NEPAD and Foreign Direct Investments (FDIS):
Symmetries and Contradictions
Yash Tandon

Paper presented at the African Scholars' Forum
on the New Partnership for African Development (NEPAD),

Nairobi, 26-29 April, 2002


Summary
The latest effort to "do something for Africa" at the continental and international level, called NEPAD (New Partnership for African Development), claims its inspiration and legitimacy from the concept of the "African Renaissance". African civil society and academia are gradually waking up to this initiative. Although the document promises to be "people-oriented", the people have not yet been consulted. However, NEPAD leaders have appealed to the people for their support (paragraph 53 to 56). This paper takes this invitation seriously, and seeks to examine both the positive and not so positive aspects of NEPAD in the hope that a critical inquiry would help clarify some of the more difficult issues underlying this initiative. The single most important issue is: where is the money going to come from for this, what appears to be, the most ambitious project conceived by some of the major political leaders of Africa? NEPAD talks about "self-reliance" and argues, repeatedly, that Africans must be "masters of their own destiny" . It also says (para 3) that the credit and aid binomial has led to the "debt deadlock", and "instalments to rescheduling". But then, in obvious, or apparent, contradiction, it goes on to say (para 130) that Africa needs to secure more aid and more credit, and furthermore, that the "bulk"of Africa's capital needs up to the year 2015 "will have to come from outside Africa" (para 147). In order to secure these funds, NEPAD promises to the Western partners to put itself in its best behaviour in matters of economic and political governance. This paper seeks to examine this proposed strategy of NEPAD in some depth, and in particular, to look at the value that African leaders seem to have placed on Foreign Direct Investments (FDIs) as their main source of funds from outside. The paper ends with proposing an alternative strategy for self-reliant development that puts more faith in the people of Africa than on foreign capital.


I Introduction: How to Engage with NEPAD
The New Partnership for Africa's Development (NEPAD) made its entry into Africa rather mysteriously. Its promoters (the state leaders of South Africa, Nigeria, Senegal and Algeria) claim it was only a merger of several antecedent initiatives by each of them, and therefore there is nothing mysterious about NEPAD. Nonetheless, very few people in Africa had heard about NEPAD, and they raise the legitimate question as to whether the earlier initiatives (such as President Mbeki's Renaissance idea or President Wade's Omega Plan) were not very different from NEPAD. Most civil society organisations in Africa first learnt about NEPAD from their northern colleagues. Many governments in Africa, too, had learnt about NEPAD from the Western media. However, whatever the origins of NEPAD, it appears now to be a serious political reality that no one can ignore. If people do not come to terms with it, and this is certainly one option, they have to decide on how to engage with it. In engaging with NEPAD, it is necessary to read the document, to understand its origins, and to analyse it. This is what this paper seeks to do, and takes only one aspect of it for an initial analysis - that of the role of foreign direct investments (FDIs) in NEPAD's strategy.

Having perused the document in its totality, it is difficult to escape the conclusion that NEPAD is really two documents in one. It is like a two-headed animal - the language of one is very different from that of the other. It is as if the two parts of the document - the first diagnostic part, and the second prescriptive one - are written by two separate groups of people working independently from one another. There is very little either logical or ontological link between the two parts. While the diagnostic section is partly reflective of a generally radical epistemology, the prescriptive part is almost entirely from the text-book neo-liberal orthodoxy. Thus, for example, the diagnostic part identifies imperialism (by name) and structural impediments to Africa's underdevelopment, the prescriptive part ignores these categories altogether and proceeds as if the analytical first part of the document did not exist.

One question that arises is what was gained and what was lost in the metamorphosis between the initial ideas of the leaders and the NEPAD. When, and at what price, was the word "partnership" added to the name? For example, the idea that the OAU endorsed at its Lusaka 2001 summit was the New African Initiative (NAI). It meant that it is the Africans who were collectively thinking through their strategy. There was no mention of "partnership". So when did partnership with the donors become its principal component? How was that "partnership" forged? Between who and who? Why was partnership with the people not seen by the leaders as the first pre-requisite before entering into a partnership with the donors? And when the donors, out of time, became the partners, what was given away? Did the language of the document change? It is usual that in forging such partnerships the text is carefully negotiated between the partners. Is NEPAD a negotiated text? If it is, as one suspects it must be, it may explain why the first part - probably of relatively less consequence to the donors - is so different from the second part, where the document gets into the really nitty-gritty question of MONEY. Where is the money going to come from for Africa's new strategy of development? What price did the donors expect, or exact, for agreeing, in principle, to finance NEPAD? NEPAD therefore remains a mystery. It is not a transparent product arrived at transparently. It is therefore incumbent for all those who would want to take the NEPAD seriously that they carry out a systematic analysis of the entire document, and not judge it in parts and out of context. One troubling aspect of the process is that the authors of NEPAD appear to be in a hurry. First, they did not consult with the people of Africa on whether this is the route they wish to go. They did not even consult with the political leadership of most of the rest of Africa. Furthermore, they have put NEPAD on a "fast track" and appear to want the G8 countries meeting in Alberta, Canada, at the end of June 2002, to make commitments to finance the NEPAD plan. To them one can only say that they must go slow. If after nearly four decades Africa has not been relieved of its poverty and misery, then another one or two years of serious reflection on what NEPAD offers will not make much difference. Why are they in such a hurry? Development, furthermore, is too serious a matter to leave it to African finance ministers only. It is even less justified to leave it to the finance ministers and the G8 countries only. Let us not get into the technicalities in a hurry. Let us look at the larger issues first - namely, the political-economy of NEPAD


II NEPAD's Political-Economic Analysis On Africa's Underdevelopment And Forward Strategy
A What is the cause of Africa's Underdevelopment ?

Like with most descriptive papers on Africa that come out of mainstream institutions, such as the World Bank and the UNDP, and other literature, NEPAD has its own facts and figures on Africa's poverty. They confirm the view that Africa is in dire a condition. In Africa, 340 million people, or half the population, live on less than US $1 per day. The mortality rate of children under 5 years of age is 140 per 1000, and life expectancy at birth is only 54 years. Only 58 per cent of the population have access to safe water. The rate of illiteracy for people over 15 is 41 per cent. There are only 18 mainline telephones per 1000 people in Africa, compared with 146 for the world as a whole and 567 for high-income countries. (para 4)

It is clear that something has to be done, something radical, to get out of this appalling condition in which Africa finds itself. But how does NEPAD explain this situation? How did Africa come to be in such a mess? There is no one cause for this condition, argues NEPAD. There are multiple causes. It does argue that there are historical causes to Africa's continuing poverty (para 18), but it does not put the blame entirely on the colonial period. The impoverishment of the African continent is "accentuated" by the "legacy of colonialism"; it is not the root cause. Among other historical "legacies" are the cold war and the "international economic system". However, colonialism did subvert the "traditional structures, institutions and values." (para 21) And it created an economy "subservient to the economic and political needs of the imperial powers." Africa, NEPAD argues, has been integrated into the world economy as "supplier of cheap labour and raw materials draining Africa's resources rather than industrialising Africa." (para 21). But the problem is not purely economic. It is also political. Colonialism retarded the development of an entrepreneurial and middle class with managerial capability. At independence, Africa inherited a "weak capitalist class" and this explains the "weak accumulation process, weak states and dysfunctional economies." (para 22). The "rate of accumulation" in the post-colonial period has not been sufficient "leading to patronage and corruption." (para 25) The "vicious circle" of "economic decline and poor governance" has confirmed Africa's peripheral and diminishing role and "marginalisation." (para 26) Among the more recent reasons for Africa's dire condition is "its continued marginalisation from globalisation process." (para 2)


B. So what is the way forward?

It is first and foremost a question of political will, says NEPAD. NEPAD is "anchored on the determination of Africans to extricate themselves and the continent from the malaise of underdevelopment and exclusion in a globalising world." (para 1). It is time that "African resources are harnessed to create wealth for the well-being of her peoples." (para 20) "In doing so, the challenge is for the peoples and governments of Africa to understand that development is a process of empowerment and self-reliance. Accordingly, Africans must not be wards of benevolent guardians; rather they must be the architects of their own sustained upliftment. (para 27) Why have African states not able to achieve this since they became independent? The historical legacy mentioned earlier remains one of the reasons. But part of the problem has been "questionable leadership" and part of it lack of "ownership" of the strategies "by Africans themselves" (para 42) As for more recent efforts, such as the Structural Adjustment Programme (SAP), these provided a "partial solution". "They promoted reforms that tended to remove serious price distortions, but gave inadequate attention to the provision of social services." (para 24)

Globalisation has created "opportunities for lifting millions of people out of poverty." (para 32). But somehow Africa has missed out on this. Why? Mainly because Africa has not been able to "compete effectively" in the globalising markets. (para 33) One of the factors that militate against Africa is "the absence of fair and just global rules." Globalisation has . increased the ability of the strong to advance their interests to the detriment of the weak, especially in the areas of trade, finance and technology. It has limited the space for developing countries to control their own development, as the system has no provision for compensating the weak. (para 33)

Also, Africa has not been able to take advantage of globalisation because of "structural impediments" and "resource outflows and unfavourable terms of trade." (para 34)

NEPAD does not say what African countries might do to make the global system of trade and finance fairer and more equitable, or how "structural impediments" might be removed, or how the adverse terms of trade might be reversed. These matters NEPAD prefers to leave to the international community. "We hold that it is within the capacity of the international community to create fair and just conditions." (para 41)

For its part, NEPAD prefers to lay emphasis on what Africa might do to improve its competitiveness in the global market place. "The African Renaissance project, which should allow our continent, plundered for centuries to take its rightful place in the world, depends on the building of a strong and competitive economy as the world moves towards greater liberalisation and competition." (para 50)

NEPAD understands Africa's underdevelopment problem as arising out of a complex set of factors, both historical and structural. It puts part of the blame on poor leadership in Africa. It hopes that a new leadership that is now in power will change things. "Significantly, the numbers of democratically elected leaders are on the increase. Through their actions, they have declared that the hopes of Africa's peoples for a better life can no longer rest on the magnanimity of others." (para 44) It says that NEPAD is a "new framework of interaction with rest of world," but one that is "based on Africans setting their own agenda," (para 48), "a long-term vision of an African-owned and African-led development programme." (para 60) But this vision, NEPAD says, cannot be realised outside of the process of globalisation. "While globalisation has increased the cost of Africa's ability to compete, we hold that the advantages of an effectively managed integration present the best prospects for future economic prosperity and poverty reduction." (para 28) Africa cannot afford to miss out on the new millennium economic revolution. "This revolution could provide both the context and the means for Africa's rejuvenation." (Para 28) Central to this revolution are the advances made in science and technology, especially, the information and communications technology (ICT). It has "reduced the cost of and increased the speed of communications across the globe, abolishing pre-existing barriers of time and space, and affecting all areas of social and economic life. It has made possible the integration of national systems of production and finance, and is reflected in an exponential growth in the scale of cross-border flows of goods, services and capital." (para 29) What Africa needs to do is to create the possibility for it to be part of this new economic revolution, and to "slice up the value chain" in many manufacturing and service-sector production processes. (para 30)