04 Feb 2009 |
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By Ayo Akinfe After all the fanfare, fancy talk and bucketful of promises, the 2009 World Economic Summit has finally come to an end. At the colourful event in Switzerland, which could give an Oscar Awards Ceremony a run for its money, political and business leaders talked about the global economic crisis, Africa, disease, poverty and pledged huge sums of money to address all these problems. How much of the vast sums pledged actually trickles down to the intended beneficiaries is another matter but to be fair to the good and the gracious, let us at least give them credit for remembering that although it is their world, others live in it too. What made this year’s event most interesting, however, was the fact that everyone present acknowledged that the way the global economic order is currently structured is unworkable. Back in the 1980s, the mercantilist school of thought took a firm grip of the political debate and it became accepted as the norm that the way to witness economic growth was to leave business unfettered. This Regganite/Thatcherite manner of thinking has dominated political discourse for about 30 years now and were it not for the current economic collapse, I doubt if many people would have begun questioning its basis. With stock markets collapsing, jobs being shed, economic growth in the negative and protectionism coming back into play, all the Harvard, Yale, Oxford and Cambridge economists are suddenly realising that there is something wrong with their crystal balls. It has suddenly dawned on everyone that when you leave business unfettered, reduce its social responsibilities and weaken your regulatory bodies, commerce acts in an irresponsible fashion. Business cannot be trusted to think long-term, protect the environment, engage in sustainable development, take responsible risks and do its bit for social cohesion. All the evidence points to the contrary. To get sustainable economic growth, business needs to be closely regulated and properly taxed and governments need to take on the task of redistributing wealth. Almost every speaker at Davos conceded this, although it took the frightening spectre of another great depression to bring the point home. The good thing is that this debate is now out of the way. Never again will anyone dispute the fact that in 2009, business thinks just the way 19th century mills owners did and left to their own devices, our captains of commerce would happily send seven year old kids down chimneys as happened in the days of Chaucer. Having sorted out the rest of the world, the Davos gathering then turned its attention to Africa, that festering sore that has become the conscience of humanity. Left behind in times of boom, it is frightening to think of what fate awaits the Dark Continent in these trying times. However, to their credit, the good and the gracious did not forget us. Bill Clinton and Kofi Annan made sure that Africa remained on the economic agenda as they warned everyone present not to use the current economic climate as an excuse to forget the world’s poorest continent. For all their good intentions, however, I believe that their words may fall on deaf ears, as they were not backed up with any concrete suggestions. One just needs to look at the reality of the African continent to appreciate the dire straits it is in and the way the rest of the world has dealt it a terrible hand. As of today, Africa only accounts for about 2% of world trade and were the continent to fall off the end of the world, hardly anybody would notice. Technology and capital transfer are so miniscule that the sums involved hardly make an impact. In every African country apart from maybe South Africa, remittances from their citizens in diaspora surpasses foreign direct investment (FDI). How on earth is the poorest continent on earth to develop its productive capacity when FDI is less than 5% of gross domestic product (GDP)? This for me is where the Davos meeting failed Africa. It should have set stringent FDI targets for industrialised nations. Failure to meet these targets should be addressed by the forfeiture of an equivalent amount into a fund, which organisations like the World Bank, International Monetary Fund (IMF), Unicef, Unesco, etc, should then spend across Africa. In Davos, business and governmental leaders acknowledged the fact that they face a destructive social backlash that could foment political instability if they fail to develop effective solutions to the current economic crisis. Solutions they are developing include bailing out troubles financial institutions, providing handouts to troubled industrial concerns, slashing interest rates to near zero and underwriting investor risks. I find it hard to understand how anyone would expect Africa to waddle through the current turbulent waters of the global economy without similar support. For instance, Taro Aso, the Japanese prime minister advocated the need to speedily dispose of non-performing loans of financial institutions and called for the use of public funds to raise bank capital. To its credit, however, Japan is also ready to lend up to $100bn to the IMF for small and medium-sized countries and emerging economies. Mr Aso added that African countries are suffering from the sharp drop in commodity prices and stressed that it is important that the international community addresses the humanitarian issues in Africa through development assistance and private capital. With growing calls for protectionism in other parts of the world, particularly the US, it is unlikely that this call will be heeded by other industrialised nations, however. For their part, African nations must also set themselves stringent targets too. It needs to dawn on the current generation of African leaders that they are not going to get a Marshall Plan bailout so it is FDI or economic strangulation. Of late, Nigeria has had some joy wooing investors into its oil and gas industry but this is nowhere near enough. This investment needs to be designed to diversify economies and ambassadors to industrialised nations need to be given stringent targets or be sacked. I understand that Professor Iyorwuese Hagher, the Nigerian high commissioner to Canada is planning an ambitious programme aimed at attracting vast sums of Canadian capital to Nigeria. This should be the norm right across Africa, with stringent penalties for failure. Given the enthusiasm with which the rest of the world raped the African continent, shipped away its people, buy its natural resources for next to nothing and con it using one-sided trade arguments, I find it perplexing that they are not imposing voluntary FDI targets upon themselves. Nobody is asking for reparations and by now, it should be clear how short-sighted, limited and temporary aid is. Africa does not need any handouts. All the continent requires is its fair share of the international finance capital invested around the world each year. We need to move away from the current patronising nonsense of developed nations priding themselves of how much food aid they send to Africa. If the enthusiasm shown for sending food packages was matched with investment, the continent would not be in the dire straits it is today. The international community has also got to challenge the mythical fears that surround doing business in Africa. Risk assessment maps depict all kinds of imaginary fears about war, insecurity, an inability to repatriate funds and contract defaulting when it comes to the African continent. Very few companies have done business in Africa and faired badly. Sums most of them would need to invest would pale in comparison to what they have spent elsewhere. I find it nauseating that these same multinationals that are writing off debts as the global economic crunch bites elsewhere, believe that risking a few million dollars in Africa will mean the end of the world for them. As things stand, it is actually countries that have more to lose if investments go sour like China that are actually standing above the parapet and investing in Africa. Within the continent itself, it is the bigger economies like South Africa, Nigeria, Libya and Egypt that are the biggest investors in the smaller nations. It would have been nice if someone had stood up at Davos and declared that the earth would not stop revolving around the sun if one or two companies lost a bit of money in an African venture. It would also have been right to point out that many companies are actually making returns of up to 35% on their African investments. If for arguments sake 10% of the world’s FDI went into Africa every year between now and 2020, I doubt if there would be any question about the continent meeting the Millennium Development Goals. Economic growth rates would surge, new markets would open up and Africa could act as an outlet when other parts of the world may be facing difficulties. Finding the political will to do this, however, is another matter. For now, we have to be content with the fact that Africa was discussed at Davos at all. Maybe we will be a bit luckier next time. Ayo Akinfe aakinfe@aol.com
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Davos should have set FDI targets
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