In 1975 , 1% of the total area had 30% of population. .Africans are good workers but their ability is seriously limited by disease and climate .Despite the abundance of rain in some areas, three fifths of Africa is semi-arid and almost half of the Republic of South Africa . Its greatly productivity has been due to the religious concern of the early settlers, the Boers. The Kalahari Desert, has an abundance of underground water Many parts of the world have untapped resources which men for various reasons do not use. Chalcedon Report No 379 Feb 97 Ec June 14th 97 Subsaharan africa grew by 4.4% last year faster than for 3 decades. Tariffs often a vital source of income Growth rate study: diffences explained -1.3% by life expectancy, -2.1% by policy variables, -0.2 natural resources, -0.3% landlocked, tropic -0.2, World economic growth was 5% in 60s, 3.6% in 70s,2.1% from 78-87, 3% 87-92 and 4.4% 92-96 Competitive advantage is not really in agriculture: disease,poor soil ,unreliable rainfall 90% of the 1 mil Malarial deaths per year are in Mexico south of the sahara Explosion of infrastructure projects Still a lot of red tape and difficult enforcing property rights EEC dumps food in Africa - destroying the market Overall : Botswana, Cameroon, Congo, Gabon, Kenya seen growth since independence
281- 647 people 1960 to 1990
Health care only 1% of GDP
Africa GDP only 1% of world GDP ( may only be sub sahara)
Prevalence of wars
African farmer produces only 600kg of cereal versus 80,000 kg per worker in US
Egypt, Morocco : inflation down, budget defecits down to 1 and 3% GDP
Tunisia : 40% Unemployed , still limits foreign ownership of firms to 49%
Free market reforms may mean allowing food prices to rise in the cities ( best to do this very gradually )
Tutsis in Burundi seized power in a coo in 1996 July ( Hutu militia still a problem)
Slaughter of 800,000 Tutsis in Rwanda caused takeover by the Tutsis.
The governing tutsis are in a minority in both countries
% of population living on less than $1 per day Guinea 80 Zambia 80 Niger 60 India 60 Kenya 50 ____________________________________________________________- Angola, means the bloodiest phase of a bloody 18-year civil war production of oil, far the biggest export, has continued by and large unimpeded. But the rest ofthe economy, from diamonds to agriculture, is on its knees.The government's writ runs only in a third of the country.
Jan29TH,994
Angola : inflation at 2800% in 97 KENYA Loan cut off from IMF in mid97 to force government to deal with corruption UGANDA Growing at 8% pa since 1992 Zambia Tropical Climate is modified by altitude- 18-24 aver temp, land locked Removal of subsidy on refined maize meal raised the price by 120% 1985 (Kaunda) - violent rioting, reintroduced lots of strikes for higher pay, April 97 forced to cancel 70% increase in fuel prices. Supporters of democracy organised in 1990. Chiluba was chairman of Zambian Congress of Trade Unions Economic decline, widespread corruption, Chiluba is Bemba tribe, traditionalists are Nsenga. President and National Assembly elected simultaneosly every five years.27 member house of chiefs. GDP/ head is $350, GDP $3,206m - population is 8 million. , inceasing but per head decreasing Agriculture is 32%gdp( 67% of workers) ind 37.4%, cobalt, zinc,lead, also coal , gold, emeralds, amethysts, limestone, selenium, , reserves of phosphates,fluorspar and iron ore, manuf is 22% (smelting and refining copper, vehicle assembly, petrol refining, food canning, fertiliser, explosives, textiles, bottles, batteries, bricks and copper wires) Self sufficient in hydro electric power Zambia's public debt is US $6,573 of which $4,858 is long term public debt. In 1985-93 average annual rate of inflation was 101.9%. pa.,less now. Late 1987 deemed inelligible for credit due to debt arrears. IMF, world bank emphasiesed the decentralisation of social services, reorg of civil service , transfer of parastatals to private sector.In Dec 1995 became elligible for credit again. Dept of Labour and Social Sevices- care of aged, protection of children, gives grants for group welfare schemes including voluntary schemes. In October 1990 free medical care in hospitals was abolished, health is 7.4% of govt budget in 1988, social security 1.5% 81% of primary school age children go to school (comp) and 16% of secondary aged ones, literacy 27% (m 19 , f 34). Education 8.7% of budget. Taxation 1988: K5,142 (steep rise), public order is 5% , educ 8%, health 7%, soc sec 1.5%, gen public service 33%, Economic service 25% (17% forrestry, agricultural) Money supply is 22 million, 13 million on deposit and 9 mil in cash.(1991) Office of the president : POB 30208, Lusaka tel 1 218282 telex 42240 Fredrick J T Chiluba , VP Brig Gen Godfrey Miyanda Tax: total K 5142 Income and profits: 1957 (40%) Domestic taxes on goods and services 1901(40%) of which Sales Taxes 1208 (25%) Excise 667 (15%) Taxes on imports 800 (20%) (taxes on property negli) Total roads of 37000 km , 6000 tarred ( 1994) Zambia has privatized most recently 145 state owned companies form cement mixer to dry cleaners Now has no exchange controls Still 3 days wait for clearance at the border Legal rights over property troublesome Very few flights Zimbabwe: -3% GDP in 1995, 6% in 1996 bad rains/ good rains IMF : government finance statistics yearbook Problems in Africa : productive farmers can't get produce to market because not enough roads (guarantee not to compete on roads) : crime :protection of private property World Bank: Adjustment in Africa Flexible Exchange rates: Bur, Gamb,Ghana, Guinea, Kenya, Madag, Mala, Moz, Mauritamia, Nigeria, rwanda, Sierra Leone, Tanzania, Uganda, Zambia, Zimb Fixed: benin, burk ,Camer, CAR, Chad, Congo, Cote I, Gabon,mali, Niger , senegal, Togo More than $650 pa : cameroon , congo, gabon,senegal, zimb(not oil),cote I (not oil) Countries still tax their farmers through marketing boards and too high exchange rates though 13 have withdrawn from marketing. The poor haven't lost from reforms especially as producers and many of the lay offs found new jobs in rural areas. Removal of costly fertiliser subsidies have not resulted in less fertiliser use. Public borrowing makes capital scarce for private sector Health and education misallocated into costly tertiary projects (should rely on priv funding for secondary and college says world bank) and to primary health care and nutrition not hospitals ( curative) Domestic deregulation a priority Growth rates 1965-85 : east asia 5% ,north africa 3.1, latin 2.4 ,south asia 1.5, midlle east 1.1, ssa .9 Agricultural growth at 2% grew by less than other parts of the world (marketing boards) " The main factors behind the decline were poor policies..a development paridigm that gave the state a prominent role" Protectionism reduced the competition vital to productivity, they nationalised & regulated Increase in govt spending to GDP of 10% correlated with 1.2% pa less growth p22 External transfers about 6% of GDP at one point. External shocks had only a very small effect on GDP growth Ghana needs to reduce subsidies for water, electricity and transport Those countries with fixed exchange rates had 3% falls in GDP versus 1.5% pa for flexible, in the first half of the 80s Inflation (10.6%) generally better than latin america. Flexible exchange rate countries have had higher rates of inflation ( no discipline of fixed ). Interest rates of limited value because they are government not market set , since the market in so thin. Mauritania's success: traditional exports not heavily taxed, most production in private hands (state industies only 8.7% GDP), elimination of import quotas, early investment came from local sources No country has complete currency convertibility on its current accounts Imports often need to be licensed- moving towards a negative list where everything allowed that is not forbidden. Zambia 10% in 89 up to 95% in 1992 (excl petroleum and fertiliser) Maximum tariffs down 170 -60 % in Kenya, 270 -100 in Rwanda, In ssa import duties are 20% of tax revenues Nigeria abolished its marketing boards in one fell swoop with good results once the difficulties were resolve Zambia has increased taxation on agriculture (imp and explcit) , Ghana has decreased greatly Countries still with price controls: Burk Faso, Cameroon, Cote Diviore, Kenya, Madaga, Moz ( but proportion of GDP controlled still dropped extensively -70-10 in the later) Closing refineries would greatly help most countries Labor market restrictions need liberalised -Mali has before 1987 Senegal had a government monopoly on hiring and recruiting for all cos Government authorisation no longer needed for layoffs in Senegal and Mali Monopolies ended: rice import in 2/3rds of countries that had them. 1/3rd for grain,11 of 27 on export monopolies, 50% on petrol distribution, telecoms still a public monopoly almost everywhere Public Sector Governments took on things private markets were doing well like allocating foreign exchange and directing credit. The paradigm was that governments could speed growth by intervention and this has failed everywhere 15 of the countries have over 75 public enterprises, some countries over 10% gdp , huge subsidies and performance contracts havent worked (with a few exeptions) ( the countries have totally sold or liquidated 550 companies mostly SMEs , about 1/5th of the number) Most countries extremely slow to privatise, some increased state sector (not many) eg Burundi where the subsidy to SOEs is 19% of govt spending, same in Ghana When governments allowed staged payments they were sometimes bought by speculators unable to run it Many banks have been recapitalised ( lot of bad debt), at the cost of 1% of GDP up to 15% in Senegal and 40% in Tanzania.. Even the privatised banks didnt do well p117 Public sector has a stake in most banks Tax to GDP ratio ranged from 6 to 20% , spending to GDP 20-25% Almost all countries had declining terms of trade but some increased growth anyway Policy is statistically far more significant than external factors on growth Flexible exchange rate countries did better: fixed have had flagging exports Poverty increased in the 80s due to lack of income growth ( or even decline) rather than because of greater inequality. Most gains in poverty comes from growth rather than redistribution p165 Most of the poor live in rural areas (99% in Malawi)- especially since food prices kept artificially low Poor urban consumers in Madagascar did loose from removal of subsidies but they benefited from other reforms. Although adjustment hasn't decreased government spending , the previous crisis did. Governments feared decreases in the civil service would lead to civil unrest but this didn't materialise Severance pay was often invested in new business projects Health spending has increased by about 5% and education decreased by about the same in the 80s African % of Gdp spend on educ at 3.7% same as for Asean but amounts a lot less of course. Health spend about 1.2% average of GDP 20% spend on higher education ( high compares to ASEAN 10% ish ) Asean spent on primary education and let the market look after tertiary 90% of primary budget is salaries, 70% of the health budget (much of this non primary) Recommendations For Macroeconomic stability countries should maintain realistic exchange rates, keeping budget defecits and inflation low and "increasing public sector savings" For agric growth: liberalise, abolish marketing boards to lower taxation on farmers Trade: more automatic allocation of foreign exchange, lower tariffs and non tariff bariers Theres been little if any progress in reforming public enterprise, financial institutions,- alternatives to privatisation - hard budget constraints , more autonomy, etc seldom work. Additionally the nationalised cos are taking valuable public funds and valuable bank borrowing. Privatising banks, encouraging new entrants etc are promising Increasing competition through deregulation has worked well everywhere While markets do not work perfectly it is not clear that government intervention is ever better .