Southern Africa customs union unlikely by 2010 - South Africa

High inflation and budget deficits in southern Africa are likely to block any effort to form a customs union in the region by 2010, South African Finance Minister Trevor Manuel has said.

The 14 members of the Southern African Development Community (SADC), which includes economic powerhouse South Africa as well as recession-ravaged Zimbabwe, have been discussing the idea of developing a customs union since 1999.

"But I don't know how you get there if you have countries that have quadruple-digit inflation or immeasurable fiscal deficits," Manuel said in a presentation to a South African parliamentary committee in Cape Town."My submission ... would be that we won't get there by 2010," Manuel said, while adding that SADC should not abandon the idea of liberalising trade and moving closer toward monetary and economic integration.

Although a number of SADC members, most notably Angola and Zambia, have managed to tame high inflation and reduce budget deficits, others remain far off the basic macroeconomic targets needed to achieve a free trade zone and customs union.

Reducing inflation to single digits and keeping the ratio of debt to GDP to 5 percent or less by 2008 were among the key targets cited by SADC. Manuel said South Africa would have no problem meeting these criteria.

While inflation has fallen dramatically throughout much of the region, deficits remain stubbornly high in Mozambique and a handful of other countries, casting a shadow over the prospect of closer regional economic ties.

An economic meltdown in Zimbabwe, which is struggling with inflation of more than 7,000 percent, has added to doubts, especially in South Africa, that a customs union could be achieved in the near future.

Reuters

Aid doesn't work

by Arvind Subramanian*

When celebrities such as Angelina Jolie or Bono appear on screen both to highlight human tragedy and to show that something can be done to alleviate it, the heart melts and the purse strings loosen.

But the stars, alas, aren’t up on the economic literature. Research is increasingly questioning the benefits of foreign aid. For a long time, aid-giving was a mission in search of empirical validation. Persistent underdevelopment in aid-receiving countries fostered doubts about whether the do-good impulse was doing permanent good.

Validation seemed to arrive in the research of two World Bank researchers, Craig Burnside and David Dollar. They purported to show in the late 1990s that aid helped boost long run economic growth. It did so not everywhere and all the time, but only where recipient countries followed good policies and had reasonable institutional environments for these policies to be effective.

Governments, nongovernmental organizations, donors, the press and civil society embraced this work with the hungry enthusiasm of the long-deprived. The research had the great virtues of plausibility and expediency. A finding that aid is unconditionally good would have strained credulity. And by linking aid effectiveness to policies, the research gave intellectual justification
to donors’ practice of imposing “conditionality” on recipient governments. Tough love had found its intellectual savior.

Unfortunately, the Burnside-Dollar findings did not hold up to further scrutiny, counter intuitive as that finding may be. Aid, after all, simply expands resources available to countries to build schools, hospitals and roads, and to pay teachers. These investments in human capital and infrastructure surely boost growth and improve living standards, the thinking went, even if there is some wastage of resources along the way through corruption or mismanagement.

As researchers pored over the data, however, it became increasingly difficult to maintain that there was any systematic relationship in which aid was good for long run economic growth. The problem is that development and long-run growth are less about resources than about the environment for generating and sustaining private sector investment. Two key aspects of this environment are decent public institutions or governance—the essential “software” for running a market economy, for creating rule of law and protecting property rights—and incentives that encourage the private sector to export, especially manufactured products.

Aid, especially in large amounts, can damage governance and make an economy uncompetitive. Like natural resource revenues, it is manna from heaven for governments. When governments receive large oil revenues or aid, they have less incentive to be accountable to their citizens, and governance suffers. In theory, donors impose an alternate form of accountability. In practice, donors’ motivations are sometimes a mixture of the murky (think of the U.S. and Pakistan post 9/11 or the West and Zaire’s Mobutu several decades ago) and the mindless (in 2000-02, the Tanzanian government reportedly had to write a few thousand reports to donors every quarter). Even where motivations are honorable, recipients have infinite ways of circumventing donor conditions.

Aid can also have adverse effects on an economy’s competitiveness. When foreign resources come pouring in and are spent domestically, wages tend to rise, especially for those in scarce supply such as managers, supervisors and entrepreneurs. Factories that export will find themselves becoming uncompetitive and go out of business. We find that in countries that received more aid, exportable industries systematically underperformed. And exporting manufactured goods has been the mode of escape from underdevelopment in many of the East
Asian successes.

Is it a coincidence that, with rare exceptions (Mauritius), there are no booming clothing industries—the launching pad for some of the East Asian miracles—in aid-addled Africa? This despite the fact that clothing is only minimally demanding of infrastructure and entrepreneurship, and despite the very favorable access that Africa has always had in Western markets for exports of clothing products.

The new research findings have provoked genuine soul-searching among aid practitioners on the need to do things differently. But a new line on aid, expressed most recently by the New York Times’s Nicholas Kristof, goes something like this: So what if aid cannot do permanent good? The question is, can it do some good? Or, even if aid cannot promote livelihoods, can it save lives? If it can, aid for a set of well defined objectives, such as improving health and education, should continue to flow, and even increase substantially.

There is ample evidence that foreign assistance helps fight disease in poor countries, documented most vividly in the Center for Global Development’s “Millions Saved: Proven Successes in Global Health.” So, why not do more of the same?

Because the fact that aid can save lives does not mean that aid might not have some of the adverse long-run effects relating to damaging governance and making the economy uncompetitive. Better health could be accompanied by slower growth, and hence reduced prospects for long-run prosperity. Even if the trade-off is worth making, it needs to be acknowledged.

Aid advocates evade this by thinking and acting as if the long-run problems caused by aid can be fixed independently. That rarely happens. Aid advocacy leads to perhaps an even more serious problem. There is a limited stock of goodwill and good intentions in the rich world and the question becomes whether this stock is best harnessed by mobilizing more aid or by pursuing alternative actions that could have a bigger impact.

Consider a few: mobilizing more money to provide incentives for greater research and development devoted to addressing poor country health and agriculture problems (the green revolution in Asia was made possible by research on high-yielding varieties of wheat, and Africa has not had a similar revolution of its own); making regulatory changes in industrial countries that can reduce corruption (for example, more rigorous enforcement of bribery and corruption by rich country officials and corporations) in poor countries, which could have a huge impact on economic performance; or allowing more immigration from the poorest countries which would have the virtue of directly benefiting the poor.

These solutions are seldom pursued with the zeal that they deserve, in part because they are more difficult to support politically, and because that zeal which is essential to overcome the difficulties gets diverted toward, well, calling for more aid. Giving aid is like looking for the lost key under the lamp post because that is the easiest thing to do. But it is not obviously the most effective way that outsiders can help.

When Ms. Jolie appears on the screen calling for more aid, she not only distracts our attention toward her obviously good looks, she may also be distracting our attention away from the search for more effective solutions to helping the poorest around the world.

*Mr. Subramanian is a senior fellow at the Center for Global Development

Wall Street Journal

African Countries Stand Up to EU on EPAs

Concern over getting too little in return for what they are being asked to give up has led some African nations to say "no" to some proposals for new trade relations with Europe next year.

Several Eastern and Southern African nations have announced that they will only sign parts of the Economic Partnership Agreements (EPAs) that relate to market access and development. The EPAs have been put forth as successor to the Cotonou Agreement, which expires at the end of December.

The Cotonou Agreement gives 77 African, Caribbean and Pacific (ACP) countries preferential access to European Union (EU) markets. Signed in Benin capital Cotonou in June 2000, the agreement replaced the 25 year-old Lomé Convention. The Cotonou Agreement was broader in sweep than its predecessor, and set as its objectives "poverty eradication, sustainable development and the gradual integration of the ACP countries into the world economy."

At a regional negotiation forum Aug. 3 to 5 in Port Louis, Mauritius, 16 Common Market for Eastern and Southern Africa (COMESA) countries agreed a strategy to be presented at their next negotiating round in September. The 16 COMESA nations, represented by no less than five separate overlapping and occasionally competing economic groups, have little choice but to sign on to the market aspects of the new pact in order to maintain preferential access to EU markets and remain compatible with World Trade Organisation (WTO) access rules.

At present ACP members enjoy non-reciprocal trade benefits with the EU, such as access to EU markets which EU nations do not enjoy with ACP countries, but these benefits are incompatible with WTO standards. New trade terms are being renegotiated through creation of WTO-compliant Economic Partnership Agreements (EPAs) that are scheduled to enter into force by the end of 2007. But EPA negotiations have proved difficult, with some countries fearing that their economies will not be able to withstand competition from European goods for years to come.

At a meeting in Brussels in February this year, COMESA negotiators said that potential loss to revenue for many African states across the continent heavily dependant on tariffs could require the EU to provide an additional 2 billion euros in assistance by 2010 if they were to allow Europeans free access. The COMESA members also want the EU to commit more funds to development in exchange for lowering trade duties.

"What Africa lacks is a market for its goods, and there are many barriers amidst which our goods are produced and sold to the EU," says Tiberius Barasa, assistant research fellow at the governance and development programme at the Institute of Policy Analysis and Research (IPAR) in Nairobi, Kenya.

The EU has been accused by some food and trade policy analysts in the developing world of applying "zero tolerance" policies on food import that they say have more to do with protecting Europe's heavily subsidised agricultural and fishing industries than with public safety.

Another mistake, some observers in Africa say, is an insistence on the part of Brussels to make South Africa the standard for assessing the capacity of the whole continent to withstand loss of revenue foreseen through the EPAs.

"This appears to be a fundamental clash of paradigms, and it's very difficult to see how we're going to overcome that," says Brendan Vickers, senior researcher on multilateral trade at South Africa's Institute for Global Dialogue. "The (European) Commission just isn't seeing the bigger picture, and there's a failure to understand that it's not just the South African market, it's the markets of other less developed countries."

South Africa, which has natural resources and a highly developed business and communications infrastructure, maintained per capita gross domestic product of 13,300 dollars last year, despite unemployment that still hovers around 25 percent. The Bureau for Economic Research in South Africa reported this month that South Africa's GDP growth holds steady at 5 percent.

By contrast, Mozambique maintained a GDP per capita of just 1,500 dollars over the same period. In Kenya it was 1,200 dollars, and in Tanzania 800 dollars.

Despite offer of a transitional period for lowering trade barriers, there are fears that any agreement that does not address issues such as production and supply within each individual economy could do more harm than good to bilateral trade.

"If you look at national impact studies that have been made, you find that these reciprocal free trade agreements are going to be devastating for industrial capacity, for tariff revenues," says Vickers. "There's a need for far greater development cooperation to address these issues."

IPS

Chinese firms invest US$480 million in Africa in first half of 2007

Direct investment by Chinese companies in Africa totaled US$480 million in the first half of 2007, the deputy trade minister, Wei Jianguo said August 28 in Beijing.

The figure for the first half of 2007 exceeded that of all of 2006, a year in which Chinese companies invested US$370 million in Africa.

According to the ministry, trade between China and Africa totaled US$32 billion in this year's first half, a year on year rise of 25 percent.

China has become Africa’s third largest trading partner, with trade increasing at an annual rate of 30 percent since 2000.

Macauhub

If China fails to deliver us from poverty, there's always India

by Charles Onyango-Obbo

There are many waves of change that sweep across the world that, when they finally reach Africa’s shores, have spent all their fury and turn into fads that don’t result in any significant improvements, and sometimes leave us worse off.

Take the democratisation tide of the late 1980s and early 1990s; in many African countries, they forced regimes to adopt multi-party politics, but little changed because ruling parties and incumbents took to stealing elections even more. The result is that in the past 20 years, only two sitting African presidents have lost an election.

Then came privatisation. In many countries, all it produced was a bonanza of bribe-taking by privatisation officials, and the transfer of public assets into the hands of politicians, generals, their relatives and friends.

Not all is lost, though. These movements created some spaces and nooks in which committed reformists and entrepreneurs could operate, while keeping a wary eye on predatory governments.

The latest big thing is China. China is reordering the global economy. In the West, unions are up in arms, angry that too many jobs are being exported to China (and India). Nationalists in the old global powers are worried their countries are become insignificant in the world. Environmentalists are denouncing China for its polluting ways. And businesses are griping that China’s economic boom is gobbling up so much of the world’s raw materials, they aren’t sure there will be anything left for them at prices they can afford.

This is where Africa comes in with its vast natural resources, because China seems to be a better trading and business partner for governments. It will lend money without imposing irritating Western-style conditions. It won’t demand that a government release political prisoners first or stop corruption before signing a multibillion-dollar trade deal.

The Western media and World Bank have been warning Africa that this approach is disastrous. How can you lend money without insisting that the borrower take steps that will enable him to pay it back? What good is a trade deal, if a government isn’t taking steps to ensure that it can continue supplying you with oil or timber? This approach will encourage delinquent behaviour that will harm not only Africa in the long run, but also the global economy.

To Africa, the issue is clear. The West is jealous and is being a bad loser. After years of treating Africa badly, they are now angry that China has showed them up and is grabbing their once-captive markets on the continent.

However, just as the old Western-dominated economic order failed to lift Africa out of poverty, so will China fail. Today, the reasons why Africa continues to do badly, in large part, have to do mostly with internal conditions.

Is the flexibility that doing business with China offers resulting in major economic improvements on the ground? Hardly. In the oil-rich countries, corrupt leaders are still pocketing the revenues from oil deals with China. Officials are taking bribes from Chinese logging companies, and turning a blind eye as they wipe out huge chunks of forests.

China, meanwhile, is booming. In the past few years, exploiting access to new markets and resources from, among others, Africa, it has pulled nearly 400 million of its people out of poverty. Continent-wide, meanwhile, about an equal number of Africans have slipped into poverty!

If things don’t improve in Africa, even China will leave us with huge holes in the ground, land polluted by oil spills, and wastelands where once lush forests stood. We shall be vilifying it the way we do the West today, and waiting for a “better deal” from a new, better global economic power – India.

*Charles Onyango-Obbo is Nation Media Group’s managing editor for convergence and new products


The East African

Chinese influx into Africa elicits mixed reactions

By official estimates, 750,000 Chinese are working and residing in Africa, reflecting Beijing’s deepening ties in the continent. But their participation in petty trade is fuelling resentment.

When Yang Jie left home at 18, he was doing what people from China’s hardscrabble Fujian Province have done for generations: emigrating in search of a better living overseas. What set him apart was his destination. Instead of the traditional adopted homelands like the US and Europe, he chose Malawi.

“Before I left China,” said Yang, now 25, “I thought Africa was all one big desert.” So he figured that ice cream would be in high demand, and with money pooled from relatives and friends, he created his own factory at the edge of Lilongwe, Malawi’s capital. The climate is in fact subtropical, but that has not stopped his ice cream company from becoming the country’s biggest.

Stories like this have become legion across Africa in the past five years or so, as hundreds of thousands of Chinese have discovered the continent. The Xinhua News Agency recently estimated that at least 750,000 Chinese were working or living for extended periods on the continent, a reflection of deepening economic ties between China and Africa.

Even when Yang arrived in Malawi in 2001, he said, he could go weeks without encountering another traveller from his homeland. Now an increasingly large community of Chinese migrants has taken root, and now runs everything from small factories to health care clinics and trading companies.

Today, in many of the countries where the new Chinese emigrants have settled, like Chad, Chinese-owned pharmacies, massage parlours and restaurants serving a variety of regional Chinese cuisines can be found; the Western presence, once dominant, has steadily dwindled, and essentially consists nowadays of relief experts working international agencies or oil workers, living behind high walls in heavily guarded enclaves.

At first, this new Chinese exodus was driven largely by word of mouth, as pioneers like Yang relayed news back home of abundant opportunities in a part of the world where many economies lie undeveloped or in ruins. Conditions like these often deter Western investors, but for many Chinese entrepreneurs, Africa’s emerging economies are inviting precisely because they seem small and accessible. Competition is often weak or nonexistent, and for African customers, the low price of many Chinese goods and services make them more affordable than their Western counterparts.

You Xianwen sold his pipe-laying business in Chengdu, in southwest China, this year to move to Addis Ababa, Ethiopia’s capital, to join a startup company with a Chinese partner he had met only online. His new business, ABC Bioenergy, builds devices that generate combustible gas from ordinary refuse, providing what You said would be an affordable alternative source of energy in a country where electricity supplies are erratic and prices high.

This Chinese activity reflects an intense appetite for African oil and mineral resources needed to fuel China’s manufacturing sector, but big Chinese companies have quickly become formidable competitors in other sectors as well, particularly for big-ticket public works contracts. China is building major new railroad lines in Nigeria and Angola, large dams in Sudan, airports in several countries and new roads, it seems, almost everywhere.

Africans view the influx of Chinese with a mix of anticipation and dread. Business leaders in Chad, a central African nation with deepening oil ties to China, are bracing for what they suspect will be an army of Chinese workers and investors. “We expect a large influx of at least 40,000 Chinese in the coming years,” said Renaud Dinguemnaial, director of Chad’s Chamber of Commerce. “This massive arrival could be a plus for the economy, but we are also worried. When they arrive, will they bring their own workers, stay in their own houses, send all their money home?”

In Zambia, where anti-Chinese sentiment has been building for several years, merchants at the central market in Lusaka, the capital, said that if Chinese people wanted to come to Africa, they should come as investors, building factories, not as petty traders who compete for already scarce customers for bottom-dollar items like flip-flops and T-shirts. “The Chinese claim to come here as investors, but they are trading just like us,” said Dorothy Mainga, who sells knockoff Puma sneakers and Harley Davidson T-shirts in the Kamwala Market in Lusaka. “They are selling the same things we are selling at cheap prices. We pay duty and tax, but they use their connections to avoid paying tax.”

Although Chinese oil workers have been kidnapped in Nigeria and killed in Ethiopia, the growing Chinese presence around the continent has produced few serious incidents. Misunderstandings are common, however, and resentments inevitably arise. Africans in many countries complain that Chinese workers occupy jobs that locals are either qualified for or could be easily trained to do. “We are happy to have the Chinese here,” said Dennis Phiri, 21, a Malawian university student who is studying to become an engineer. “The problem with the Chinese companies is that they reserve all the good jobs for their own people. Africans are only hired in menial roles.”

Another frequent criticism is that the Chinese are clannish, sticking among themselves day and night.


NYTimes

Free trade is a prison; book review

Title: From the Slave Trade to ‘Free’ Trade: How Trade Undermines Democracy and Justice in Africa
Editors: Patrick Burnett and Firoze Manji
Publisher: Fahamu
Year: 2007
Pages: 170

Reviewer: Philip Ngujiri

A new book on the lessons learnt from The Slave trade and how its “successor,” free trade is undermining democracy and justice in Africa has just been published.

Can trade in the era of globalisation be just? This is the principle question the book tries to answer in insightful, sharp and thoughtful articles by writers from across the African continent.

The articles were designed to raise awareness on issues of trade and justice. Topics range from the absence of women’s voices at global level negotiations to the decimation of a country’s health system as a result of World Bank policies or the sacrificing of community rights in the interests of multinational corporations.

The book begins by looking back at 2005 — the Year of Action for Africa on Debt, Aid and Trade — and what it achieved. This first section considers the role of foreign investment in Africa and the impact of the global financial and trading regime on communities. Why is China so keen to invest in Africa? Why do global trade policies determine the health care available to millions of Kenyans? Why is South African industry getting cheaper electricity than poor consumers?

The next section's articles profile the damaging effect of trade policies on the rights of informal traders, who in Africa are often women, how global trade policies have resulted in the feminisation of poverty and how it is the women who have to step in when the state cuts back on health and social services.

The final section deals with agriculture and the environment. Why does the oil trade wreak havoc in the Niger Delta? Why are local communities excluded from development projects driven by multinational companies? Why is it that cotton farmers in West Africa suffer because of a grossly unfair subsidy racket? Why are international trade rules more important than a population’s right to food security?

The editors say they have chosen a deliberately provocative subtitle for this book: ‘How trade undermines democracy and justice in Africa.” In the global trading system, justice and the interests of ordinary working people often take a back seat to trade policies dictated by global powers; countries and even entire continents like Africa frequently appear to be on the losing end of the equation.

It is in this context that 2005 saw calls for “trade justice,” defined as a commitment to lobbying for the introduction and implementation of trade rules that work for all people, instead of benefiting those who already have the most.

Campaigners for trade justice argued that existing trade rules were damaging to many people, especially the poor and vulnerable, the environment and social policies. They maintained that the global trading system should be re-balanced, taking into account the needs of the poor, human rights, and the environment. The mobilisation for fair or just trade during the period received few, if any, concessions, although it was noted that the issues were at least given a higher profile in the minds of many.

The trade in African slaves was just the beginning of a major transformation of the nature of trade, leading to an accumulation of capital that fuelled not only the industrial revolution in Europe, but also provided the impetus to the imperial scramble for territory worldwide.

The world market as we know it today has long been conquered, controlled and dominated by metropolitan capital. This was not achieved by economic means alone, but also — and primarily — by the use of brute force. The metropolitan countries imposed unequal treaties, demolished existing manufacturing industries, enslaved, robbed, seized by tricks, exploited and carried out wholesale colonisation.

Once the conquest of the world market had been achieved and the North had ensured its domination, the dogma of “free trade” was imposed on a worldwide scale. The industrial revolution led to massive over production and the voracious appetite to conquer the world and seize its markets. The more recent revolutions in micro- and biotechnology have also led, in their own way, to an era of conquest of world markets through a massive restructuring of economies — which was what the period of structural adjustment programmes and poverty reduction strategy papers was all about.

And it is no surprise that “free trade” is once again the banner of the neo-liberals and neo-conservatives. This new voracious surge is what is currently referred to as “globalisation.” It is what has led to the rich getting richer and the poor poorer. It is what has condemned us to be consumers, not citizens, and commercially degraded every aspect of our lives.

And since only a minority have the capacity to consume, the vast majority of Africa’s people are effectively disenfranchised.

And it was precisely the imposition of the neo-liberal economic policies that led to the enforced opening of Africa’s economies to the free movement of capital — the so-called liberalisation of the market. And once the markets were opened up, one should hardly be surprised that capital in all its forms should seek opportunities in Africa.

The penetration of Asian capital — including China, India, Malaysia — as well as from Latin America that we have witnessed recently was only possible once the international financial institutions had been victorious in opening African economies to “free trade.” As Arundhati Roy writes, there is a notion gaining credence that the free market breaks down national barriers, and that corporate globalisation’s ultimate destination is a hippie paradise. But “what the free market undermines is not national sovereignty, but democracy.”

Multinational corporations on the prowl for sweetheart deals that yield enormous profits cannot push through those deals and administer those projects in developing countries without the active connivance of state machinery — the police, the courts, sometimes even the army. Trade in the era of globalisation is neither “free” nor “just.” Behind the arrangements of the world trade system lies the ever present threat of force. As Thomas Friedman put it: “The hidden hand of the market will never work without a hidden fist.

McDonald’s cannot flourish without McDonnell Douglas ... And the hidden fist that keeps the world safe for Silicon Valley’s technologies to flourish is called the US Army, Air Force, Navy, and Marine Corps.”

Taken together, these articles provide an insight into how ill-considered trade policies have a profoundly negative impact on the rights of communities.

Whether it is the absence of women’s voices at global trade negotiations, the decimation of countries’ health systems as a result of international trade policies or the sacrificing of community rights in the interests of multinational corporations, it is clear that trade policies impose a “profit first and people last” regime in Africa.

The East African

African civic call for three year suspension of EPA negotiations

Civil society groups in Africa have called for the suspension of the Economic Partnership Agreements (EPAs) negotiations between the European Union (EU) and the 77 African, Caribbean and Pacific (ACP) countries for at least three years to allow African governments to critically look through other regional initiatives they are already engaged in.

They have also called for unconditional debt cancellation for Africa and for the EU countries to increase development aid to 0.7 per cent of their GNP. They made these demands during a meeting in Lusaka, Zambia, that coincided with a Southern Africa Development Community (SADC) Heads of State meeting.

During the meeting, various representatives of the groups resolved to remain opposed to the current policy frameworks that continue to undermine socio-economic development in Africa and to work towards "the repositioning of Africa as an independent key global player and not as a junior partner of Europe."

They also expressed feelings that Africa should be allowed "to consolidate its own regional integration before being forced to open up to free trade areas with Europe and other economic blocs." Further, they want an increase in the access of goods and services from Africa in the EU, the removal of non-tariff barriers and that the EU commits resources to support national food security and land reform programmes in African countries.

The EU's subdivision of the ACP nations into six negotiating blocks has not gone well with critics. For instance, African civil society groups have expressed concern that the division of African countries into regional negotiating blocks not only undermined their integration, but also threatens the ability of governments to "defend the livelihoods of their citizens."

On its part, Oxfam International says this had reduced Africa's negotiating power. It also decries the fact that the negotiations were being conducted in an unequal environment in which the 25 EU countries have a combined GDP of $13,300 billion, while among the ACP countries are 39 of the world's 50 least developed countries. It avers the fact the West African region is more than 80 times smaller than the EU in terms of GDP. "Given these vast inequalities, it is not hard to see where the power lies."

"Why agree to equal game rules when you know the stronger team is already rigged to win?" asks a statement Oxfam released to the media.

The civil society movement is also concerned that the agreements will be signed in four months, yet few Africans neither know what they are all about nor how they will affect them. "In December, African governments will head to Lisbon, Portugal, to sign up to a new partnership with European Union governments. Yet, very few Africans know about this important upcoming event, which will have serious ramifications for generations to come."

On their part, African governments have expressed mixed reactions to signing the EPAs. For instance, the Kenya government early this year showed a willingness to sign the agreement with the Trade and Industry ministry, faxing a statement to newsrooms that expressed fears of losing the lucrative EU market unless the EPAs are on course by the end of 2007.

Kenya's warming up to the EPAs had taken many by surprise, especially because of a hardline anti-EPAs stance taken by Trade minister Mukhisa Kituyi in June 2005. He quipped then, "To make poverty history, we will also have to make EPAs history."

But the Government had a change of heart early this year when it said that it needed to continue tapping into the lucrative EU market for its horticultural products. To Kenya, this was necessary to secure over one million jobs and investments worth more than US$700 million (Sh50 billion) in the sector. EU is Kenya's significant trading partner, which contributes 26 percent of its exports and 35 percent of its imports.

Maintaining access to the EU market is also critical to Kenya because its competitors - Morocco, Ethiopia, Tanzania, Uganda and Zambia- are already guaranteed duty free market access by the EU under the Everything-but-arms agreement.

This positive inclination to EPAs has gone hand-in-hand with a demand made earlier by an African trade ministers meeting in Addis Ababa, Ethiopia, that asked the EU to "show flexibility and to positively and adequately respond to key concerns of Africa." They had also asked the EU to provide additional resources to develop infrastructure as well as Africa's ability to raise production and to compete effectively in the market.

What worries pundits most is that African economies have limited capacity for being flexible and might not know how to respond once cheap goods from the EU flood their markets. Critics say that the economic costs of implementing the EPAs are likely to be very high, yet there is no guarantee that the promised benefits will ever reach Africa, and particularly the average African.

While signing the EPA might have its own merits, the trickiest part is that it is not so obvious how African countries might end up loosing. Analysts attribute this partly to the subtle 'coating' the EU has been using to the entire scheme.

"Behind the herd of acronyms, obscure economic jargon and polite euphemism lies a pernicious programme that threatens to subjugate economies of ACP countries to the needs of European capital," says a report published early in the year in Africa News, an authoritative weekly online newsletter.

allafrica.com

South Africa should restructure for competition, not opt for protectionism

By Peter Draper and Phil Alves

At the beginning of September last year, South Africa’s Minister for Trade and Industry, Mandise Mphalwa, announced that the government would impose quotas on imports from China covering some 200 items of clothing until the end of 2008.

Deputy President Phumzile Mlambo-Ngcuka reportedly said that clothing retailers who circumvented quotas by importing from other countries would be regarded as engaging in “treason,” and their actions would be “a slap in the face for the poor and the unemployed.” She was endorsing the view of trade unions and the majority of South Africans that the government needed to step in and limit the flood of cheap Chinese imports.

How can we be genuinely competitive and efficient if we continue losing thousands of jobs, suffer 40 per cent unemployment and have nearly half the population living in poverty?

Tito Mboweni, the Governor of the South African Reserve Bank and former labour minister under whose watch South Africa’s modern — some say rigid — labour laws were introduced, said in comments to parliament’s finance committee that the clothing and textiles sector “did not have a dog’s chance in hell” of being competitive.

There are signs of deep rifts over the future of South Africa’s economic policy. But how should South Africa cope with China’s economic emergence?

Based on current trends, China will overtake the US as the world’s largest economy before the middle of this century, if not earlier. This transformation is occurring at a breathtaking pace and is likely to continue at the same pace for the next decade or two. Hence a new centre of global economic growth has emerged to supplement the traditional triad economies: The US, EU and Japan.

This is good news for the global economy. This transformation is concentrated in assembly-based, export-oriented manufacturing, within which multinational corporations locate low-wage, labour-intensive processes along China’s seaboard. These “foreign funded” enterprises account for approximately two- thirds of China’s exports, most of which are destined for the US, European, and Asian markets. Collectively, this constitutes a giant interconnected production system into which Africa and Latin America are incorporated principally as suppliers of raw materials. This process constitutes a secular transformation of the global economy and production systems, sweeping aside cosseted manufacturing producers elsewhere.

China's export boom has been accompanied by price declines in labour-intensive sectors such as clothing, which have underpinned China’s exchange rate, widely regarded as undervalued against the US dollar and other floating currencies like the South African Rand. Besides, large sectors of the Chinese economy are still state-owned and financed; in these sectors, investment is inordinately high while productivity levels are rather low. This has created significant excess capacity in a variety of industries which, if released onto global markets, may lead to further global price declines.

Of course, there is much more to the China story than this. Nonetheless, we believe these are the three key features that should determine how South Africa engages with China on a long-term basis.

The first, namely China’s secular transformation, makes a long-term strategic response imperative. The next question is what this response should be.

China’s voracity for resources and its manufacturing export juggernaut collectively constitute the core of South Africa’s dilemma. Doomsayers argue that we are “condemned” to exporting primary products while our manufacturing sector is unfairly hollowed out through ruthless low-cost competition. The concerns are genuine and serious but misplaced.

First, given its small domestic market and location vis-à-vis the major economic centres, South Africa has to trade to survive. Resource exports are our comparative advantage. Yet unlike Australia, Chile and other successful resource exporters, we have not taken sufficient advantage of the global commodity price “supercycle.” Potentially significant export proceeds and the tax revenues from them should be pumped into the economy.

In this respect, the government’s new “Accelerated and Shared Growth Initiative,”which prioritises reducing South Africa’s cost structure mostly through infrastructure provision, is on the right track, but should be far more vigorous. Two key priorities are infrastructure expansion to support the domestic market and facilitate movement of people (bringing transport costs down) and rapid expansion of our ports (both sea and air) accompanied by liberalisation of trade in goods and people (services and skills).

This would encourage a host of new entrepreneurial activities while boosting productivity levels — two keys to our future prosperity.

Second, the government should provide generic support to the manufacturing industry to counter the Chinese challenge, but not through protection. Current protection levels are generally low, and building a “Great Wall” around manufacturing would only encourage illegal imports and criminal syndicates, boosting a crime wave, increasing anti-China sentiment and ultimately, worsening bilateral relations with China. Besides, South Africa’s labour-intensive sectors are already shielded by high tariffs, with those on clothing ranging between 40 and 45 per cent. However, with WTO negotiations underway and an expanding free trade agenda, these tariffs are under pressure.

So, serious dislocation of our labour-intensive industries is underway or just around the corner. Restructuring is imperative but will be painful. COSATU (trade union umbrella body), the SA Communist Party and their allies on the left have targeted this liberalisation pressure as the primary scapegoat for South Africa’s indisputably high unemployment rate.

Yet protected firms will not be competitive and thus stagnate compared with more productive competitors. Besides, protection, even if it reached very high levels, would not provide these industries with the wherewithal to kick-start strong, sustained, job-creating growth. South Africa’s tradeable manufacturing sector faces deeper, more fundamental challenges.

Peter Draper and Phil Alves are researchers at the South African Institute of International Affairs

The East African

East African States resolve differences over overlapping EPA engagements with EU

A major dispute between partner states of the East African Community has been averted after the parties agreed that all the five members will now collectively sign one Economic Partnership agreement (EPA) with the European Union when the current Cotonou pact governing trade between the EU and the ACP (Africa, Caribbean and Pacific) countries expires at the end of this year.

The decision to negotiate under one roof was reached at a meeting of permanent secretaries and technocrats for trade and regional co-operation held in Arusha last week, ahead of a crucial meeting of the presidents of the region to be held on Monday (August 20) this week.

Last week’s meeting was held against the background of tensions — between Tanzania and Uganda on the one hand, and Kenya on the other — over the configuration of the bloc under which they will enter into an EPA with the EU.

Over the past six months a perception had grown among government officials in Uganda and Tanzania that Kenya was leaning towards the so-called Eastern and Southern Africa (ESA) group, the configuration of COMESA member states that has been negotiating an EPA with the EU as a single bloc — and to which Tanzania does not belong.

The simmering disagreements came to the surface two weeks ago, when opposition Members of Parliament in Tanzania claimed that Kenya had decided to deal with the EU through the ESA COMESA grouping — with Opposition MP Zitto Kabwe alleging that Kenya’s Trade Ministry had secretly written to COMESA informing them that Kenya would negotiate the new trade agreement with Europe under ESA. A trade expert in his own right, Kabwe has been intimately involved in EPA negotiations on behalf of Tanzania.

Against this backdrop, pundits predicted explosive differences when the regional presidents gather at the summit meeting on Monday, a possibility which has been avoided by the pact hammered out by the permanent secretaries.

Kenya reaffirmed that, like the other partner states of the community, it was bound to sign an EPA under the East African Customs Union as stipulated in the East African Customs Management Act. Nairobi’s plea, however, is that member states of the community must understand that the country is intimately involved with what is going on at the ESA level and should, therefore, be allowed to continue engaging at that level, as long as it does not compromise its commitment to the East African Customs Union. President Mwai Kibaki is the current chair of the COMESA Authority, while Trade Minister Dr Mukhisa Kituyi is chair of the ESA Council of Ministers.

On their part, the Tanzanian delegation said that the country was in full support of an EAC EPA configuration, given that the community already has an operational Customs Union with a complete trade regime. The Ugandan delegation also supported the ECA EPA configuration, as did Rwanda. It was stressed at the meeting that at no time had it been suggested that Burundi, Kenya, Rwanda and Uganda leave COMESA, or that Tanzania leave the SADC EPA configuration.

At the end of it all, the following decisions were made:

First, that the EAC EPA configuration be made open to other countries that are willing and able to comply with the provisions of the East Africa Customs Union.

Second, that the EAC EPA take into account the milestones reached under either ESA and/or SADC EPA in coming up with the new EPA for the East African Customs Unions.

Third, the EAC secretariat immediately open negotiations with the ESA EPA and SADC EPA configurations to agree on areas of joint negotiations.

Fourth, that the European Commission be requested to provide a formal commitment by October this year that there will be no disruptions to trade after December 31.

In a sense, this is first time countries of the region are waking up to the problem of overlapping memberships of regional economic groups. Tanzania pulled out of COMESA in 2000 and joined SADC. Thus, while the rest of the members of the East African Customs Union are members of COMESA, Tanzania is the only country with a Free Trade Area access to SADC.

Compounding the problem is the fact that SADC and COMESA have been negotiating with Europe separately. The so-called ESA negotiating group comprises 16 of COMESA’s 19 member countries — the exceptions being Angola, Egypt and Swaziland. On the other hand, the SADC negotiating group includes 7 of that bloc’s 13 member countries, namely Angola, Mozambique, Tanzania, Swaziland, Lesotho, Botswana and Namibia.

The East African

Seychelles rejoins SADC

The Seychelles have been re-admitted to the Southern African Development Community (SADC), bringing the total number of member states to 15.

New SADC chairperson, Zambian president Levy Mwanawasa, said in Lusaka last night during the post 27th SADC summit media briefing that the heads of State and Government for the grouping decided to re-admit Seychelles.

Mwanawasa said all member States had remitted some funds towards the expected US$18,907,693 SADC budget for the 2007-08 fiscal years. An outstanding balance of US$3,246,947 was still to be received from States, of which US$1,369,190 constituted arrears from the Democratic Republic of Congo (DRC) accumulated over the past two years.

With the exception of DRC whose US$500,000 pledge was yet to be remitted, all SADC member States have remitted their pledges towards the new SADC headquarters totalling US$6,000,000.

"You may wish to know, we have established the SADC HIV/AIDS fund. Towards this fund, a total of US$526,427 has been received from six member States that have remitted their pledges. One was yet to remit its pledge while the remaining seven are still to pledge and remit their contributions," he said.

In line with SADC priorities, Mwanawasa said the summit held a brain-storming session on infrastructure development. "You will agree with me that, as we move closer to deeper regional integration level, suitable infrastructure and services have become an urgent need. We have thus deliberated measures to enhance financing of regional infrastructure to support the Free Trade Area (FTA), Customs Union and common market," he said.

Zambia as chair will be deputised by South Africa, while Tanzania handed over the chairmanship of the organ on politics, defence and security cooperation to Angola, with Swaziland being the deputy.

Times of Zambia

African nations to sign at least parts of EU EPAs by December deadline

The European Union and east African countries thrashing out a new but contentious trade deal will sign parts of it by a December 31 deadline even if all is not ready by then, a Kenyan trade official said in early August. The accord must be in place by the end of this year, when a World Trade Organisation exemption on preferential EU market access for African, Caribbean and Pacific countries expires.

"If we have finished 70 percent of it, we will put that on the table and sign it," said David Nalo, permanent secretary in Kenya's Trade and Industry Ministry. "Whatever is remaining, we will negotiate and engage with the EU on how we deal with parts that are not concluded."

Kenya and 15 other nations in eastern and southern Africa are negotiating the new deal Economic Partnership Agreement (EPA) with the EU as a bloc to protect their fledgling farm sectors and industries.

Nalo said the EU had assured the African nations that trade in agricultural commodities would not be disrupted during a transition period after the deadline lapses. "The most important thing that we must do is to ensure that the transition process is such that we don't disrupt trade," he said.

The EPAs give the countries preferential EU trade access and are intended eventually to lead to full trade liberalisation. They demand poor nations progressively open their markets to European products. The EU is also in talks with five other similar regional groups made up of former colonies of some of its members.

Engineering News

Kenya chooses to negotiate EPA deal outside East African Community ambit

Kenya is opposed to negotiating new trade deals with the EU under the East African Community (EAC) platform to protect itself against possible loss of more than Sh100 billion ($1.5 billion) in trade and investment.

Kenyan trade officials maintain it would be impossible to negotiate conclusive fresh Economic Partnership Agreements (EPAs) with the EU through the EAC bloc within the next four months when the current ones expire, a position that would greatly disrupt its economy.

All EAC member states, except Tanzania, have been negotiating new trade deals with the EU under the Eastern and Southern Africa (ESA) platform that is backed by Africa's largest trade bloc, the Common Market of Eastern and Southern Africa (COMESA). Tanzania's trade negotiations with the EU have been conducted within the fold of the Southern Africa
Development Community (SADC) after it quit COMESA in 2000.

But in a surprise twist, Uganda and Tanzania have teamed up and demanded that all the five member states of the EAC withdraw from the ESA negotiations and instead open up joint talks for new EPAs with the EU in accordance with the community's treaty.

This has not augured well for Kenya, which argues that the December 31 deadline for new deals with the EU would not be attained within four months if fresh talks were opened under EAC. "With only four months to the December 31 deadline, starting a fresh EPA configuration is rather ambitious. Experience in all configurations that are currently negotiating EPAs shows that a minimum of three to six months is required to agree on negotiation mandate, structure and procedure," the Trade and Industry ministry said in an official report on the EAC-EPA options.

According to the ministry, the country stands to loose more than Sh69 billion ($1 billion) in trade with the EU should it fail to land new deals because of competition from other countries. This projected loss is equivalent to 28.4 per cent of Kenya?s total exports last year. Besides, the trade regime between the two would revert to a General System of Preferences (GSP) platform meaning that Kenya, which has been exporting products to the EU at zero duty, will attract duty ranging between 8.5 per cent and 15.7 per cent.

According to trade provisions with the EU, developing countries that fail to land new EPAs on time automatically revert to the GSP scheme unless waivers are granted. Analysts at the trade ministry observed that should the country opt for EAC/EPA talks and fail to reach a deal on time, finding a waiver from the World Trade Organisation (WTO) over the remaining four months would be difficult, a position that would leave trade in jeopardy.

"Tanzania is free to join ESA without necessarily pulling out of SADC. This means that we would only serve notice to ESA that our negotiations would cover our interests as the East Africa Customs Union," explained Mr. Richard Sindiga, who heads the COMESA desk at the Ministry of Trade and Industry.

The official said Kenya was also keen on sticking to the ESA platform because Tanzania, which is classified as a Least Developed Country (LCD), had a privileged position to opt to negotiate for an Everything But Arms (EBA) with the EU. "Tanzania has an option to move to the lesser hectic EBA negotiations being an LDC, a position that cannot be entered into by Kenya, which is
ranked among developing countries, which must have EPAs to trade with the EU," said Sindiga.

In trade circles, EPAs are preferred because they contain provisions for special gestures such as technical assistance schemes for developing nations.

Analysts, however, said it will be interesting how EAC Heads of State handle the matter early next week when they converge in Arusha to avoid jeopardising the spirit of co-operation. Though some say the latest standoff is driven by genuine provisions of the EAC treaty others
believe political undertones and power games could be unfolding behind the scenes.

Business Daily

Egypt to scrap energy subsidies for industry

Egypt is to scrap its gas and electricity subsidies for 'energy-intensive' industries over a period of three years and introduce a new pricing policy. The eradication of subsidies will initially affect 40 firms in sectors such as steel, cement and petrochemicals. The policy will see gas prices rise from around $1.3 per British thermal unit (BTU) to close to $2.7 BTU.

The Egyptian Trade and Industry ministry said the subsidies are largely to blame for the country's budgetary deficits and would be removed and the pricing of key commodities set afresh based on international rates.

"The reduction in subsidies would save the government $2.66 billion over the coming three years," Egyptian Trade and Industry minister Rachid Mohamed Rachid said. The ministry said it will increase the prices within that period "until they reach cost recovery. After the abolition of subsidies, the price of gas and electricity will vary according to a formula linked to cost and world market prices." Prices would then not be allowed to rise more than 15 per cent per year.

The cut, which will apply to 40 companies, will increase efficiency of Egyptian industry and introduce clarity and predictability in energy pricing, the ministry said.

Reuters

Does anybody know Zimbawe's inflation rate?

At the end of July there was a widely publicised report in which Abdoulaye Bio Tchane, director of the IMF’s Africa department said, “If recent monthly trends continue, IMF staff project are that year-on-year inflation could well exceed 100,000 percent by year-end.”

News reports said the official (but un- announced) Zimbabwean year-on-year figure for May “topped 4,500 percent.”

An IRIN news report dated August 16 about the difficulties many Zimbabweans face in South Africa says, “Zimbabwe is suffering its worst recession since independence… inflation has topped 13,000 percent…”

An article dated August 18 in the South African Mail and Guardian said inflation is “well past the 5,000% mark.”

An Associated Press story in the International Herald Tribune of August 18 says, “Independent estimates put real inflation closer to 20,000 percent on goods still available.”

In other words, nobody really knows!

South Africa must resist collectivism to remain economically free

by Temba Nolutshungu

Liberty is the most important human right. People have always migrated from countries under oppressive regimes to countries where they can enjoy freedom.

It is not surprising, therefore, that the freest countries attract the greatest numbers of refugees. In South Africa, we see this unfolding. Freedom gives meaning to human existence; it is what we yearned for under apartheid. We wanted true liberty; not only civil liberty but economic liberty as well.

The abolition of apartheid increased SA’s economic freedom and we moved up the Economic Freedom of the World Report rankings to 37th. After 30 years of an economy that was shrinking, it started growing. This growth was to be expected as the repeal of the initiative-draining, racially biased laws was equivalent to feeding the economy growth hormones.

Suddenly, for everyone, the barriers to advancement had been lifted. The civil liberties were important but it was the increased economic freedom that got the economy moving. A pool of 44-million people could now fill positions that had previously been reserved for 5-million. The sky was the limit for every child born in our free country. Of course we would prosper. How could we not if every person in the country could put her or his talents to the best possible use?

Sadly, it was not to be — our economic freedom rating has started sliding. While the world generally is gaining in economic freedom, SA is saying, “Stop the world, we want to get off!” We hear talk of nationalisation of steel mills and fuel production. Don’t the collectivists know that having public enterprises run businesses is bad for consumers and workers?

Because these state industries are incapable of competing on a level playing field, their political nannies protect them; they prohibit privately owned companies from competing with them and constantly feed them with extra taxpayer cash, even when there is no economic justification for doing so. The result is high prices, poor service, excessive taxes and constant anxiety for workers.

Collectivists say state industries belong to the people but they refuse to hand over the industries to their “owners.” Members of the Free Market Foundation have long contended that giving ownership of the public enterprises to the poorest people in the country would represent real broad-based black economic empowerment. We suggested a “democracy dividend” consisting of shares in the public enterprises, and more recently, transferring ownership of hospitals and clinics to the people that work in them and, where appropriate, to the members of the surrounding communities. Utilising the vast assets accumulated by the pre-democracy governments to remedy past wrongs is surely the best way to carry out empowerment without continuing to harm the economy for decades .

In the 2006 Economic Freedom of the World Report, SA slipped back 16 places to 53rd. Countries that have increased their economic freedom ratings substantially are Cyprus, Latvia, India, Israel, Malta and Poland .

There are two major reasons why South Africans should be concerned that we are slipping down the economic freedom rankings. The first is that all the measures of human welfare show that the citizens of economically freer countries are better off than those in less free countries. Incomes are higher, economic growth is higher, there is less unemployment, life expectancy is greater, infant mortality is lower, there is less corruption and the people have greater political rights. The second is that freer economies attract more investment capital, which is what we need to increase economic growth and improve the incomes of the poorest members of our society.

Collectivist claims that the “working class” is better off in command economies with high levels of government ownership and control of economic activity are wrong; the truth is just the opposite, as the figures clearly show. All anyone has to do is to visit the top 10 free economies — Hong Kong, Singapore, New Zealand, Switzerland, US, Ireland, UK, Canada, Iceland and Luxembourg — to understand why they are more desirable places to live and work in than the bottom 10 countries.

Free economies do not happen by chance. They are the result of the conscious creation of a business environment that is conducive to entrepreneurial activity and that has a minimum of red tape.

The key ingredients of economic freedom are: personal choice, voluntary exchange co-ordinated by markets, freedom to enter and compete in markets, and protection of persons and property from aggression by others.

The most important practical steps the government can take to improve our economic freedom are: reduce government involvement in the economy by disposing of public enterprises; simplify and reduce taxes; stop the excessive increase in the money supply; visibly reduce the crime rate; abolish exchange controls; remove legislative measures that are causing high unemployment; abolish all price controls; further reduce tariff barriers, and increase the ease of doing business by substantially reducing the burden of regulation.

Carrying out these reforms will make SA one of the freest economies in the world. It will also give us one of the highest growth rates. Government is free to choose — wealth creation and peace through increased economic freedom is a simple matter of adopting policies that have proved to be effective wherever they have been implemented.

*Nolutshungu is a director of the Free Market Foundation.

Business Day

China drills for oil in Chad, no strings attached

In January, the Chinese bought the rights to a vast oil exploration zone in a remote rural part of Chad without roads, electricity or telephones, the latest frontier for their thirsty oil industry and increasingly global ambitions. The same is happening in one African country after another. In large oil-exporting countries like Angola and Nigeria, China is building or fixing railroads, and landing giant exploration contracts in Congo and Guinea.

In mineral-rich countries that had been all but abandoned by foreign investors because of unrest and corruption, Chinese companies are reviving output of cobalt and bauxite. China has even become the new mover and shaker in agricultural countries like Ivory Coast, once the crown jewel in France's postcolonial African empire, where Chinese companies are building a new capital, in Yamoussoukro, paid for by Chinese loans.

Surging Chinese interest in this continent has helped bring about what many Africans believe is the most important moment since the end of the cold war, when democracy was spreading in Africa and Western nations spoke of a "peace dividend" that might ease African poverty.

That blush of interest in Africa quickly faded, though, as did several of the new democracies, and Africans and Westerners have regarded each other warily ever since. Westerners complain about chronic corruption and ineffective government, while Africans lament broken promises on aid and a hostile international economic system.

The Chinese have stepped into this picture, coming to struggling countries like Chad with deep pockets, fewer demands on how African governments should behave and an avowed faith in everyone's ability to prosper. China plans to build the country's first oil refinery, lay new roads, provide irrigation and erect a mobile telephone network, for starters.

With such intensive efforts across the continent, China's trade with Africa topped $55 billion in 2006, up from less than $10 million in the 1980s. To achieve this growth, it has bypassed multinational institutions like the World Bank and the International Monetary Fund and flouted many of their lending criteria, including minimum standards of transparency, open bidding for contracts, environmental impact studies and assessments of overall debt and fiscal policies.

In some ways, the new Chinese model of doing business in Africa is a throwback to an earlier era of Western involvement that is now widely seen as disastrous. In that era, borrowing countries typically had to work with companies from the lending nation, limiting competition and giving priority to business over development. Today, China takes things even further, signing long-term deals for rights to natural resources that allow countries otherwise unworthy of credit to repay their debt in oil or mineral output.

"In what manner has Africa progressed, in what sector?" asked the Chadian president, Idriss Déby, referring to decades of close ties to the West. "Whatever the good will of Africa's old partners in its development, it has not progressed at all."

Still, major doubts hang heavily in the air. Will China's hunger for raw materials enable Africa to take off? Or will Beijing's willingness to spend whatever it needs in Africa, without regard to fiscal prudence, democracy, honest business practices and human rights, produce a replay of booms past, enriching local elites but leaving the continent poorer, its environment despoiled and its natural resources depleted?

In 2000, the World Bank agreed to help finance a $4.2 billion, 665-mile pipeline connecting Chad to Cameroon on the condition that oil revenues be used to fight poverty. Chad's revenues quickly outstripped expectations, but have not gone into quelling its immense poverty. Mismanagement and fraud have beset the World Bank plan from the start.

in 2006, Chad ended a relationship with Taiwan and recognized mainland China, and the floodgates opened. China bought the rights to several oil exploration zones in the country from a Canadian company and has gone from bit player to center stage in Chad's affairs, confident that it can wring smart profits from the most inhospitable conditions.

Chinese officials almost invariably describe their relationship with African countries as a win-win ? based on mutual respect, aimed at joint prosperity and free of the overtones of exploitation and paternalism that critics worldwide say have governed much of the West's post colonial relationship with Africa.

To China's new African allies, the notion of "no strings attached" aid is a breath of fresh air. After years of hewing to the latest fads in international development doled out by the World Bank, the International Monetary Fund, Western donors and the United Nations, African governments have grown weary of the strings attached to foreign aid.

To some critics, the no-strings-attached approach is problematic. Kenneth Roth, executive director of Human Rights Watch, said, "Often what is happening is underwriting of repression."

Even with binding arrangements governing the use of oil revenues, Chad's people have largely missed out.

Limassou Saleh, a community organizer in Bongor, said he was deeply skeptical. "Chad is maybe the most corrupt country in the world," he said. "We have a long history of human rights violations, of lack of transparency, of exploitation. China has a reputation for corruption. They are one of the worst human rights abusers. They have no record of transparency. What would we want with a country like that? Only to make our own problems worse?"

"We have very high hopes," said Khalifa Malloum, a regional government official. "If the West does not want to invest in us, let the Chinese come. We welcome them. They don't tell us what to do and they bring development. They are good partners."

abridged from the NYTimes

Africa seen losing out on cotton without Doha deal

The collapse of global trade talks could thwart efforts by poor African countries to curtail cotton subsidies and capitalize on a higher world price for the crop, a global cotton organization said.

Terry Townsend, executive director of the International Cotton Advisory Committee, which groups 44 cotton-producing countries, called the World Trade Organization's talks, known as the Doha round, the "biggest single issue in world cotton markets today."

If a new global trade deal can compel rich nations like the United States, which accounts for 40 percent of world cotton exports, to reduce generous supports for cotton farmers, ICAC expects global prices to climb. Without any such supports, the world price would rise by around 10 percent, ICAC believes.

Either case would be a boon for Chad, Mali, Benin and Burkina Faso, the West African countries that have made the price depressing effects of cotton subsidies a headline issue in the talks and a symbol of poor nations' trade ambitions.

But after five acrimonious years of negotiations, most onlookers are not optimistic a deal can be had soon.

ICAC believes that without a Doha deal, those countries, which already grapple with inferior farm technology and poor trade infrastructure, will remain relegated to their weak trading position.

Africa is the world's fifth largest cotton producer and its second biggest exporter; in West African countries alone, some 11 to 15 million people are dependent on cotton farming. Output from those countries has been declining in recent years, ICAC said, not solely linked to rich country subsidies but also due to a stronger CFA Franc and poor weather.

The United States is not alone in its assistance to cotton farmers with subsidies or import restrictions; China, the European Union and others also support farmers.

Townsend also sees new production technology, competition from chemical fibers, and lower clothing prices as other factors behind a decline for average world cotton prices since the 1990s.

If a Doha failure does frustrate the push from the West African countries, known as the C4, it's uncertain if they would be able to revive their aspirations elsewhere. Townsend is skeptical that a sector-specific agreement outside of the round would gain traction in the United States. "The U.S. industry would go nuclear," he said.

The National Cotton Council, which represents the U.S. industry, has long said it would support some reductions to subsidies but only if they occur in step with changes for other U.S. crops and in line with concessions from trading partners.

U.S. cotton subsidies are also under scrutiny in a high-profile WTO challenge from Brazil, which successfully argued that U.S. supports violate world trade rules. The WTO is expected to issue a final ruling later this year on whether the United States has done enough to comply with the ruling.

Reuters

COMESA to ease trade for hawkers

Small scale traders may soon be able to do business across the COMESA region if new policies are adopted by member states. A meeting of representatives from the various member countries meeting in Kenya was expected to endorse proposals that could see an increase in cross border trade, and a drastic reduction in smuggling of goods across borders.

COMESA Secretary General, Erastus Mwencha, said that although trade within the region had increased in the past years, a significant member of small scale traders still opted to smuggle goods in and out due to policies which seemed to favour large scale producers.

Among the proposals put forward are the decentralization of officers dealing with exports to the various boarder points and to exempt the traders from paying taxes for goods worth less than Sh35,000 ($525). Lack of a common visa from all the COMESA countries to ease movement of persons was also discussed as one of the issues to be tackled.

The proposals are coming at a time when the trading block is working on a draft law to harmonise customs rules.

Daily Nation

The teething problems of China's engagement with Africa

Links between China and Africa are growing. More than 700 Chinese companies are active in Africa, and trade between China and the continent is worth US$55 billion.

China gets roughly a third of its oil and many other important natural resources from African countries. These assets have helped fuel China's remarkable economic growth. But China has been accused of exploiting Africa's wealth of natural products.

To counter this, China has pledged to overtake the World Bank as Africa's main financial provider. At the November 2006 summit of the Forum on China-Africa Cooperation (FOCAC), China pledged US$5 billion to set up a China-Africa development fund encouraging Chinese companies to invest in and provide financial support to Africa.

It also promised to train 15,000 African professionals, send 100 senior Chinese agricultural experts to Africa and set up 10 agricultural technology demonstration centres over the next three years. In February this year, Chinese president Hu Jintao visited eight African countries (Angola, Cameroon, Liberia, Namibia, Seychelles, South Africa, Sudan and Zambia) and pledged millions of dollars worth of investment.

To Zambia, for example, Hu promised US$800 million over the next three years. With some of this money, China plans to establish an economic zone.

But not everyone welcomes Chinese involvement.

Cephas Mukuka, assistant national executive secretary of the Zambia Federation of Free Trade Union says little has been done by China to support the growth of local industries. He said that the Zambian government should come up with a policy to compel Chinese investors to help set up infrastructure to aid technology transfer in Zambia.

He says China should commit to long-term investment and set up a university of science and technology in Zambia to help build local capacity. His views are supported by Lameck Simwanza, programme coordinator for Women for Change, which lobbies for good educational policies in Zambia. "Current investment is not working to build our local technology expertise, but aims at using Zambia for casual labour," Simwanza says.

Critics say China is actually giving Africa problems. Zambian markets are flooded with fake traditional Chinese medicines that claim to cure diseases such as Aids and tuberculosis, and conditions such as impotency. Rodwell Vongo, the president of the Traditional Health Practitioners Association of Zambia (THPAZ), says that there has also been an increase in Chinese herbal clinics, which are not regulated and do not observe ethical guidelines.

Such claims are leading opposition parties and trade unions to claim that dishonest Chinese workers are coming to Zambia, using Chinese investment in the country as a cover.

The Chinese prime minister, Wen Jiabao, rejects criticism that his country is only interested in Africa because of its raw materials. At a meeting of the African Development Bank in China in May, Wen said his country is committed to helping Africa develop in all sectors of the economy.

Some of the problems arising from China's investment and donations have been caused because China is a newcomer to international aid issues, says Zeng Aiping from the African Research Centre at the Peking University in China.

Zeng says China's low level of activity in African science and technology so far is because the country is still learning science from the West and is not accustomed to exporting its science to developing countries such as those of Africa. At present, Zeng says, Chinese economic activity in Africa is very business-centred, and research is still highly connected to Chinese companies.

Xue Hong, director of development assistance research at the Chinese Academy of International Trade and Economic Cooperation, agreed. He said China's scientific presence in Africa is highly enterprise-oriented, mainly existing in telecommunications, and sometimes in the mining or oil industries.

Hong says that Chinese enterprises are the main source of Chinese money in Africa, but this is mainly because China has not developed a mature foreign assistance system that can operate independently. He added that many Chinese companies have not been in Africa long enough to develop the capacity to involve local people.

There are exceptions though. Hong cited China's National Petroleum Corporation, which has projects in some West African countries and has donated millions of dollars to help develop infrastructure in local communities.

And though Chinese technical aid exists in agriculture and malaria prevention, the projects are small scale and limited to a few countries, so they may not necessarily be experienced by local people, Hong says. He added that China is also inexperienced in the culture and politics of Africa.

To aid this technology transfer Mwananyanda Lewanika, President of the Zambia Academy of Sciences, believes that it is up to African policy makers to make sure that Chinese funding is directed to priority areas. "African leaders should stand firm and propose investment in relevant sectors such as science and technology and put skills transfer as a condition for future business deals," he says.

Business Day Africa