Globalisation – How can Africa harness this phenomenon

This paper looks at the concept of globalisation and its origins. We look at key indicators of globalisation as they relate to the continent. Has Africa witnessed the dramatic shifts in the movement of people, culture, trade in goods and services, investment flows, technology that have transformed the world recently making it into a global village? Why have such shifts occurred or not? What are the benefits and costs of this process to the continent? What should the continent do to ensure that such shifts take place in a positive way? Globalisation should and cannot be wished away but must be harnessed.

Globalisation is a concept that came into being in the last decade of the 20^th century when observers began commenting on how intertwined the world was becoming. The changes that have been making the global village smaller and smaller accelerated and this process is increasing at an exponential rate. Trade, investment, the movement of people and technology between countries and continents were growing towards the end of that millennium at an unprecedented rate. We are now living in the world of real time where events around the world unfold on our TV screens or computer terminals as they happen and impact on our lives as never before. Consumption patterns, culture, eating habits, diseases are no longer isolated in places where they originate. Global brands, economic and political forces transcend frontiers as never before.

This process is however not new but started with European “discoveries” which saw European powers reach out to the various continents. Prior to that period movement and in particular, conquests were within a continent or generally between two continents. This early globalisation process gave birth to the trans-Atlantic trade – slaves from Africa to the Americas and agricultural products from the Americas to Europe. New plants, livestock, technology, cultures and people crisscrossed the various continents. The ubiquitous potato and rice were good examples of the movements of plants, which appear on the plates of consumers around the world.

Globalisation has its supporters and detractors and in both camps there is a growing industry unfolding. The leading supporters are major multinationals, global brands, which see an opportunity to penetrate new markets that are yet underdeveloped, particularly as opportunities in mature markets tail off. Among countries, the US, the leading nation in this process is the main proponent of globalisation. Among “ethnic/cultural” entities, the Anglo-Saxon entities, the US, Britain, Australia and New Zealand are the leading proponents of the concept. Their cultural outlooks, business cultures and language have made them major supporters and practitioners of this phenomenon. Britain, an Island trading nation, spread its commercial and political tentacles around the world to become the first global power, with three quarters of the globe painted red. The cultural and ethnic landscapes of the US and the UK are probably the most diverse in the world. The Anglo Saxon business culture with shareholders reigning supreme means that there is always pressure to seek new markets to penetrate. Indeed globalisation has been described as “the spread of free market capitalism to virtually every country in the world”. This philosophy led to structural adjustment policies in the last two decades of the 20^th century, which saw widespread market liberalisation of the economies of virtually all African countries. This process has resulted in the continent facing the full brunt of the various aspects of globalisation.

Opposition to globalisation has been led by a group of strange bedfellows, nationalists, socialists/communists and Non Government Organisations (NGOs). Nationalists feel that their cultures and economies are threatened. Socialists/communists, who were leading proponents of globalisation in a bygone era – remember the “international” anthem – are opposed to the exploitation of workers in poor countries by multinationals. And NGOs many of whom have developed global brands in that sector oppose the rape of indigenous cultures and the negative effects of unbridled capitalism. The views of anti-globalisation cannot be dismissed as naïve rants of alternative types because “free trade” is often a myth imposed by the strong on the weak. African countries need to take the observations of anti-globalisation into account in their response to this phenomenon.

1. How has it manifested itself in Africa There have been dramatic shifts in movement of people from the continent to all corners of the world. African sportsmen and women, professionals and technicians ply their trades in all corners of the world, as everywhere is just a plane flight away. You only need to look at the football league in Europe to see how easy it has been for European scouts to poach talent from the continent. Increasingly desperate refugees from the continent have been hoping off on planes, trains, boats to all corners of the world, not waiting for scouts or invitation from governments of recipient countries. Rich countries are becoming alarmed at such movement, ignoring the fact that in the early stages of globalisation which saw the movement of Europeans move en mass to the Americas, Africa, Australia, New Zealand etc when very few hurdles were placed on them, before things like passport controls came into existent.

African culture has reached all corners of the globe and unlike previous movements when the likes of Picasso borrowed heavily from the continent with hardly a mention of Africa, the source is now acknowledged. African music may not have made the mainstream but is increasingly featured on the airwaves in all corners of the world. African art and literature have spread extensively. Most regions now have African studies as part of university curricula.

Trade in goods and services are where the continent has failed abysmally to corner a fair share of the phenomenal growth that has taken place recently. Africa’s share of world trade shrunk from 5.3% and 5.7% of exports and imports respectively in 1950 to 1.6% of exports and 1.9% of imports in 1998. Similarly, Africa’s share of foreign direct investment (FDI) although on the rise in the last decade of the 20^th century has not had a sterling performance, with only 1% of total foreign direct investment, worldwide, to the continent which accounts for 12% of the world’s population.

It must be noted though that the last decade of the last millennium saw a significant improvement with FDI flows to the continent rising at a faster rate than that for the world as a whole. Globalisation has seen the volume of foreign direct investment to Sub-Saharan Africa in the year 2000 at US$ 6.7 Billions, seven times the level in 1990. Furthermore the share of foreign direct investment to Sub-Saharan Africa within the Low and Middle Income group increased from 3.46% to 4.01%. Within that group, which includes all Sub-Saharan African countries, the increase in foreign direct investment was the third highest although dwarfed by the increase and volume of investment to Europe and Central Asia, the biggest gainers in the group.

GLOBAL FINANCIAL FLOWS (US$ MILLIONS)
	NET PRIVATE CAPITAL FLOWS			FOREIGN DIRECT INVESTMENT
	1990	2000	% CHANGE	1990	2000	% CHANGE
World				199954	1167987	484%
Low & Middle Income	43556	225846	419%	24119	166691	591%
E Asia & Pacific	19402	65693	239%	11135	52130	368%
Europe & Central Asia	7692	45446	491%	1051	28495	2611%
Latin America & Carib	12630	97305	670%	8177	75088	818%
Mid East and N Africa	384	1074	180%	2458	1209	-51%
South Asia	2162	9254	328%	464	3093	567%
Sub-Saharan Africa	1287	7074	450%	834	6676	700%
Sub-Saharan Africa % of L&MI	2.95%	3.13%		3.46%	4.01%
Source: World Bank

On the issue of flows of technology the continent has lagged badly behind the rest of the world. There have been insufficient flows of new technology, crucial for the development of the continent. The issue of technology transfer goes beyond the infrastructure. The continent has failed in this aspect with respect to ownership of technology. The very limited resources to universities and research in particular has meant that the continent has had to rely outside sources for virtually all new developments which cannot be easily adapted to solve the myriad of problems it faces. More important is the education has failed to produce a significant pool of skilled technicians, which will attract foreign investment. The recent incidence in Nigeria where hundreds of foreign workers were held hostage on oilrigs highlights this flaw. Why does Nigeria have to rely on hundreds of foreign workers, many of them in junior positions to man its oil fields after half a century of oil production?

3 Why have these shifts occurred The movement of people from continent can be summed up in one word, opportunity. Failure of the system has made driven sport stars, professionals and the unskilled to greener pastures. Football stars can see a quantum leap in their incomes by moving into even minor leagues in rich countries. Professionals often denied promotion because the system is riddled with nepotism, corruption and tribalism and the fact that they cannot often have the wherewithal to practice what they are trained to do have emigrated. Unemployment among all sections but particularly among the unskilled has seen them take huge risks to enter rich countries by whatever means.

Africa’s failure to grab its share of world trade is due to a combination of factors. An undue reliance on primary commodities which has seen a long-term deterioration in the terms of trade – real prices have declined significantly over the years – has meant lower export values. Reliance on a small number of products and failure to move up the production chain into processed products and diversify into new products has caused this relative decline. This situation has been caused by inappropriate policies, lack of domestic investment and crucially failure to attract foreign investment that has played a pivotal role in other more successful regions.

Africa’s failure to attract foreign direct investment, crucial if it is to harness globalisation is the result of a number of factors. Wars and political instability are top of the list. Other factors include endemic corruption; inappropriate (investment) policy framework and legal system, the poor infrastructure and the lack of a cadre of skilled workforce have resulted in investor shying away from the continent.

4 Benefits and costs of globalisation Globalisation has brought significant benefits to the continent. The Diaspora has provided substantial financial flows to relatives left behind. Skills acquired by them have helped significantly, African football is a notable example, and without globalisation Senegal would not have humbled its former colonial masters, France at the last World Cup. Globalisation of African culture has reaped significant gains for the continent’s artists who seen substantial increase in royalties, which they had previously, been denied.

Trade in goods and services have provided income and employment to millions of people on the continent, particularly when transparency has been introduced to ensure that the companies and workers who are engaged in these activities actually benefit. The break up of monopolies by marketing boards, which had failed to provide high prices or cushion the effects of a volatile commodities market, is a case in point, where this has occurred producers have reaped the rewards of their efforts. Africans can be just as productive as producers anywhere when the incentives are realized and not taxed or siphoned off by parasites. The rapid rise in Investment flows which globalisation has generated has brought jobs and incomes to the continent. We would expect this process to accelerate and hopefully the continent can increase its investment portfolio as well as its diversity, which is currently largely concentrated in the extractive and primary industries.

Globalisation has been useful in the fight for good governance. It is now virtually impossible for tyrants to suppress their peoples without the world knowing about it. Opposition to tyrants can be mobilised through modern means of communication as never before. Multi-nationals are also under close scrutiny and ethical fund managers are putting pressure on such companies on a range of issues, including the environment, child labour and a host of other issues.

On the negative side globalisation has decimated African sports with many of the best stars being poached by rich countries. Similarly many artists, professionals and skilled personnel have decamped to rich countries negatively impacting on the development process. Many countries under World Bank and IMF advice have liberalised their markets, reducing tariffs and import controls which has resulted in infant industries being adversely affected. This has resulted in jobs being lost and more worrying when skilled personnel are made redundant and not redeployed it means investment in the training of such staff is lost. The reduction in tariffs and import controls on the continent has not been matched in many rich countries. These rich countries have maintained import barriers, often non-tariff barriers such as phyto-sanitary to keep African products out of their markets – preaching one thing and practicing the opposite. Private investment flows have also had a downside as the financial meltdown in Argentina and the South East Asia demonstrated, although the continent has so far been spared of such melt down. Often investment is speculative and countries can witness investments flights largely as a result of sentiments not economic fundamentals. For example despite what has been regarded as sound economic policies by the South African government it has failed to attract the level of investment that other countries in a similar level of development have attracted.

African culture and minority ethnic groups have come under pressure as a result globalisation. American culture has become deeply embedded in many countries, logging, mining and other activities have devastated the environment. Diseases have spread rapidly, scientists have revealed that aids was first identified in the 1950s but it wrecked relatively little havoc until the 1980s as mass travel spread the disease. South Africa which was closed to the outside world during Apartheid had very few incidences of the disease which has risen to the level where that country now has the highest number of cases of HIV. Africa has seen hazardous waste from rich countries dumped on the continent. There is great concern that genetically modified plants and animals are being introduced into the continent, which has a very rich biodiversity. The relatively limited regulatory framework in most countries and the need for food aid means the continent has weak defences against this trend.

5. How can the continent harness globalisation Globalisation must be managed to ensure that the positive effects are maximised and the negative effects minimised. Firstly, Africa must minimize the haemorrhaging of its qualified people and make effective use of the Diaspora in rich countries. The continent must create economic and political opportunities for all so that its citizens can realise their potential on the continent and have to flee to the four corners of the globe to seek them. Appropriate economic policies, which will ensure economic growth and create employment opportunities, must be implemented. Good governance and in particular, eliminating all forms of persecution for political, religious and other forms of persecution will stem the flow of refugees. Governments need to adopt a policy where the best wo/man gets the job, gets promoted and rewarded.

Africans need to own the development process. This will create a pool of trained and experienced personnel. It will make the continent more competitive – expatriate managers are expensive, a study in Cote d’Ivoire revealed that 25% of value added in manufacturing was gobbled up by the wages of expatriate managers. African have a better understand the cultures and market conditions and do not have to undergo an orientation process. Lastly, trained management and technicians may move on to setting up their own businesses. Governments must take measures to ensure that companies, aid agencies and NGOs that set up shop on the continent employ qualified Africans. Companies and organisations must prove that they have made all efforts to try to employ Africans either those based at home or the Diaspora. To assist in the process governments would have to increase their educational budgets and tailor programmes to the needs of industry and aid organisations. More emphasis would need to be placed on technical courses. Tax incentives followed by punitive measures should be used to ensure that Africans are employed. African governments to press rich countries to assist in this process should exploit the current backlash against refugees in rich countries, particularly in Europe. Africa needs to also make use of its Diaspora by encouraging networking and to use such networks to transfer technology, skills and capital. Other regions, notably the Indian sub-continent and China have made use of such networks to encourage investment, technology transfer and lobby rich countries.

The continent needs to increase its share of world trade and this can be done in a number of ways. The continent needs to widen its export base to include non-traditional exports, which will include other primary commodities as well as increasing the level of processing of primary products. Non-traditional exports will increase export revenues as well as minimising the risk of a generally volatile commodities market. Increasing the level of processing will achieve the same objectives as well as avoiding the long-term downward spiral in prices that commodities have faced in the last few decades. Domestic and foreign investment must be encouraged through tax incentives and other measures to encourage investment in no-traditional commodities and in the processing of primary commodities and non-traditional exports.

The continent needs to review trade protection and its management of investment flows. Firstly, while it is acknowledged that, all things being equal, a reduction in trade barriers increases economic growth, all countries, including the USA have managed trade as part of their economic development policies. The aggressive reduction in tariffs and non-tariff barriers undertaken by African countries in the 1980s and 1990s as part of structural adjustment programmes may have overly exposed those countries. Certainly, a recent review by this author of import tariffs on the continent showed that Tunisia and Mauritius, which have exhibited high growth rates, have relatively high tariffs. Trade protection to help develop certain industries must be a policy option but such policies must be transitory with a finite time frame during which protection must be scaled down. The continent needs to adopt preferential treatment for African countries like the EU and NAFTA agreements. African governments must continue to press rich countries to open their markets, not just in terms of tariff barriers but also no-tariff barriers.

Africa needs to attract significantly higher foreign direct investment. First and foremost the continent must do all it can to end wars and political instability across the region. Investors do not go to war regions if they go into political instable regions they require very high rates of returns. Other facilitating factors include a relatively liberal set of regulations in the flow of capital, transparent investment rules, a pool of skilled and trained labour and economic infrastructure.

Intra-African trade, one of the more promising areas in the last two decades must be encouraged. This means that there must be a move away from narrow and misguided nationalism. Typically African countries have small populations with low purchasing power, hence the continent will increase foreign investment if investors can be assured that they can be based in one country to supply a number of countries within the region. This suggests a harmonisation of trading and marketing legislation across the continent. Competition for attracting such investment would be based on the quality of the country’s infrastructure, which will be an incentive for countries to improve such facilities. Indeed Africa can only harness globalisation if it improves its infrastructure. The road and railway networks, ports, power suppliers, telecommunication networks need to be improved. Only when these are developed will the continent attract its fair share of investment.

As we mentioned above, there is a downside to private foreign investment, namely, turbulence in financial markets. African governments must improve their financial systems to be able to successfully absorb capital while minimising the risks. The more sophisticated the financial system the lower the possibility and severity of financial turbulence. This suggests regional capital markets as individual country capital markets are unlikely with the exception of possibly South Africa (in Sub-Saharan Africa), to have depth and breath required to respond to threats. Capital markets must have competent and honest regulators. Finally there should be some controls, for example a tax on capital inflows based on the period spent in the country or regional markets with relatively high rates on short term capital and low rates on long term flows.

6. Conclusion Globalisation is a feature of modern life and we are likely to see an acceleration of this process. Africa must live with it and harness the process to avoid been further marginalized. The world does not owe the continent a living. The various stakeholders must work to make this process a success. These stakeholders include national governments, multinational organisations such as the AU, the UN, donor governments and NGOs. While the concerns of anti-globalisation activists have much validity they should not push governments into false hopes. Many of these organisations have their own agendas, which are not necessarily identical to those of the continent. Indeed some of these organisations, which are themselves global brands, can assist Africa in the process by empowering Africans. Let them appoint African in senior positions and make them spokesmen in Africa and in rich countries to speak on behalf of the continent and give Africans the opportunity to understand the mechanics and politics of globalisation. This is the position taken by Acord recently, which transferred its HQ to Africa and the leadership to Africans. This does not mean Africans must blindly follow supporters of globalisation because there are many faults with the process and some of these [JR1] supporters preach free market while they continue to protect their markets. Finally the most recent literature review of investment flows by the IMF shows that unfettered capital flows are not necessarily panacea for poor countries, this indeed shows that the process must be managed[JR2] .

JB Rogers Page 6 1/27/200409/12/0319/05/03

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