Monday, May 6, 2013

FDI vs. Indigenous Enterpreneurs which is key for Economic Transformation of Low Income Countries?

My "favorite" military & former world leader (//">) says-" Foreign capital is a coward: It flees disease; it flees ethnic conflicts; it flees corruption; it flees political instability (bad governance in general); it flees poor infrastructure; and it flees small markets"`! African countries over the years have been in a "race-to-the-bottom" in a bid to attract foreign capital. They hope this will deliver the transformation of their economies that have eluded them over the decades. They have done so at the expense of building the capacity of their indignous enterpreneural champions (in some African states actually they actively fight the emergence of indignous enterprises!). I have studied economics for 15 years now. I never came across an economy that was solely transformed from one stage of development to another (3rd world to 2nd world for instance) by foreign capital. I came across of many which almost became failed economies because of foreign capital cowardizing and fleeing them! Albeit FDI delivers good jobs (mostly in small numbers) and quality technology to the receipient country! Whats your take? and whats your experience or what do yu know that I dont know? is this race-to-the bottom for African countries a lost cause? could we have gotten the transformation yesterday if our visionary men had decided to focus their vision on creating national (native) champions in business like Japan did in the 50s, 60s& 70s ? you can back your view with facts from the ground! I want to hear from yu......

Monday, April 19, 2010

scholarship in Africa

Tuesday, March 30, 2010

Conflict & Development

Wednesday, March 24, 2010

Can Africans Learn from History?

I believe Africa has suffered at least three tragic forces in its development history.

First, the 7th to 19th Century slave trade, the trans-Saharan, Indian & Atlantic Ocean slave trades, together robbed the continent close to 50million souls, depleting a pool of its economically active human resource consequently arresting African development possibilities.

Second, the 19th to 20th century colonization, the associated massive robbing & plundering of the continent’s resources, present value estimated at $ 50 trillion dollars during 1885 - 1980 by European powers, three times more of what they have been able to remit back as official development aid since independence.

Third, the 1945 to 1990 cold war geopolitics, Africa was a vital arena of geopolitical competition between United States, USSR & their allies, consequently plunging the continent into chronic despotic regimes, retarded institutions with profound negative development implications.

Once again Africa is facing significant challenges in the 21st century. Since 2007, it has witnessed a number of deep tectonic forces, especially the triple F crisis: fuel; food & financial crisis. Forces likely to have profound irreversible effects in reshaping the geopolitical & geostrategic map of the world post slavery, cold war, colonization era!

In this article, I describe 5 specific signposts directing where events may be headed, with global food security dilemma likely to revitalize the geostrategic importance of Africa, and also spell tragic consequences for its people as other world powers erect their strategic postures on the continent for its vast natural resource-land:

First, beginning late 2007, a quiet force of massive negotiation & acquisition of prime fertile land has rapidly spread across the continent. Close to 100 million hectares of agricultural land has been acquired by foreign governments, sovereign funds, foreign backed investment companies, & foreign rich individuals.

Foreign states on this acquisition spree include: Bahrain, Saudi Arabia, Abu Dhabi, Kuwait, Oman, Qatar, India, China, South Korea etc, all of which are currently potential or world major net food importers & Germany, U.K. Norway for bio-fuel farming. Overall motive is to secure stability of food, water, & energy supplies for their populations in the 21st century through 44, 99 and 999 year (i.e., 2 to 34 generations) land leases in Africa. Africa has the cheapest chunks of arable land, i.e., land prices per acre in Africa is $800-1000 cf Poland $6000, Argentina/Brazil-$6000, U.S. $7000, U.K $18000 & Germany,-$22000.

The problem is; African governments clandestinely leasing chunks of agricultural land to foreign states to grow food for their domestic markets have a section of their populations massively & chronically suffering food shortages i.e. Ethiopia, Kenya, Uganda, Zambia, Tanzania, Congo, Mali, Sierra Leone, Ghana, Sudan, Mozambique, Swaziland etc. & occasionally extend begging bowls to the world for international food aid.

Second, climate change is producing far reaching effects across the continent i.e. droughts in Kenya, landslides in Uganda & rapid desertification across the continent. Effects that will continue to be exacerbated by increased quest for agricultural intensification, food & energy security & demographic changes. Increased urbanization, demand for water for: growing food& bio-fuel crops; and hydroelectric power will reach unprecedented proportions, putting pressure on the resource sector on the continent. Currently close to 300 million Africans do not have access to clean water and 600 million to clean sanitation; the numbers are projected to rise rapidly through 2025 and many African countries will be chronically short of fresh water by 2050.

Third, Thomas Malthus in 1798 put it“ that with food supplies increasing arithmetically while the number of people grew geometrically, the world population would eventually run out of food…” this is likely to happen first in Africa! Africa’s population is headed to add a staggering 350 million souls to its current 900 million by 2025 and will have a quarter of the global population by 2050, the highest rural-urban migration and home to world’s leading mega cities. Two in five Africans currently sleep on an empty stomach, or chronically malnourished, the numbers will rapidly rise as Africa competes with other parts of the world that have been food secure until recently, as the World Bank predicts a 50 percent rise in global food demand by 2030.

Fourth, global energy security has entered into direct competition with food security; crops for food and for bio-fuels are already in stiff competition for the available arable land and the resulting intensification further degrading the environment but also creating global food scarcity & hikes food prices. Land in major grain exporters like the giving way to bio-fuel farming, projected to produce 60 billion gallons of ethanol by 2030. Combined effects could create an imbalance in global grain market, fuel food riots, civil strife & consequent state failures in Africa particularly.

Fifth, poor agricultural productivity in Africa coupled with diminishing public investments in agriculture research and development. Global official aid for agricultural research has fallen by more than 65 percent since 1980 profoundly so in Africa. The budget of the Consultative Group on International Agriculture Research (CGIAR) has fallen by 50 percent in the last 15 years, & Africa’s meager budgetary support for farming & structural adjustment programs have crippled agriculture research & development. For instance, the average African government spends only 4.5 percent of its budget on agriculture.

What can be done?

First, African governments should now see the global change & prospects of agriculture in the 21st century as a window of opportunity to transform their societies, firmly take advantage of its current comparative advantage in land resource to develop agriculture primarily for strategic food security, for its people, food & energy exports to its rich neighbors. They should see this as Africa’s turn to turn the levers, become the world’s food basket & global energy source & make poverty & misery history on the continent. Well handled the prospects of agriculture in the 21st century could lift millions out of poverty in Africa. This opportunity should not be squandered!

Second, foreign capital (FDI) is needed, but not in the current format of long term land leases negotiated so far that marginalizes the local people. African leaders must know when they are needed most and play to it not marginalize their own people. Contract farming and/or land hiring for a specific limited period (10 years) that leaves smallholder farmers in control of their land and contracts to investors, could still deliver the investment capital, technical know-how, jobs to local farmers and predictable food security for Africa and stable food supplies in form of African exports from African farmers to foreign partners as well with no threat of backlash in future.

Third, multilateral development institutions such as World Bank and African Development Bank should urgently direct their efforts on facilitating the above with development of the necessary physical infrastructure (roads, railways, ports, storage systems etc) to enable African states take this opportunity that is emerging for Africa in the 21st century.

Finally, I think they should be an immediate Pan African conference to bring together researchers, experts, policy makers and other practitioners from the continent and the world development agencies to discuss the 21st century strategic food security opportunities and threats on the continent.