The United Nations University
The UNU Africa Network

Knowledge and Development in Africa:
Some Directions in Academic Research



Prof. J. A. van Ginkel
Rector, United Nations University


The Second Tokyo International Conference on African Development (TICAD II)

20 October 1998
Session 3


Mr. Chairman, Your Excellencies, Ladies and Gentlemen,

The United Nations University highly appreciates this opportunity to make a presentation at this important event on behalf of the researchers and research networks it worked with in the process leading up to TICAD II. While we cannot speak directly for our African and international partners, I am sure that I am presenting some of the key concerns they have.

We do sincerely thank the Japanese government for their continuous support – in particular now for their interest in mobilizing the expertise of scientists specializing on Africa in the preparation of TICAD II.

The main theme for my comments today is "Knowledge and Development in Africa."

Our understanding of the development process, Mr. Chairman, no longer only focuses on the accumulation of capital but also increasingly highlights the importance of knowledge. Work by the World Bank and others clearly shows that having access to knowledge is crucial to improving the living standards of the poor. In some ways, knowledge is even more important than money as it can help to develop better institutions and spur more creative ideas. Sharing knowledge; ensuring a more equitable and fair distribution of knowledge could contribute importantly to closing the gap between rich and poor countries.

At this stage, Mr. Chairman, it is my opinion that many of the issues concerning African development in the 21st Century - on social development and poverty reduction as well as on economic development and good governance - have already been eloquently addressed by previous TICAD II speakers. Therefore, I would only like to address three additional sets of issues.

II

The theme of mutual learning between Asia and Africa that has been a particularly valuable intellectual contribution of the TICAD process. We have been trying - and will continue to do so - to identify key policy lessons, both from East Asia’s era of rapid growth as well as from the current economic crisis. As a particular result we have distributed a policy brief on "Strengthening Africa’s Participation in the Global Economy" to everyone here today.

The brief covers many of the economic policy issues that we have discussed these days, such as the importance:

  • of stable macroeconomic foundations;

  • of further liberalizing trade ……… but to do so carefully.

  • of using regional dynamism as a spring board to world markets.

  • of focusing on the primary sector, and
  • of developing sound financial systems and caution in financial opening.
But, getting the economic policies right in Africa is not enough. There is now substantial evidence that institutional weakness in many African countries is a critical obstacle to economic performance. Surveys on the obstacles to business in Africa highlight the damage caused by:

  1. the unpredictability of changes in laws and policies,

  2. the unreliability of law enforcement, and

  3. the impact of corrupt bureaucracies.

Unless governments eliminate these kinds of obstacles it is unlikely that business, domestic or international, will flourish. From the preliminary findings of an ongoing United Nations University-African Economic Research Consortium survey on the links between the bureaucracy and the private sector in twenty four African countries, we are happy to conclude that the relationship between the government and the private sector is improving. This gives us some cause for optimism about the sustainability of the current growth turnaround.

III

I would also like to draw your attention, Mr. Chairman, to the valuable role for research and training institutions in Africa. We have heard a lot about the crucial importance of primary education over the last two days and rightly so. But I also believe there is a need for a bit more balance. This is in line with the outcomes of UNESCO’s World Conference on Higher Education two weeks ago.

No commodity is more expensive than "knowledge". An Africa without a sustainable, strong knowledge sector of its own will always remain in a dangerously dependent position. Research and training institutions on the continent can make a critical contribution in at least three ways:

  1. by making the most of existing indigenous knowledge;
  2. by accessing the vast reservoir of existing global knowledge, as well as the ongoing advances in understanding, and adapting them to suit specific local conditions; and,
  3. by helping to find innovative solutions to seemingly intractable problems.
There is a need to strengthen the Universities and Research Centres at the national level so that they can fulfil these tasks. But, given the limited scope at the national level there is a valuable place for "Regional Centres of Excellence" on research and training in key development issues, both in terms of policies and in terms of actually doing things. Regional Networks can be of high value both when linking regional centres of excellence together, as well as when linking such centres with well-chosen minor centres, through which the high-level centres can more easily provide the needs of society at greater distance.

We at UNU/ Institute of Natural Resources in Africa (UNU/INRA) hosted by the Government of Ghana, for example, are committed to assisting African Universities and research institutes to build the endogenous capacity needed to conserve, maintain and effectively use Africa’s natural resources.

IV

The third set of issues I wish to address, Mr. Chairman, concerns the follow up to TICAD II and the Agenda for Action.

The Agenda is a very comprehensive and valuable document. It provides a whole range of very agreeable proposals and the organizers must be commended. I would like to make a few suggestions not directly on the agenda per se but more concerning the ways of following it up. I do not plead for not having all the specific guidelines and actions, but to complement these in the short term with a few concrete and implementable commitments in key areas. For example, one issue must be to resolve the debt problem before the end of the century. In our view there is an overwhelming case that significant reductions in the external debt of African countries would improve growth rates. The debt issue was highlighted at TICAD I, and yet five years later, there has been very little relief on the ground.

As was the case yesterday and today, in our preparations we often discussed the obvious fact that war and instability are key hurdles to sustained development in Africa. The human and economic costs are too high not to give these issues the highest priority. The conference should send a strong message that without widespread and lasting peace in the region, there can be no growth.

We also believe that some of the concepts and definitions need to be more clearly defined. For example, a prerequisite for regional cooperation is complementarity. Without complementarity, regional initiatives are more likely to lead to competition. The analysis could also be pushed a little further. For example, it may be appropriate in the first instance to try to stop capital flight and the brain drain before trying to encourage foreign direct investment.

There is also need in the implementation phase for a more flexible approach at the national level since Africa is such a diverse and multifaceted continent. Problems are best solved by those closest to them. We feel it would also be valuable to broaden the process to involve other important stakeholders. There is a strong case that civil groups, including research institutions and NGOs, could be included more closely.

V

I would like to conclude, Mr. Chairman, by highlighting that His Excellency Thabo Mbeki gave a lecture on "The African Rennaisance" earlier this year at UNU Headquarters. Mr Mbeki started off by quoting the Latin Expression meaning "something new always comes out of Africa."

Improved economic performances are one of the new and positive things to emerge out of Africa in recent years. And I would like to pay tribute to the efforts of countries that have persevered with economic and political reforms in very challenging circumstances. The development of Africa will be something that only Africans themselves can do. That is why endogenous capacity and capacity building are so important. But they do deserve greater help from outside – or to paraphrase President Rawlings of Ghana, they deserve a more supportive and fair approach to the issues of debt and trade.

I hope this conference will further the spirit of achievement and renewal that His Excellency Mr. Mbeki referred to. And I hope it will help cement the commitment of countries in Africa and external partners to choosing approaches that will lead to greater peace and prosperity on the continent in the 21st Century.

Thank you very much.

******

Appendix

Strengthening Africa’s Participation in the Global Economy

Executive Summary

First, the forces of globalization are perhaps the most important factors that affect the current environment for economic development. Second, there are lessons from Southeast Asian experiences that policy-makers in sub-Saharan Africa could adapt to their own contexts. These lessons stem both from Southeast Asia’s era of rapid growth as well as from the current economic crisis. In this report, we highlight three underlying issues and eight key lessons.

Underlying Issues

1. Participating in the global economy provides immense opportunities.

This has been shown by the success of countries with an outward-oriented strategy. By contrast, inward-looking development strategies lead to marginalization and condemn countries to slow growth. Pursuing an outward-oriented strategy is even more crucial for most African countries because their domestic markets are particularly small.

2. Participating in the global economy also entails significant risks.

Participating in the global economy also poses significant challenges for the economic management of fragile economies and can lead to major problems. In particular, as shown by the recent Southeast Asian experiences, the risks of liberalization are particularly high for capital accounts due to the massive size and fluctuating nature of financial flows. Although few countries in Africa are likely to face the scale of inflows that precipitated the Asian crisis, a key lesson concerns the importance of developing sound financial systems.

3. Successful participation requires a strategic approach that is actively pursued.

It is vital that African countries actively engage the forces of globalization. But the specific nature and scale of the benefits and costs depend on the forms of integration. A strategic approach is needed.

First, integration is multi-dimensional, involving among others the aspects of trade, investment, capital flows and technology. The optimal level of openness may differ for each aspect, which itself depends critically on the stage of development in each particular market. This leads to questions regarding the best policy mix (towards trade, foreign direct investment and capital flows) to achieve integration.

Second, there seem to be certain prerequisites necessary for countries to manage the risks and to ensure orderly liberalization. This has significant implications regarding the most appropriate pace, sequencing and time-frame for reforms.

Third, international economic interactions are currently characterized by fractured globalization. In particular, trade is concentrated in regional blocs. Therefore, African countries should place a high priority on trying to generate economic dynamism with neighbouring countries. Another implication is that countries’ strategies towards trade and towards attracting investment should be targeted towards those non-African regional blocs with which the country has the strongest potential complementarities.

Key Lessons for a Successful Outward-Oriented Development Strategy

1. Ensure a stable macroeconomic environment.

Macroeconomic stability is an old lesson, but one which remains fundamentally important. Africa’s growth "tragedy" is partly attributable to governments’ failure to achieve stability on key macro-economic issues such as maintaining low inflation; keeping budget deficits manageable; keeping exchange rates in line; keeping external debt under control; and maintaining stable and positive real interest rates. Although many African countries have made significant improvements in these areas, there is a need to consolidate and further improve macro-economic fundamentals.

2. Liberalize trade, but with care.

In order to participate more in international trade, African countries will need to further liberalize their trade regimes. But liberalization has fiscal and balance of payments implications stemming from the difficulty of finding alternative secure sources of revenue. Also, premature de-industrialization could set in if trade liberalization is carried out without regard to the competitiveness of otherwise successful domestic enterprises. Therefore, in designing credible and sustainable trade reforms, more care will need to be taken regarding the sequencing, pace and phasing of trade liberalization. Countries should start with export liberalization and promotion, while import liberalization should be implemented steadily over a longer period.

3. Realise the opportunities of regional dynamism.

Africa’s market is equivalent in economic terms to that of Belgium, yet it is fragmented into over forty different countries. Bearing in mind the fact that much international economic interaction is regional rather than global in nature, there would seem to be great potential for African countries to promote regional interaction and markets as a stepping stone towards participating more actively in global markets. The first step is to work towards trade liberalization and deregulation of foreign investment between neighbouring countries in order to generate regional dynamics. Building regional infrastructure networks in roads and telecommunications would also help.

4. Focus on the primary sector

The performance of the primary sector will be crucial because this sector provides Africa’s main source of foreign exchange earnings. A crucial immediate task for most countries in Africa is to rebuild the primary commodity export sector, while also proceeding with strategies to promote export diversification. A vital consideration is that the primary sector should not be penalised.

Governments could also actively intervene in expanding and diversifying primary exports. Creating or supporting institutions for research and development as well as education and training in this sector should be given priority. Infrastructual investments to overcome power failures, water shortages and poor rural road networks are also essential.

5. Some protection and selective promotion policies may be helpful....

Governments could also intervene to promote upgrading of exports and encourage inward investment. Selective promotion measures for consideration include export-processing zones (EPZs), bonded warehouses, and duty exemption and drawback schemes. Also, protection can be justified in order to promote infant industries. Thus, temporary and strictly time-bound protection and promotion for certain industries can be justified if industries are selected in view of countries’ evolving comparative advantage.

6. .…But they can be dangerous if the institutional preconditions are weak

However, in addition to the importance of sound policy foundations, selective measures can only be effective if the necessary institutional foundations exist. Therefore, African countries should concentrate on building sound policy and institutional foundations. Such institutional foundations include government commitment to economic development, communication between the public and private sectors, an effective bureaucracy and low risk of corruption.

7. Reinforce the institutional preconditions for outward orientation and growth

There is increasing acceptance of the value of institutional reform in improving Africa’s economic performance in general, and its external performance in particular. By institutions we refer to the formal and informal rules of the game that govern the behaviour of state and market agents as well as their interactions. Institutions are vital, among others, at four levels:

  1. At a political level, it is important to have institutions that lead to commitment and credibility. There are two key lessons here. First, shield top economic agencies from political pressures and follow their advice. Second, develop sub-regional free-trade agreements as a means of demonstrating commitment, as well as of realizing other benefits.

  1. At a public level, it is desirable to have institutions that lead to an efficient and non-corrupt public service. The key issue here is to align incentives. Important measures include:

  • merit-based recruitment and promotion;

  • appropriate wages;

  • limits on political appointments and insulation from political pressures;

  • streamlined structures and bureaucratic practices; and,

  • efforts to combat corruption (most managers identified corruption as the number-one obstacle to doing business).

  1. Regarding the interaction between the public and private levels, it is important to have a bureaucracy that is responsive to the business community but still independent. Information-sharing through business councils is one useful mechanism to improve this responsiveness.

  2. At the level of private agents, the importance of secure property and contract rights cannot be overstated. There is a real need to improve the independence and effectiveness of the judiciary and to establish the rule of law.

Overall, there is substantial evidence that institutional failure in Africa is a critical obstacle to better growth and external performance. In particular, surveys identifying local entrepreneurs’ views on the obstacles to business in Africa highlight the unpredictability of changes in laws and policies, the unreliability of law enforcement, the impact of discretionary and corrupt bureaucracies, and the danger of policy reversals due to changes in governments. Unless governments eliminate these kinds of obstacles it is unlikely that business, domestic or international, will flourish in Africa.

8. Developed countries can help by:

  1. Radically transforming aid. Aid will have to be substantially transformed if it is to serve as a useful instrument for mediating Africa’s future relationship with the world. There is a need for donors to target their efforts more selectively towards countries demonstrating commitments towards sound policy and institutional foundations. This should be undertaken in tandem with a substantial reduction in donor procurement restrictions and other constraints. Aid should be formulated in the context of clear national strategies and effectively co-ordinated by recipient governments.

  2. Reducing the debt burden. There is an overwhelming case that significant further reductions in the external debt of debt-distressed countries would improve growth prospects in Africa, particularly if the resources provided are additional.

  3. Guaranteeing open markets. One of the most effective mechanisms to help African countries integrate into the global economy would be for OECD countries to guarantee open markets for African exports and commit themselves to help strengthen Africa’s participation in the world economy.

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