Trade, Aid, Subsidies and Development in Africa

1. Trade, Aid, Subsidies and Development in Africa By Thompson Ayodele Institute of Public Policy Analysis Nigeria www.ippanigeria.org info@ippanigeria.org

2. Development in Africa • What makes a country poor? • How does a country move from poverty to prosperity? • Is prosperity a miracle? • Does foreign aid work? • Does trade work? • Is aid more important than trade in achieving development and economic growth?

3. Is aid free? • Rudolfo (1998) says: “Aid as a simple philanthropic does not exist, there is always some interests, although this does not seem to be explicit.” • The interests could be either economic or political

4. Political Interests • Most of the French government aid was channeled to Francophone African countries. • In 1990 alone, Francophone countries received 61 % of France’s total development assistance. • Britain’s aid policies are similar to that of France, focusing mainly on its Anglophone countries. • Most of Belgium foreign aid is channeled to its former colonies, Rwanda, Burundi and DRC. • The primary motives for granting aid by former colonial power are largely to influence the political and economic policies of their former colonies and to bring them in line with their own interests, and not necessarily to assist them.

5. Economic Interests • In 1997, over 50% of the $26 billion in global overseas development assistance by the E.U member states were tied to goods and services from donor companies • In 1996, more than 25% of aid from OECD countries was given in form of Technical Cooperation/Assistance

6. Foreign Aid in Africa • Sub-Sahara Africa alone received total aid of some $83 billion between 1980 and 1988 • Standard of living fell by 1.2% a year during this period • During the 1965 – 1984 period, 18 African countries had growth rates of less than 1% per annum. • The worst performers were Benin, Burkina Faso, Chad, Ghana, Mozambique, Liberia, Somalia, Sudan, Uganda and Zaire

7. Relief to Uganda and Mozambique was negligible, reducing debt service from $166 million to $149 million and $113million to $110 million respectively. • By 1998, Mozambique already with $6 billion debt found itself repaying more than $100 million a year in debt service. • The actual relief amounted to little more than $10 million a year, leaving it to use 20% of its earnings into debt repayment.

8. To partake of the “national cake” which in most cases is aid from the wealthy countries. African countries experienced:

9. Between 1981 and 1996, nearly half of the countries in Africa experienced violent conflict between government and opposition groups. • In 1999, an estimated 4 million people had lost their lives as a direct result of political violence. Another 3 million became refugees. • During the 1980s, at least 92 successful or unsuccessful military takeovers were recorded, affecting 29 African countries. Seven Africans heads of state lost their lives whilst in office in the 1980s and 1990s

10. President Yoweri Museveni of Uganda once said: "The biggest request we are making of Western countries is to open their markets . . . Debt relief has saved us some money, but the real money will come from trade. Give us the opportunities, and we will compete."

11. Percentage of Labour Force in Agriculture • Angola: 85% • Burundi: 93% • Cameroon: 70% • Eriteria: 80% • Ethiopia: 80% • Gabon: 60% • Ghana: 60% • Guinea: 80% • Kenya: 75%-80%

12. Lesotho: 86% • Liberia: 70% • Malawi: 86% • Namibia: 47% • Niger: 90% • Nigeria: 54% • Rwanda: 90% • Senegal: 60%

13. South Africa: 30% • Sudan: 80% • Tanzania: 90% • Togo: 65% • Uganda: 82% • Zambia: 85% • Zimbabawe: 66%

14. Between 60 % and 80% of the export of countries such as Benin, Burkina Faso, Burundi, Chad, Malawi, Mali, Rwanda, Sudan, Tanzania, Uganda and Zimbabwe are affected by the domestic support granted by WTO members

15. Market Access: WTO Ministers’ Position • The Trade Ministers in Doha in 2001 agreed to “substantial improvement in market access, reduction of with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.”

16. Rich countries spend $1 billion a day to support their farmers. • In 1997, support and protection to farmers in OECD countries was $280 billion. • In 2002, the same OECD countries transferred $318 billion in support and protection to agriculture. • The E.U alone subsidies to its farmers is $86.6 billion annually.

17. Phasing out subsidies and protection in high-income countries could attract new investment and lead to increases in annual income in developing countries up to $150 billion and $400 billion.

18. The U.S. and European subsidies drained an additional 10% from little the income Malian cotton farmers managed to bring in 2002. • West and Central Africa account for a 15% share of world cotton exports; second after the US. • In 1999, cotton represented 43.9 % of exported goods in Burkina Faso, 39.1% in Benin, 32.2% in Chad, and 29.5% in Mali.

19. According to the International Cotton Advisory Committee, the average price per pound of cotton was $0.92 cents, but subsidy represented $0.82 cents - amounting to 87 % of the international market. • Direct support to 14 cotton producers rose from $3.8 billion in 2000/01 to $5 billion in 2001/02.

20. When a farmer in the EU produces a ton of butter, under CAP farmers receive about $3,800. • The wholesale price of a ton of butter in America is less than $1,400. • CAP places a 153 percent tariff on foreign-produced butter • CAP tariffs of 140 percent keep foreign sugar out of the EU market • That explains why European dairy production far outstrips European demand.

21. According to Institute of Economic Affairs, London, agriculture policies in the EU has depressed milk products by more than 90 percent • livestock by nearly 70 percent • meat by almost 60 percent • non-grain crops by 50 percent and • grains by more than 40 percent.