TCS Daily

How Europe Can Help Africa

By James S. Shikwati - July 5, 2002 12:00 AM

The recent G8 meeting in Canada resulted in a $6 billion aid offer and a load of advice on good governance and open markets. It seems not to have warmed African hearts too much. Should Africans focus on the billions in aid or on developing local efficiencies to churn out wealth?

The situation in Africa today is disastrous. A report by the New Partnership for Africa's Development points out that Africa is becoming poorer with half the population living on less than $ 1 per day. The average lifespan is growing shorter. The illiteracy rate for persons over 15 is 41% and school enrollment is declining especially among women and girls. With 13% of the World's population, Africa exports less than 1.6% of global trade and that percentage is falling. Africa attracts less than 1% of global investment but 40% of her own savings are not invested within the continent.

Heavy investment from the developed world in African parochial politics - coming as it does at the expense of economic development -- has hampered the African economy, rendering Africans poor in a resource rich continent. Instead of the vast resources in Africa being an asset, they have more often been a liability leading to senseless wars. An estimated 100 million small arms are in circulation due to these wars that have prompted 6 million refugees and displaced persons.

What is needed urgently in Africa is a system that will enable the people to rely less on governments and more on their talents, resolve and integrity. Contrary to the popular belief that Africa needs more aid, what is needed is change of policy.

The 6th global economic freedom report released last month in Canada [Economic Freedom of the World Index - 2002] by the Fraser Institute highlights that greater freedom, anchored by a rule of law and private property system, can help lift Africa from her woes.

Freer economies tend to have more prosperous people than the less free. Economic freedom correlates with per capita income where the citizens in "least free" nations earn an average of $2556 whereas people in the "most free" nations earn an average of $23,450. In terms of economic growth, the least free tend to realize negative growth as opposed to the free economies that realize a growth rate of 2.6%. Life expectancy in the least free nations is at 55 at in the free economies it is at 77.

In Africa, trade is a key to growth and rising prosperity. Economists understand that individuals engage in trade because both sides benefit: The buyer wants what he buys more than the money he gives up to obtain it, while the seller values the money he gets more than the commodity he is selling. This is true for people in the streets and no less true for people on different sides of international borders.

People will be more productive if they are sure that they will enjoy the fruits of their labor. Meetings of the wealthiest nations in the world are a challenge to the poor countries not to beg for money but to seek to learn what made them wealthy. The rich countries have a history of respecting and utilizing individual talent. Africa has a history of not only regarding the talented with suspicion but also of destroying them. It is evident through the number of immigrants and visa seekers who want to move to the wealthy countries.

To have peace and economic prosperity in Africa, the current political culture allocating resources, goods and services must cease. Policies that enable people to engage in voluntary exchange, protect individuals and their property and devolve government enterprises to the private sector offer the swiftest hope. With this in place, increased trade - and not government to government transfers -- will see Africa close the long chapter of instability and poverty.

The writer is Director of the Inter Region Economic Network [IREN Kenya]

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