How Globalization Works - and Doesn't Work - in AfricaPublished: January 14, 2005 in Knowledge@Wharton
Globalization has created a paradox in Africa: A few Africans are thriving, but the continent as a whole seems to be falling further behind the rest of the world. "The benefits of globalization have been missed by most Africans, even if the effects can be seen all around them through the media, the Internet and their interactions with their relatives who have emigrated to other countries in search of better lives," says J. Kofi Bucknor, a corporate financial consultant based in Accra, Ghana.
Bucknor concedes that he is an African who has seized opportunities presented by globalization and built a business in ways that would have been impossible as little as a decade ago. "I describe myself as a globalized African," he says. He spoke at the United Nations Global Compact Academic Conference titled, "Bridging the Gap: Sustainable Environment," which was held recently at Wharton. The conference was organized by Wharton in collaboration with the United Nations Global Compact and Sabanci University in Turkey.
Thanks to mobile phones and the Internet, Bucknor can run his consultancy in Ghana and do so at a lower cost than he could in a developed country. And because many Western investors have so far ignored Africa, he says he is able to find many untapped opportunities. But too few Africans have been able to follow his example. And their plight poses a challenge to the idea that globalization benefits everyone. Bucknor and a scholar from England named Akpobibibo Onduku argued that governments, companies and aid organizations, both in Africa and abroad, will have to change their ways of doing business if globalization is to deliver the kind of economic growth in Africa that it has in places such as China and India.
If anything, many Africans believe that globalization has worsened their economic situation, Bucknor says. They complain that Western tariffs discriminate against the local processing of commodities such as cocoa, coffee and cotton. "African goods sold in [Organization of Economic Co-operation and Development] countries face tariffs roughly 10 times higher than those levied on goods traded within the OECD," Bucknor points out. And some Western firms seem interested only in exploiting Africa's natural resources, not in pursuing the sorts of value-added investments that they have in, say, India. Foreign direct investment in all of Africa and the Middle East was only $11.6 billion in 2002, compared with $38.4 billion in China in the same year.
Consider Nigeria, one of the world's leading oil producers. Oil accounts for about 90% of its exports and 80% of its government revenues. Among the multinational corporations doing business there are Shell, ChevronTexaco and ExxonMobil. Oil companies operate in Nigeria in ways that would hardly be tolerated in the developed world, says Onduku, a professor of peace studies at the University of Bradford in England. They are sloppy, averaging one oil spill a week, and they fail to recover 90% of the oil that they spill, he says. They pollute the air with practices such as "flaring," which entails burning off natural gas that is produced as a byproduct of drilling. Nigeria accounts for a quarter of the gas that is flared worldwide, he notes. Drilling can also sometimes contaminate water sources and land.
In essence, he argues, multinationals, foreign governments and the oil-dependent Nigerian government collude against the communities in the oil-producing Niger Delta. They reap profits, while local people endure pollution.
For all its shortcomings in Nigeria and the continent at large, globalization has helped Africa in ways that Africans often overlook, Bucknor notes. Communications technology, for example, has contributed to a freer press and more effective political opposition. The numbers tell that story: No incumbent African leader lost an election until 1982, but after the 1990s, more than 20 have been voted out of office, he adds.
With political liberalization has come economic liberalization. To attract more private money, governments have privatized inefficient state-run companies and decreased regulation. Those moves are paying off, with, for example, the stock markets in Ghana and Nigeria posting strong gains over the last several years. Some African governments also are trying to better educate their citizens. They recognize that the developing countries that have benefited the most from globalization are those with the best-educated workforces. "Gambia and Uganda have registered 20% growth in primary-school completion rates in the last decade," Bucknor says.
In addition, many Africans who left the continent for college and graduate studies in the United States and Western Europe are turning their attention homeward. Some, like Bucknor, have returned and started businesses. Others, while they continue to live abroad, act as liaisons for western companies or repatriate their money. Remittances from Africans abroad now exceed the amount of development aid that the continent receives, Bucknor says.
Going forward, African countries must figure out ways to harness the positive power of globalization. To do that, analysts there and abroad have to understand why the continent thus far has been left behind, Bucknor says. Plenty of Africans blame colonialism, which often left their countries with weak, corrupt governments and, at times, arbitrary borders. While colonialism certainly shares part of the blame, it alone can't explain Africa's failure to advance during the last several decades. Other former colonies in Asia have thrived after independence.
In the years since their liberation, too many African countries have failed to govern themselves effectively, Bucknor says. "Simply put, most governments are administratively and technically too weak to manage their countries. Economic governance, characterized by measures to combat corruption, has been poor. The delivery of education and health services has fallen well short of international standards." Misguided western policies have exacerbated the situation. Many African governments operate under an enormous debt burden, which hamstrings their development efforts. So far, the West has been reluctant to forgive much of this debt.
What steps can be taken to alleviate Africa's problems? Government reform has to come first, Bucknor argues. Money must be channeled to attracting and training better-quality lawmakers and bureaucrats. Once these people are in place, foreign governments and aid organizations need to let them focus on their countries' critical needs. "Today, officials are overwhelmed and bogged down with too many issues from too many constituencies, including international donor organizations and multilateral institutions," Bucknor says. "They are paralyzed."
At the same, African countries must develop strong legal and regulatory systems and administer them honestly. Existing systems are too often plagued by mismanagement and corruption. Attracting better people and reforming laws and regulations depends partly on better schools. Better schools also yield workers who are better prepared to compete in a global economy. Therefore, funds, both local and international, must be funneled into educational reform.