Globalisation, NEPAD says, 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." (para 33) So how Is FDI going to diminish the power of the strong? Would it not, in fact, increase the power of the globalisers in relation to the globalised?

And if Nigeria is to choose the option of opening the door to capital resources from outside "to fill the gap", is it not an easy way out for its ruling elite not to do anything seriously to ensure that its domestic natural resources (oil, for example) are not frittered away? Why should they change their life-styles, or their production style, if money is going to come from outside to "fill the gap" anyway? At independence, NEPAD says, Africa inherited a "weak capitalist class" and this explains the "weak accumulation process, weak states and dysfunctional economies." (para 22). Would it be right to infer from this that NEPAD is the framework through which FDIS will be invited from outside to bolster the fortunes of this "weak capitalist class" in Africa?

It should be obvious that it is not simply a question of "good leadership" or "good governance", or one or two "top leaders" who are "incorruptible". The issue is much more profound and subtle than NEPAD makes it out, or what NEPAD wants the people of Africa to believe.

The other equally absurd consequence of this single-minded pursuit for FDIs, is that it gives licence to a country like Nigeria then to propose that global sanctions be applied to a country like Zimbabwe because the latter is alleged to have violated "the norm" set by, among others, Nigeria, to which Zimbabwe was not a party. NEPAD's rationale for this is that "participation in the Economic and Political Governance Initiatives is a prerequisite for participation in the Capital Flows Initiative." (para 147) In other words, a country has no right to "capital flows" if does not participate in the "Economic and Political Governance Initiatives" as ordained by NEPAD. This is not to enter into a discussion into whether Zimbabwe's behaviour is right or wrong. That itself is a complex issue, made even more so by the active, indeed quite aggressive, intervention of Britain in the internal affairs of the Zimbabwe. However, that is not the issue here. At issue here is the principle that any African country whose behaviour endangers the "Capital Flows Initiative", an idea that is itself seriously flawed, must then be subject to collective sanctions of the Western countries on the recommendation of the bigger African countries, whose elite leadership would like to have their cake (FDIs) and eat it too (e.g. not change the "structural impediments"). Is it a burden that self-appointed "leaders of Africa" would like to take on and answer to History when things go wrong?


B. A logical construct is not the same as empirical reality

It is interesting to understand how NEPAD, or to be more correct, the economists who produced the document, came to the conclusion that there is "resource gap" (in the monetary sense) in Africa. It is based on a quite simple mathematical logic, which may or may not have any empirical basis. It starts with a development goal, or rather, a "goal" in terms of projected increase in the GNP (which is not the same as "development" goal). In NEPAD this is stated as 7% growth per year for Africa up to the year 2015 in order to meet the millennium objectives. Then, based on spurious data and questionable concept of "saving" (analysed below), the economists give a figure of say 2% or 3% as Africa's "saving rate". It then follows, logically, arithmetically, that the balance has to come from outside. Hence, it is argued, the need for capital inflows, or FDIs. The logic is so simple that anybody who questions it would, by definition, be either a lunatic or simply stupid. It is, after all, a syllogism. Who can question it?

The use of mathematics, especially by a certain genre of economists, can sometimes be merely pedantic, or a means to prove something that is banal and obvious. But if this is their chosen language to make if difficult for ordinary people to question their logic that spuriously sounds unassailable, then sometimes it is also necessary to resort to their language to draw out its many hidden assumptions.

Take the famous equation:

Y - E = S (1)

where Y and E are national income and expenditure, and S is national saving. If one wishes to make saving as the focus of ones inquiry, then the equation may be written as:

S = Y - E (2)

The equation itself says nothing about any particular reality. It is simply a logical construct. All that it says is that national saving is whatever is left out of national income after expenditure. In order to reach the reality on the ground, one has to look into the actual sources and amounts of national income and the sources and amounts of actual expenditure. A country like Angola, for example, may have a huge income from the sale of its oil and minerals, but most of it could go into two major items of expenditure - war expenditure, and profits taken out of the country by foreign companies exploiting the oil. The result could be zero saving or, if the country has to borrow money to finance the war, negative (domestic) savings. Or, to give the example of one of the promoters of NEPAD, namely, Nigeria, the "expenditure" may consist of oil revenues externalised into foreign banks by a corrupt bureaucracy. So once again, there may be zero savings, or if the country borrows from the external market, then there is negative savings, or what amounts to the same thing, the country gets into external debt. The equation may thus be written as:

Sd = Y - Ed - Ee (3)

Where Sd is domestic saving, and Ed and Ee are domestic expenditure and externalised expenditure. If, in real life, Ee is very large, i.e. there is vast seepage of value (through, for example, corruption, payment of past debts, transfer pricing by which multinationals overprice their imports into the country and underprice exports; worsening balance of payments on account of worsening terms of trade or flight of capital because of speculation - in other words, by a hundred different ways in which an "externalised expenditure" drains away the national income), then, obviously, there is little, or even negative, domestic saving.

This is not as hypothetical as it may sound. It is indeed the "real life" situation of most African countries. There is such enormous amount of funds that get externalised (for many reasons) that Africa indeed has no, or little, "domestic saving". However, if the analysis of saving does not go into the details of real-life situations, and limits itself to a mathematical formula, then, of course, logically, it would be correct to say that Africa has no saving, and hence, creates the "basis" for the NEPAD economists to argue, that Africa must open its door to FDIs.

What such an exercise does is to act as a cover up for not getting deeper into the empirical reality. For example, instead of "logically" coming to the conclusion that FDIs have to be solicited because there is a "zero saving" and hence a "resource gap", a deeper, real-life analysis, might lead to the conclusion that instead of looking for foreign capital, it may be better from the national point of view to block, or reduce, some of the externalised expenditure, for example, blocking the use of transfer price mechanism, or refusing to pay illegitimate foreign debts. That is why NGOs and civil society organisations that call for "debt cancellation" are more on the correct lines than NEPAD economists who want to go on paying the debts (or beg of the donors to give periodic debt reliefs) because cancelling them (even those that can be proven to be illegitmate) would send "wrong signals" to FDI owners, who will then be shy of coming to Africa. Let us bring investment (I) into the equation, and the first and third equations can then be written respectively as:

Y - E = S - I (4)

Sd = Y - Ed - Ee - I (5)

Equation 5 may further be written as:

Sd = Y - Ed - Ee - Id - If (6)

Where Id and If are domestic investment and foreign investment. The equation may be written as:

If = Y - Ed - Ee - Sd - Id (6)

Once again, this is only a logical construct, and says nothing about reality. In real life, then, if a case for foreign investments (FDIs), or capital inflow, is to be made, then, from formula 6 one or more of the following must apply:

1. The national income (Y) may be very small; or 2. the domestic expenditure (Ed) may be too high, or 3. there may be large externalisation of funds (Ee) - external seepage; or 4. there may be no or little domestic savings (Sd); or 5. there may be no or little domestic investment (Id).

But all these propositions have to be empirically explained. They are not just mathematical constructs. To put it differently, in a concrete situation, such as in Nigeria or South Africa, those who make a case for wanting capital from outside may have to explain, concretely, at least two things:

One: Why is domestic expenditure so high? Is it because of war? Is it because the ruling elite, or a section of it, is very indulgent and wastes national income in "unnecessary" imports - such as luxury cars and expensive consumables?

Two: Why is there a high externalisation of funds? Is it justified? Is it because of corrupt officials and/or private sector operators are externalising funds? Is it because of repayment of interest on past debts that may have been incurred illegally or unjustifiably? Is it because exporters are not bringing the full value of their exports back into the country?

Conclusion: All this tortuous exercise is undertaken to show that the rationale behind NEPAD's case for wanting foreign direct investment is based on a logical construct, and not on real life analysis. The case for FDIs, in the light of the above, can be interpreted in two ways.

One: the ruling elite has no intention to cut down on their own profligacy. Two: those who are externalising funds (legitimately or illegitimately) have no intention to put controls on their activities.

If these conclusions have empirical validity, then the ruling elite's case for wanting an inflow of capital becomes all the more suspect if it is in control of both the state and the major sources of export revenues, such as oil or minerals. If, furthermore, the ruling elite is in alliance with foreign corporations, or foreign banks, wanting profitable investments in these countries, then it is difficult to escape the conclusion that the whole thing is a massive fraud.


C. A brief case study of South Africa

Let us take South Africa, one of the main authors and promoters of the NEPAD. The London Economist, in a special survey of South Africa in its issue of 24 February 2001, recorded the following: . by the standards of other countries, South Africa has lured relatively little foreign direct investment: $32 per head in 1994-99, compared with $106 for Brazil, $252 for Argentina, $333 for Chile. At the same time, money has been leaving South Africa: the $9.8 billion it invested abroad in 1994-99 exceeded the inward flow by about $1.6 billion. . And its big companies, long confined by apartheid's isolation, are now anxious to seek stock-exchange listings abroad. .The capital they need for expansion is far more expensive if raised in South Africa, which still has some exchange controls, than in Europe or North America. So in the past few years, Anglo American (mining), Billiton (mining), Old Mutual (insurance), South African Breweries and Dimension Data (a hugely successful information-technology company) have all sought primary listings elsewhere.

Coming from one of the most conservative, free-market ideological publications in the Western world, that is an alarming, or damning, evidence against South Africa's "open door", or what comes to the same thing, NEPAD, strategy. Of course, South African policy-makers may argue that $9.8 billion capital exit during the 1994-99 period (compared to a mere trickle of $1.6 b inflow) is "good" for South Africa "in the long run", because, "eventually" the externalised capital will generate profits for South African companies, and these will then return to the country, and create the basis for jobs, etc. (which, in the meantime, will have been lost - regrettably). That argument is a lot of "hogwash" (to use a scientific term). Running after that exited capital is like running with a whip behind a horse that has already bolted.

Looking at the Economist figures again, what good did it do to Argentina to have attracted $333 FDIs per head, compared to South Africa's mere $32, in 1994-99? Argentina is in the midst of an economic, social and political crisis whose equal its citizens have not experienced in their life-time. And it cannot be said that Argentina is "resource poor" (in the sense of natural or human resources). What good FDIs have done to Argentina is a question we shall leave the neo-liberal economists from Argentina and South Africa to sort out.