedented OECD prosperity."
Social indicators - poverty and ill-health persist but girls'
education and literacy improve
African Development Indicators show clearly where the region's
greatest social challenges and opportunities lie. Indeed, Africa's
future economic growth will depend less on exploiting its natural
resources, which are being depleted and are subject to long-run
price declines, and more on its labor skills and its ability to
accelerate a demographic transition.
Poverty
According to the latest data, some 300 million Africans live on
barely 65 cents a day. The average GNP per capita for the region is
US$492, but in 24 countries GNP per capita is under US$350, with
the lowest incomes found in Ethiopia (US$100), the Democratic
Republic of Congo (US$110), Burundi (US$120), and Sierra Leone
(US$130).
The new report shows that overall Africa's demographic transition
remains slow. Fertility has started to decline, particularly in
countries with higher incomes and better access to contraception.
Still, some countries in the region have the highest fertility
rates in the world (Niger, 7.3; Somalia, 7.2; Angola and Burkina
Faso 6.7). Even though the age dependency ratio has changed little,
the percentage of the population aged 0-14 has fallen slowly during
the past two decades.
Growing urbanization, and the rapid exodus of rural Africans to the
continent's cities, has given Africa the largest rate of urban
population growth in the developing world. Moreover, on current
trends, the continent's urban population is expected to outnumber
the number of people living in rural areas by 2025. In countries
like Nigeria, Kenya and Tanzania, there are now twice as many
people living in urban centers today than 20 years ago; in
Mozambique, the percentage has almost tripled during the same
period.
Health
Child mortality is a particularly acute problem for many countries
in Africa. Infant mortality is close to 10 percent, and on average
151 of every 1,000 children die before the age of 5, although in
many countries the mortality rate exceeds 200 per 1,000. The region
has had the smallest improvement in under-5 mortality since 1970,
and some countries - including Kenya, Zambia, Mozambique and Cote
d'Ivoire - saw infant mortality increase in the 1990s. This
compares with 53 in East Asia and 9 in high-income countries. Even
allowing for Africa's low incomes, its under-5 mortality rates are
exceptionally high.
Although life expectancy has risen slightly in Africa, this is
happening at a slower rate than elsewhere and, since 1990 the
HIV/AIDS epidemic has caused it to decline, especially in countries
with high adult infection rates. In Zimbabwe, for example, life
expectancy has fallen by five years, while in Botswana, it has
fallen by over ten. Today in 21 African countries more than 7
percent of adults live with HIV/AIDS, with the highest absolute
number of cases found in South Africa, where one in every five
adults has contracted the virus. Countries like Niger, Sudan, and
Mauritania, which have some of the lowest incidence of AIDS in the
region, offer great potential for control.
Education
The new report shows that Africa has made more progress in
education than in health with literacy rates improving for both men
and women. At 41 percent, the illiteracy rate in the region is
still high compared to rest of the world, but it is at its lowest
point ever. Of particular significance is the advance being made in
girls' education, with the percentage of illiterate women slowly
declining from 66 percent in 1985 to 49 percent in 1998. While this
represents welcome progress, far more needs to be done.
Although girls' enrollments continue to lag behind boys, primary
school enrollment has increased slightly for women and the
enrollment ratio of females in secondary school has more than
doubled in the last two decades. This means that a greater number
of African girls than ever before are attending primary and
secondary schools.
Report offers new database system for African states
In a development that its authors hope will greatly help African
countries improve the quality of their own statistical reporting,
the data tables in the African Development Indicators were produced
by an advanced World Bank information system called 'the 2nd
generation Live Data Base' or 2gLDB, which the Bank offers
ministries of finance, central banks, national statistical offices
and other institutions in developing countries to help produce
accurate and timely reports and publications.
The World Bank recently approved a grant to transfer the system to
six Southern African countries (Mozambique, Botswana, South Africa,
Lesotho, Tanzania, and Zambia) to strengthen their statistical
reporting capabilities. The 2gLDB system will provide economists,
decision-makers, and general business users in these developing
countries with access to the latest information. Using technology
in this way can help reduce poverty.
"The quality of development data depends on the source. Our goal is
to empower statistical offices in Africa, and help them to move
from hand-written National Account tables to a modern system that
is easy to adopt, maintain, and capable of delivering quality
data," says Ziad Badr, the team leader of African Development
Indicators 2001, and a senior World Bank economist in its Africa
region. "This will bring statistical institutions in Africa into
the new millennium, and provide a reliable system to measure
development progress and identify remaining challenges."
Despite debt relief, Cameroon faces a new trap
Jubilee Plus, 2 February 2001
http://www.jubilee200uk.org/news/cameroon050201.html
(includes statistical tables not available in this posting)
The Paris Club of bilateral debtors cancelled $874 million of
Cameroon's debts at a meeting on 24 January. This is only 16 per
cent of Cameroon's bilateral debt and it does not end Cameroon's
debt crisis. The country will still pay more this year in debt
service than for health and education combined, and will need to
borrow money even to deal with its AIDS epidemic.
Cameroon reached "decision point" in October 2000, when the IMF and
World Bank agreed a programme by which creditors will cancel $2
billion of Cameroon's $7.8 billion debt. The reduction is real -
debt service in 1998 was $533 million. After HIPC, debt service
will fall to $312 mn this year (2000/2001). In addition, the Paris
Club has "rescheduled" some of the repayments due next year and the
year after - this money must still be repaid, but repayment is
deferred.
Thus debt service will fall to $226 mn next year. But this is very
temporary. Cameroon will be forced to borrow more than $300 mn per
year, according to World Bank estimates, and debt service will
rise to $328 million in 2004/5. In effect, each year Cameroon will
borrow about the same amount it must repay that year, and each year
it will sink deeper in debt.
On 11 January, the World Bank announced a new $50 mn loan to
Cameroon as part of its HIV/AIDS programme. The Ministry of Health
estimates the number of person who are living with HIV as 937,000.
One out of nine sexually active Cameroonians is infected with the
HIV virus. Because Cameroon is paying so much in debt service
payments to the World Bank and other creditors, it is being forced
o borrow yet more money the deal with the AIDS crisis.
"The HIPC Initiative is insufficient and very weak. It will not
reduce poverty in a context where debt has reached an unprecedented
level despite 12-years of structural adjustment programmes. This
result is also very far from the objectives announced by the G7 in
Cologne," said Georgine Kengne Djeutane of Cameroon's Jubilee 2000
movement and the Ecumenical Service for Peace. "Once more, the IMF
and the World Bank are relentlessly avoiding the real problems,
trying to divert us and implementing their unjust policy of
exploitation."
According to the World Bank's own data, Cameroon spends about $210
million per year on education and $80 million per year on health.
This is less than the $312 million it will spend this year on debt
service. Aid grants (that is, money the government can actually
use) in 1998 were $278 mn, according to the World Bank. That means
all of the aid to Cameroon immediately goes out again to repay
debts, so Cameroon must borrow more for health and education. This
leads to a new debt trap.
Yet even the World Bank admits that the health and education
systems are collapsing. The Bank's "Cameroon Country Assistance
Strategy Progress Report" of November 21, 2000 says there has been
"little progress" in reducing poverty and, "in particular both the
coverage and the quality of the education and health systems remain
poor. Cameroon has significantly lower life expectancy, primary
school enrollment ratios, and access to safe water than the average
low income country . Education quality and enrollment rates have
deteriorated to such an extent that the decline is virtually unique
for a country that has not experienced civil war or other severe
social conflict. After coming close to universal primary education
in the late 1980s, enrollment rates have fallen to only 65 percent
of the relevant age group in primary education and to less than 50
percent in secondary education. . Similarly, sharp cuts in
government spending in the health sector and the decline in
household incomes led to reductions in the accessibility, quality,
and utilization of health services. A 1998 demographic and health
survey found that the chronic malnutrition (stunting) rate of
children increased from 23 percent in 1991 to 29 percent in 1998."
Nevertheless, the World Bank and IMF say that Cameroon can spend
more on debt service than on health and education - and borrow more
money to deal with HIV/AIDS.
Cameroon may receive some additional debt cancellation. The two
largest creditors are France ($2 bn before the Paris club cancelled
16 per cent of bilateral debt) and Germany ($1.4 bn). During the
21st French Africa summit on 17-19 January, France announce the
"immediate and total cancellation" of the commercial debt dealt
with by the Paris Club. This covered 19 countries, including
Cameroon. So far there has been no formal action on this
announcement.
Indeed, in the Paris Club debt cancellation was calculated without
taking into account any possible French cancellation. This works to
the advantage of the Cameroon, because it means that if France
actually does give the promised cancellation, it will be in
addition to maximum HIPC debt relief. If France and Germany did
cancel their debts, it would made a significant difference, saving
Cameroon more than $100 million a year in debt service payments.
But it seems hard to argue that Cameroon can afford to pay any debt
service. Clearly, the entire debt should just be cancelled.
The "other" Paris Club countries, all with debts less than $100 mn,
are Finland, Japan, Netherlands, Switzerland, and the United
States. The non-Paris Club creditors are China, Kuwait and Saudi
Arabia.
Of the bilateral debt, $1.3 billion is post-cut-off date (that is,
after 13 December 1988), meaning it is not dealt with under HIPC,
$0.9 bn is aid (ODA) debt which should already have been cancelled
under promises made by the G7, and $3.3 mn is pre-cut- off
commercial debt on which Cameroon has defaulted and which has been
nationalised by creditor country governments.
Two key reports are available on the World Bank website:
HIPC Decision point document, 15 Sept 2000
http://www.worldbank.org/hipc/country-cases/country-cases.html
Report No.: 21072, CAMEROON Country Assistance Strategy Progress
Report, November 21, 2000
http://www.worldbank.org/html/pic/cas/caslist1.htm
This article by Michela Telatin and Joseph Hanlon,
Jubilee Plus,
2 February 2001.
This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC provides
accessible information and analysis in order to promote U.S.
and international policies toward Africa that advance economic,
political and social justice and the full spectrum of human
rights.
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