The Africa economy competitiveness

The African competitive economy

Actualization of the theoretical competitiveness framework

And elements of a strategy for its application in African conditions

 

Contribution to the debate by Djilali Benamarane, Economist

International Forum for African economies competitiveness

Dakar, March 1999

 

1… Recall of some fundamentals of the concept

Since the beginning of the modern economy with the succession of The Thought Schools, from the Mercantilist to the Monetary Neoclassic School, the Competitiveness concept found its legitimacy in the International Trade Theories. Two important dogma constitute the corner stone of these theories: the "comparative advantage" and the "depreciation of the exchange terms".

A priori, it seems impossible to meet theoretical or practical difficulties to define and to measure the productiveness, which gives an indication between a product or a service and necessary factors to its production. The productivity of a product, a service, a firm, a sector or a national economy defines the relation between the obtained wealth and the cost of its production factors. It means that the productiveness will be higher when the production factors are more and more low. Among these factors are cost of labor or production means (equipment, installations, raw materials, energy, services, etc…), or external factors.

The competitiveness, which is the instrument to compare the productiveness at the national or international level, is well described in many studies. One of them defines the relation between the international trade and competitiveness as following: "the trade balance covering rate is an excellent performing indicator to measure the economical health of a country…. Any trade deficit is a syndrome….

Such description, even if it is not totally complete, remains operational to explain causes of the lack of competitiveness in economies in general and in those of developing countries in particular.

Researches in how to reduce production factors' cost have been specially concentrated on labor factors. In this field, productivity objective growth depends on technical production conditions (technological level used, scientific work organization, rational resources management), as well as on workers' social and psychological labor conditions (work environment, professional training, workers' adhesion to the objectives of their firm, workers' mobilization practices, etc….).

Difficulties appear when the concept is applied as a criteria to compare sectors with different technological levels or national economies with different development levels. In this case, the problems related to performance analysis, which are significant only when they address countries with similar production structures and relative price systems. Unfortunately, that is not the case when the comparison concerns developed and underdeveloped countries.

So, it is possible to consider that to be pertinent, the comparison between national economies must only concern economies with the same production structures and the same relative price systems. Then, appears the imperative to revisit the theory of the comparative advantage, which constitutes the base of international exchange theories since the contributions of free exchange authors. It is necessary to recall that when David Ricardo in the beginning of the XIXs Century illustrated his law of the comparative advantage and the benefit of the economic specialization, referred to the exchange of English cloth with Portuguese wine. Bearing in mind reference to the natural and/or the constructed resource allowance, the difference between the two economies was certainly less important than the actual difference between a space travel proposed by The American NASA and the travel proposed by an informal camel driver enterprise in the North Nigerien area in the Aïr.

Considering voluntary practices allowance of an economy with constructed production factors, even the multinational firms which create and promote sophisticated technologies, when they invest in highly profitable sectors in underdeveloped countries, they often face the trend of the deterioration of the exchange terms. This is in contradiction with the comparative advantage concept.

The relation between prices of raw materials and agricultural products and those of industrial and services products give the advantage to the last ones. The international labor division draws underdeveloped countries into export activities of raw materials and agricultural products, which force them to remain in import activities of industrial and services products, with a high technology component and added value. The historical trend shows the poor economies becoming poorer and the rich ones becoming richer.

Today, under the double effects of the aggravation of the abyss which separates developed and underdeveloped countries and the globalization process of the world economy, the international exchanges nature is changing. Explaining theories of optimal condition of economic growth and social progress in a same Global Village need a great adaptation effort, a real renewal to take into account the effect of the reconstruction of the global system of production and worth share.

II… The competitiveness of the African continent supposes a harmonious ensemble in which constituency parts complete and reinforce each other.

The present situation gives an excellent example of creative conditions in building the European ensemble with a continental dimension. The construction process has been a progressive and difficult one, with many efforts to get a real economical convergence, especially during the period of the Euro currency promotion as the principal instrument in the harmonious process to built a sound European space.

Today, Africa is more diversified than ever before. The chauvinist nationalism inherited from the colonial period has been worsen by aggressive practices founded on ethnical, religious or regional differences. The lack of concerted strategy on social project and that of credible, performing and selfless leaders, African human resources have been oriented to useless religious, regional and cultural disputes in spite of development battles. The African integration, strongly supported half a century ago, during the independence access process, is in a great delayed process. In this field, divergent signs are more present than convergent ones.

Today, Africa is more fragile than ever before, facing wars and disputes. The continent is destabilized by conflicts from its North to South and from East to West. In the North, over a decade, Algeria is confronted by a quasi civil war, opposing extremist to tolerant and republican Muslims. In the South, South Africa winner of a historical anti apartheid war is facing a double challenge of the national reconciliation and the difficult succession of President Mandela. From the East to the West, open or latent conflicts oppose populations, or States in Sierra Leone, Senegal, Guinea Bissau, Occidental Sahara, Chad, Congo, Democratic Congo, Somalia, Sudan, Burundi, Angola, Ethiopia, Eritrea, …etc. This last years, the trend is so dangerous that it will be in the future more easy to refer to African countries with populations which live in peace and concord.

Today, Africa is more dependent than ever before, handicapped by an insufficient and inadequate international aid with a significant burden which often impede economic growth efforts made by underdeveloped countries. After four decades practices, the international aid has demonstrated its inefficiency as supported countries are today in a worsen dependent situation. Unfortunately, the international aid is considered by donors as well as by beneficiary countries as an obligation or intervention sustainable duty which aims more to contribute to poverty alleviation programmes than to support economic growth and self reliant social development. Institutions and countries' donors use the international aid as an instrument to keep aid demanding governments under pressure and to judge them accordingly to their good governance respect. Poor countries use the international aid inefficiency as a proof that development is a complex process even project and programmes proposed, funded and monitored by development partners are unable to change the situation and to help the economy take-off in underdeveloped countries. In many aided countries, the result of recommended and funded privatization programmes is a regress of industrialization base and experience obtained by African countries during the 1960s and 1970s. It is a fact that between 1960 and 1980 many African countries built a difficult and expensive industrial experience, thanks to the public sector and it was the only feasible way in the historical post colonial context. In that period, the manpower has been promoted from its rural statute to a modern and productive one. During the post independence public economy, rural workers learned how to work together, in modern public enterprises instead of individual, informal and other slavery forms of production. In recommending and supporting programmes related to the shortage of manpower among civil servants, donors made the African administration less performing, unable to monitor any economic growth policy, powerless in promoting a real policy dialogue with partners. This situation has to be addressed and institutions must be rebuilt in the future, even if it needs important financial means. Civil servants have been dismissed without any consideration to maintain a minimal capacity for the administration to ensure its basic missions. In the future when it will be possible to recruit national employees it will be necessary to pay international expertise expensively to teach them how to proceed. In recommending, supporting, funding, monitoring and assessing democratization aid programmes, donors promote situation of electorate behavior which exacerbate ethnic and regional conflicts giving advantage to short term policy related to electoral needs in spite of long term policy aiming sustainable development.

III. Plea for the African exception in the current global process

14. The competitiveness is not a technical operation independent of the political, economical and social context where it is applied. When reference is made to that colonial period, not so long ago, just some decades before, nobody pleaded for international competitiveness in regard to colonial economies where production, transportation and exchange were made in respect of the only metropolitan preoccupations. When Communism was ruling in the Soviet Union, regarding the pacific coexistence real policy, it was normal to consider two worlds with two systems and two-competitiveness calculation basis. Presently, developed and underdeveloped countries are in so different situations, due to this, isn't time to consider during a defined period the need to accept an African exception in the current global process, just to give to the continent the necessary time to address its delay ?

3.1. Addressing the unacceptable insufficiency of Africa in the leading global system institutions. And operating a process of integration and insertion of Africa, in an ensemble European and African as one of the three fundamentals of the global system in construction. In the Security Council as well as in the Bretton Woods institutions or in the World Trade Organization, Africa is under and/or badly represented. The current events give a good illustration with the International Olympic Council (IOC) where it shows the extreme fragility of African representatives, designated, co-opted and sacrificed with a shameful effects on the whole Continent. There are thousands of examples of African designated representatives selected more on pressure than on consultation basis. Often, the choice is made without any reference to their capacity to apply if any, a previous concerted programme. Despite its present insignificant economical weight, Africa must consider its representatives in the Security Council as one of its first priority. Hoping that it is not too late, African leaders have to anticipate the debate and to decide on basic rules to select their representatives to these institutions before it will be made under pressures. In a global approach based on three constituencies, in the ensemble Africa, Europe and the Middle East, Africa has more chance to get one on two representatives in the Security Council. As an illustrative example in a reconstructed Security Council with eighteen members six for North, Central and South American Continent, six for Asian countries and six for Europe, Africa and the Middle East, who can contest the legitimacy for Africa to have one or two representatives?

3.2. Addressing the total absence of African concern in the internalization and growing concentration of financial, production and service firms, including international institutions in charge with monitoring and exchange regulation. At the end of this century, the on going global process is supported by an extraordinary multinational firm's concentration phenomena. These huge firms implement fusion, absorption and integration strategies giving them dominant situations in the current period of international economy deregulation. This process is affecting all sectors such as those of aeronautic, chemical and petrochemical, air, sea and road transportation, bank and insurance, and even new technology of information and communication. Annually, this phenomena costs many billions of American dollars.

The phenomena are leading real economic structure changes in the on going global system process. The state weights are diminishing in the profit of the multinational firms, which have incomes higher than each of all those countries, including developed ones. Africa needs to promote a strategy to ensure its presence in some of these international operators, which are concentrating more and more on the reality of the economic, social and political global power.

This approach could be considered as utopia regarding the incapacity of African countries to maintain their presence and their authority in a very few number of small international firms like Air Afrique or African Development Bank. It is of the greatest importance that African Governments safeguard their multinational firms even if they are not necessarily competitive but only as a pedagogical instrument to learn about the feasibility of how to manage such institutions. For historical conditions, at the independence moment, African countries had not sufficient human and financial capacities to create and manage together public or private multinational firms. The only possibility was to create and manage slowly and with difficulties national public enterprises, which unfortunately had been disturbed by the Stabilization, and Structural Adjustment Programmes promoted by Bretton Woods Institutions.

Public enterprises, with all the proved insufficiencies when functioning in Africa constitute a fright only in poor and depending countries, as it has been underlined by the French Economic, Financial and Industrial Minister in his speech "In a changing world, principles which lead our actions are clear :

Facing the necessity to have at disposal such type of firms and enterprises playing sometimes an engine role in the economic process, Africa must plead for a transitory phase to have the time for States and private African operators investing, creating and managing multinational African firms, able to operate in Africa and in the world which is the famous "Global Village" to which they seem to belong.

3.3. Addressing the viability of Structure Stabilization and Adjustment Programmes regarding their mitigated performance in the new global context. It is difficult today to contest the fact that Structure Stabilization and Adjustment Programmes implemented since the end of the 1970s without significant results. In many African countries, these Programmes aimed at rapidly correct the bad effects of two decades of central planning practices experimented in the post colonization period. The central planning experimental period as method of a self reliant national economic building, tried to improve the colonial inherited system destruction showing its inefficiency and had been replaced by SSAPs, which at the beginning had to address the situation as a short time management instrument of one or two triennial programmes, just the necessary time to achieve the destruction of any sign of the native planned basis. After more than twenty years of an unsuccessful improvement, perhaps it is now time to promote an independent assessment of the SSAPs effects and to propose new approach and instrument to address the specific African situation. Isn't it time to require the Economic Security Council creation with a special mandate to evaluate the gravity and the cost of the Bretton Woods's advice and programmes and to propose correcting measures ?

3.4. Addressing the need to correct the improvement conditions of democratization and good governance processes applied in Africa in a rapid and inadequate manner, which is not correlated to long term and sustainable development strategies. Under pressure from their partners in development, many African countries with a vital need of aid to ensure their population surviving try to do their best in a way of democratization and good governance hurdle race. The aid is given to countries which made as rapidly as possible the best and the most. These last ten years, in a global thought context where all economies are oriented and monitored into the Ultra Liberalism options, political parties born in great numbers, unfortunately are often based on ethnic, regional and religious basis. Sometimes, political parties are created or/and supported on other basis such as the preferences of partners in development. In less than a decade, with the democratization and good governance mode, some African countries have experimented successively the military dictatorship, the parliamentary government, the political alternate and different forms of pacific, suspicious or aggressive political cohabitation rules. Sometimes, the process end with the return to the military dictatorship which should be replaced, at the donors requirement, by another range of democratic political practices, with a consequent need of expensive elections, aggravating the dependency of poor countries without means.

In conclusion:

Today it is difficult to contest that Africa is economical, political and cultural dependent on donors, its partners in development who have the reality of the strategic choices. These choices seem to maintain Africa in its dependent and great poverty situation as related specially in UNDP Human Development Reports where African countries are always ranged at the end of the world classification regarding to their human development indicator rank. All efforts to reach aimed objectives to make Africa benefit from the new international labor division failed. Today, the current global system in construction is managed in such a way that Africa is obliged to respect the specialization and the world labor division rules. Unfortunately, this confines Africa in sectors and activities where the continent is in the short term useful for North dominant economies and for the multinational firms' needs. In principle, the continent is required to draw its efforts into sectors, which should constitute the basis of sustainable development. It is the truth regarding investments made with the support of partners in development, in sectors like population, gender, environment, education and/or health sectors. It is not so sure when it concerns economic growth basis. Concerning education, under partners pressure, priority has been given to the only primary education sector, as if Africa does not need secondary, technical, professional, academic education or scientific research. In such situation how will Africa be able to master an assessment capacity to plan, manage, monitor and evaluate its development? How can this continent reach an acceptable level to bargain in good conditions with its development partners? The sector priorities remain agricultural production, animal husbandry, fishing, environmental safeguard initiatives, all activities led by informal sector, grassroots associations, individual entrepreneurs and bazaar economy. For basic economic social needs and services like water supply, electricity or telephone and telecommunications, banking and insurance, international firms are invited to be in charge of these activities in respect of privatization policy. The multinational firms are also available to manage if necessary useful and profitable, modern export activities especially in raw goods production.

Final questions : Is it realistic to debate on productiveness and competitiveness of each African country or isn't it imperative to consider that it is preferable to debate on the competitiveness of the continent as a whole and to encourage in priority actions for the economic integration before considering the other aspects of the globalization process? Is it realistic to debate on the productiveness and the competitiveness at the sector or the firm level? Isn't preferable to do it at the continental level to give to African operators, leaders, entrepreneurs and consumers to refer in their daily decisions and actions to the continental level? Is it realistic to consider the individual or the enterprise level researching productivity and competitiveness progress? Isn't preferable to have an economic and social continental vision accordingly to the extreme necessity to built rapidly an African field of reference as a primary base to bargain in the global reference!

Final answers : The 21st Century economies will be certainly supported by the scientific research progress, Science is today more than ever the corner stone of the power relations, thanks to the new technologies of information and communications in all human economic, social and cultural activities. It is time for Africa to promote itself in these new opportunities where it has some possibilities even if they do not constitute classical comparative advantages (movies production, art, fashion, sport, tourism, antiquities, etc…).

Version of 4 February 1999.