THE CHALLENGES FOR SUB-SAHARAN AFRICA by ROBERT S. McNAMARA Sir John Crawford Memorial Lecture Washington, D.C. November 1, 1985 INTRODUCTIONa am deeply pleased to have been invited to deliver this first Memo- rial Lecture, sponsored by the government of Australia, in honor of Sir John Crawford. Those of you who knew him personally will understand why. It is not merely that he was a man of immense accomplishment in the complicated field of development econom- ics-at once a scholar, a teacher, an administrator, and a brilliant policy adviser-but that he wore all of these talents and abilities with such grace and modesty and contagious good humor. All who are interested in the advancement of the developing peoples will be deeply indebted to Sir John. For he was both a man of vision, and a man of action. A man who dearly understood that progress throughout the developing world was not only theoretically possible, but quite certainly attainable. Attainable, however, only if all of us-in the rich and poor countries alike-are willing, as he was, to think clearly enough, plan wisely enough, and work hard enough to help make it happen. I want to explore with you today a part of the developing world which is not experiencing progress and whose outlook is far from bright. It is the huge expanse of Africa and, in particular, sub-Saharan Africa. No area of the world has captured more dramatically in recent months the attention of people everywhere. The graphic reality of mass starvation has shocked television viewers in the affluent na- tions. There has been an outpouring of private and public donations of emergency assistance. Sensibilities have been jolted, and con- sciences have been touched. There is a strong personal desire on the part of millions of concerned individuals :o help in a direct and practical way. Ironically this avalanche of compassion for the open and visible suffering of the victims of famine-genuine as it is-has tended to ,I am indebted to the staff of the World Bank, and particularly to S. Shahid Husain, Armeane M. Choksi, and John L. Maddux, for assisting me in preparing this statement. They, of course, bear no responsibility for the judgment; and conclusions I am pre- senting. obscure the more fundamental problems not only of the Sahelian zone itself, but of much of sub-Saharan Africa as a whole. Part of the public's problem of comprehension is the sheer di- versity of this vast region. It encompasses 45 countries. These con- tain some 800 different ethnic and linguistic groups, constituting a total population of 400 million people. Ten percent of them live in countries which have few resources (for example, Burundi, Lesotho, Rwanda, and Senegal) or low rainfall (Burkina Faso, Chad, Mali, Mauritania, Niger, and Somalia). Thirty-five percent live in oil-ex- porting countries (Nigeria, Angola, Cameroon, Congo, and Gabon). The remainder in countries with land, water, or other natural re- sources that are generally adequate for long-term development. Except for Ethiopia and Liberia, none of these sovereign states has been independent for more than 30 years. Their administrative structures are still recent, and their territorial divisions are often fragile and fragmented. Per capita incomes range from $80 per year in Chad to $3,950 in Gabon (see Annex 1). The diversity, then, of sub-Saharan Africa is enormous, and the inclination of the mass media-and indeed of some governments- to oversimplify the issues is understandable. But it is important to recognize that there are certain long-term development problems in this immense region that tend to affect adversely virtually all of its countries, and all its peoples. These problems are not unique to Africa, nor are they equally severe in every corner of the continent. But they are basic, and they are serious, and they are getting worse rather than better. They are going to determine the future of sub-Saharan Africa. Already they are severely eroding its present. I want to review with you four of these critical issues as they affect the outlook for economic growth, and examine how they might best be addressed. They are: * The macroeconomic policy adjustments required to achieve long-term development; * The mounting pressures of population growth; * The ecological degradation of the resource base; and 2 * The shortfall in external development finance. I will conclude with a few brief comments on the task ahead for all of us. Before beginning this review, however, I want to underscore an important point. It is this. Much has already been written about these issues. The World Bank, in particular, has published three reports. One, Accelerated Development in Sub-Saharan Africa: An Agenda for Action, was prepared in 1981 before I left the Bank. The other two, Sub-Saharan Africa: A Progress Report on Devel- opment Prospects and Programs and Toward Sustained Develop- ment in Sub-Saharan Africa: A Joint Program of Action, were issued in 1983 and 1984, respectively. One, then, might well ask, What possible justification is there for another statement at this time? My answer is this: the action proposed in the previous reports has, for the most part, not yet even been initiated; the situation is continuing to deteriorate; and the external financial flows that will be needed in the second half of this decade to support whatever structural adjustments the African governments are prepared to initiate are simply not now in prospect. It is for those reasons that these issues deserve to be considered again now. I. AFRICA'S ECONOMIC GROWTH RATES AND THE NEED FOR POLICY REFORM The Nature of the Problem A discussion of Africa's economic and social problems must begin by reemphasizing the fact, as is shown in Table 1 below and in more detail in Annex II, that per capita gross domestic product growth rates began to fall in the 1970s and have been negative on average in the 1980s. Table 1 Per Capita GDP Growth Rates, 1961-84 (annual average in percent) Country Group 1961-70 1971-79 1980-84 Sub-Sahara: Low Income 1.4 -0.1 -2.8 Sub-Sahara: Other 1.4 1.3 -4.7 Sub-Sahara: Total 1.4 0.4 -3.6 Other Africa 3.1 4.2 2.0 Total Africa 1.8 1.2 -2.4 3 No set of statistics, however dramatic, can convey the level of human misery that exists and is increasing throughout the continent. The most helpless victims are the children. It is they who reflect most quickly in physical terms the fact that tens of millions of human beings are living, literally, on the margin of life. In Zambia's poorer regions, for example, height-for-age ratios have fallen in all categories under 15 years. Child mortality in all of sub-Saharan Africa was 50% higher than that in other developing countries in the 1950s, now it is almost 100% higher. The number of severely hungry and undernourished children has risen 25% in the past 10 years, and there is every reason to believe that mal- nutrition is so great and so widespread it will lead to increasing physical and mental impairment of children in the next 10 years. Why are Africa's economic growth rates falling? Some would say that the continent's present problems are the result of external economic conditions that it has neither caused nor could change. And to a degree that is, of course, true. Despite its differences and relative remoteness from the more industrialized areas of the world, the continent has not been able to escape the turbulence of the international economic environment of recent years: the persistent recessions; the severe decline in commodity prices; increasing protectionism (which has been particularly dam- aging to two of Africa's major exports: sugar and livestock); the high real interest rates; and the decreasing net capital flows. All of this is the price of living in an interdependent world. Dis- tance no longer isolates Africa, or virtually anywhere else, from major international economic currents. But it is not true that Africa is simply the hapless victim of im- personal economic forces over which it has no control. Other re- gions, facing similar outside forces, have suffered far less. Africa's present difficulties have not been imposed on it exclusively from the external environment. Like all newly developing societies, the countries of sub-Saharan Africa have had to wrestle with their own internal economic distortions. And they have made their own share of mistakes. There have been: inadequate trade and pricing policies, espe- cially in agriculture; overvalued exchange rates that discriminate 4 against exports; mounting fiscal deficits; and a variety of burden- some government interventions and controls in the production pro- cess. Such policies, by and large, have pervaded sub-Saharan Africa for decades. They have exacted the inevitable penalties: an erosion of productivity, pragmatism, and entrepreneurial energy. And that, inevitably, has translated into sluggish economic growth. A major cause of the distorted policy environment in many of the African nations has been the encroachment of the state into almost every sphere of economic activity. The politicizing of eco- nomic life has proceeded further in Africa than in any other region of the developing world. More and more areas of the economy have fallen under the control of the political elite. That in turn has led to the practice of accumulating wealth through access to state power rather than through contributions to productive enterprise. This is not to suggest, of course, that all government interventions are bad. Clearly there is a major role for African governments to play in promoting their countries' economic growth. This is espe- cially true where markets are imperfect, as is the case in many of these nations. But government interventions are not without cost, and, in the future, officials must weigh far more carefully than in the past the penalties of intervention-reduced private incentive; inefficient parastatal institutions; dictated prices; and a suffocating atmosphere of administrative controls-against the penalties of less than perfect markets. The Plight of Agriculture As is shown in Table 2 below, and in more detail in Annex Ill, Table 2 Growth Rates of Per Capita Food Production and Levels of Food imports Growth of Per Capita Food Levels of Food Imports Production (%) (millions of US$) Country Group 1961-70 1971-80 1980-84 1970 1980 1985 Sub-Sahara: Low Income 1.3 -1.3 -2.1 562 2,307 1,966 Sub-Sahara: Other 0.6 -1.1 -1.8 554 4,200 3,353 Sub-Sahara: Total 1.0 -1.2 -2.0 1,116 6,507 5,319 Other Africa 0.8 -1.5 -1.8 770 8 _7,_129 Total Africa 0.9 -1.3 -1.9 1,886 13,889 12,448 5 per capita food production, which barely held its own in the 1960s, began to decline in the 1970s, and fell at a rate of 1.9% per year in 1980-84. As a result, in current dollars, food imports rose sev- enfold between 1970 and 1985 ($1.9 billion versus $12.4 billion). The destruction of Africa's ability to feed itself need not have occurred. The fact is that agriculture, which accounted for a third of the continent's gross national product (GNP) in 1982, has been discriminated against for decades. Not only has it suffered from unrealistic pricing and exchange rate policies, but it has often been deprived of desperately needed government investment-invest- ment in irrigation, in research, in training, and in extension services. It has been deprived of this essential investment by a distorted policy framework that has siphoned it off into an overprotected and in- efficient industrial sector. The key importance of agriculture in sub-Saharan Africa must not be underestimated. It is a labor-intensive sector in which most of these countries can enjoy a comparative advantage, particularly relative to industry. A vigorous growth in agricultural production and exports is an absolutely essential condition for the creation of significant employment and earning opportunities for the rural poor. The reality is that the average African, who depends critically on agriculture for a living, is poorer today than he was in 1970. If the problems of agriculture are not addressed more effectively, he will be poorer in 1990 than he was at the time his country became independent. And what is even more ominous, the disastrous fa- mines that are currently restricted to years of drought-and to only a few countries will become everyday occurrences affecting a ma- jority of the sub-Saharan nations. The Debt Crisis Another critical component of sub-Saharan Africa's economic environment-and one made worse by inappropriate domestic pol- icies-is its debt crisis. The roots of the problem reach back into the turmoil of the 1970s with the transitory commodity booms, the sharp increases in foreign borrowing, and the reluctance of governments to cut back on spend- ing programs. Matters grew worse in the early 1980s as the global 6 recession persisted, and the structural adjustment programs were delayed. The prolonged drought over much of the region com- pounded the problem even further, and all of this has resulted in severe debt-servicing difficulties. The estimated total of disbursed and outstanding debt at the close of 1983 for sub-Saharan Africa was some $80 billion. About 75% ($60.3 billion) of this was public, or publicly guaranteed, medium- and long-term debt. $5.1 billion of it is owed to the International Monetary Fund (IMF), and $8.0 billion to the World Bank Group (see Annex V). The absolute size of the African debt, particularly the commercial component, is of course much smaller than that of the highly pub- licized Latin American debt. Thus, it has received much less atten- tion from the international financial community. But the reality is that the adjustments necessary to service this debt are as critical for most of the African countries as are those of the major Latin Amer- ican nations. Sudan, for example, is already $110 million in arrears to the IMF alone on $700 million in outstanding loans, and Liberia and Zambia may soon be in similar straits. Indeed for many African societies the futu,e debt service profile is staggering. Already, in the recent past, they have been caught up in reschedulings and arrears. Now these are expanding. Scheduled debt service in the 1985-87 period for pubic and publicly guar- anteed medium- and long-term debt is double what it was in 1983- 85. The adjustment problems will be formidable. The Importance of Reforming the Policy Framework Given the nature of the problems confronting sub-Saharan Afri- ca-and the food and debt crises are typical-the importance of economic reform cannot be overstated. Failure to face up to it will seriously jeopardize the long-term prospects both for growth, and for reducing absolute poverty. What is required now is not another call for further studies. What is required now is remedial action. The policy distortions that have penalized African progress are well documented in most countries. And the required compass headings to set a new course are clear. They include: realignment and closer control of government ex- 7 penditures; keeping fiscal deficits to a lower fraction of GDP; tighter discipline on monetary expansion; more realistic trade and pricing policies and exchange rates in order to encourage production and promote exports; reforming, and where necessary eliminating, in- efficient public enterprises and marketing boards; and avoiding extravagant projects designed for prestige rather than economic viability. No country anywhere, including some of the most advanced of the industrialized nations, is free of temptations to turn away and temporize when confronted with painful economic dilemmas. But in the end such dilemmas must be faced if they are to be solved. And that means adjustment. There are signs that such adjustment is beginning to take place in some African countries. The recent efforts of Ghana are encour- aging, and other countries, including Cameroon, Malawi, Botswana, and Rwanda, are beginning to show the beneficial effects of moving toward sound macroeconomic management. But many other nations are postponing action. They fear that the necessary macroeconomic policy reforms may, in the short run, lead to lower-and perhaps even negative-consumption and GNP growth. There will be an inevitable transition period, and these years will be difficult. As the structural adjustments take hold, some groups in these societies will benefit, and some will be adversely affected. Some will gain new opportunities, and others will lose old privileges. Those with vested interests against the reforms will undoubtedly bring political pressure to delay or reverse them. Certainly there will be political and economic costs that must be paid in order to see the adjustment process through. The costs of adjustment come early, the benefits only later on. There are no quick and easy solutions, and none should be ex- pected. After three decades of policy-induced distortions, sustain- able growth with equity cannot be achieved overnight. But what African governments must recognize is that the costs of failing to adjust will be incalculably greater. This is certainly true over the longer term, and it is very likely to be the case in the short 8 run as well. The critical point is to make a start, and to make it now. The penalties of further delay will be enormous. Policy reform, of course, must go hand in hand with institutional reform. The fact is that the marked decline of key institutions is an important dimension of the crisis facing many sub-Saharan African countries. It is not simply that desirable institutional development may not yet have taken place, but rather that a number of previously able and functioning institutions are now losing their effectiveness. There are, for example, entire central ministries that are no longer in adequate control of their budgets and personnel; public agencies that have lost their capacity to carry out their proper tasks; state universities, scientific facilities, and statistical offices that have se- riously declined in the quality of their work; parastatal organizations and marketing boards that impede rather than promote productivity; and critically important agricultural research institutions that are becoming increasingly ineffective. The primary weakness in agricultural research today is not an inadequacy of staff or funding, but rather the ineffective use of existing capacity: management is weak; researchers are underem- ployed and are too isolated from farmers and extension workers; and the results of research are inadequately disseminated. The deterioration of critical institutions is iot, of course, uniform (Senegal, Togo, Mauritania, and Malawi, for example, are showing some progress), but it is widespread, it is serious, and it is not yet being dealt with effectively. The matter is urgent because it is un- likely that the overall economic crisis can be halted without at least a minimally efficient level of performance by the public institutions. A major part of the problem is that many African politicians have used the state to reward themselves and their supporters with jobs, contracts, public monopolies, and illicit income. The state itself, in turn, has become increasingly ineffective as a producer of goods and services for the mass of the population. It is vital that this trend of institutional decline be reversed. Good public policy, no matter how wise and appropriate, cannot be put into practice-indeed, cannot even be researched and formulated in the first place-without effective public institutions. That is why institutional reform is a bedrock responsibility of African govern- 9 ments. Nothing lasting can be achieved without it. It is not a huge, heroic, one-time event. It is more difficult even than that. It is a vigilant, careful, and continuous process. Public institutions are, after all, living organisms, and must remain responsive to changes in their environment. They deteriorate when they harden into inflexibility and indifference, and lose sight of their fundamental purpose: to serve and assist the public. Before concluding this section on the importance of the reform of policies and institutions, I want to return to the problems of Africa's agriculture and to emphasize once again the key to Africa's economic recovery lies in its agricultural sector. The economic policy environment within which the sector operates is of crucial importance. It is not enough simply to have "good agricultural projects." They can be completely undermined by an inappropriate set of incentives, and particulary by the wrong cost/price relationship. This is not to suggest that getting the agricultural prices right is the one all-purpose remedy for every possible problem in the development of the sector. But governments need to reflect that getting them wrong can and does lead to immense difficulties. Altering the economic policy environment in sub-Saharan Africa more in favor of agriculture would dramatically alter the economic scene. It would apportion scarce economic resources more ration- ally across the economy. It would improve the international com- petitiveness of the agricultural sector. It would provide incentives to farmers both to produce more, and to produce more efficiently. And it would stimulate more employment, more exports, and more income-earning opportunities. All of the suggestions for reforms that I have made would help alleviate poverty. And they would serve as well to ease the debt problem, both by reducing aggregate demand-which for many African countries is essential in the short term-and by expanding the supply of tradable goods in agriculture. Clearly, only the African governments and peoples themselves can take the fundamental actions required to solve the critical prob- lems that flow out of the crippling distortions in the economic policy 10 framework of their countries. No outside assistance-however mas- sive or generous or well-meaning-can possibly substitute for these internal efforts. But given the resolve of Africans themselves to take on that heavy task, the international development community has a clear obli- gation to assist and support them in those efforts. I will expand on this point in Section IV. I only want to stress here that if we do not make those joint efforts, then all of us must prepare ourselves for a scenario of suffering and starvation and economic collapse in Africa beyond anything we have seen thus far. II. THE MOUNTING PRESSURES OF POPULATION GROWTH' Eliminating economic distortions, then, is of immediate concern. But they are not the sole set of constraints to sustainable develop- ment. The most important long-term issue is the rampant growth of population. For most countries in Africa that issue constitutes a ticking time bomb. The Dimensions of the Population Problem Africa's 1980 population was estimated to be about 453 million, including 363 million in sub-Saharan Africa (Annex VIII). The den- sities vary, but are generally low. Most countries have densities of under 40 persons per square kilometer, and even in the most heavily settled areas densities rarely exceed 200. By sharp contrast, national densities in Asia range from 42 to 600, with heavily settled areas exceeding 1,000 persons per square kilometer. The population problem in Africa, then, is not that there are now too many people there. There are not. The problem is that the population growth rate is explosively high. During the 1950s and 1960s, with death rates on the whole declining faster than birth rates, the rates of population growth con- tinued to increase in most developing countries. But beginning with the early 1970s, a slow deceleration of population growth has be- come evident in all regions of the world except Africa. For the I am indebted to the staff of the Population Council and to members of the World Bank's Population Study Task Force for assisting me in collectirg material for this section. 11 developing world as a whole, measured over five-year periods, the growth rate peaked at 2.46% in the first half of the 1970s. For Africa it is continuing to grow, reaching 3.01% in 1980-85. Table 3 Population Growth Rates, by Region, 1950-85 (annual average in percent) Region 1950-55 1960-65 1970-75 1975-80 1980-85 Africa 2.11 2.44 2.74 3.00 3.01 Latin America 2.72 2.80 2.51 2.37 2.30 East Asian 2.08 1.81 2.36 1.47 1.20 South Asia 2.00 2.51 2.44 2.30 2.20 All Developing Countries 2.11 2.30 2.46 2.14 2.02 aExcluding Japan. Source: United Nations 1982 assessment. Sub-Saharan Africa, already the poorest region in the world, now has the highest population growth rate in the world, even exceeding that of the rest of Africa. It is 3.2% per year. Were that to continue, the population would double in 22 years, quadruple in 44 years, and increase eightfold in 66 years. What are population growth prospects in Africa for the next few decades, and for the longer term? Uncertainties affecting the future argue for some caution in an- swering. Demographic processes have a built-in momentum that permits relatively accurate forecasts for 15 to 20 years ahead. Be- yond that time span, the possibility of error becomes much greater. The question, however, remains highly appropriate, and is an- swerable with a fair degree of accuracy. We know, for example, that a large majority of the children born in the 1980s will still be alive past the midpoint of the next century. To answer the question for the longer term, we can spell out plausible assumptions as to the future course of fertility and mor- tality, and calculate demographic characteristics. Those who wish to challenge the orders of magnitude resulting from such calcula- tions can best do so by challenging the underlying assumptions, and by proposing and defending alternative assumptions that they consider more plausible. 12 The results of such a projection exercise for Africa covering the time span 1980 to 2100, undertaken by the World Bank, are sum- marized in Table 4 below and presented in more detail in Annex VIII. Table 4 African Population Projections, 1980-2100 (population in millions) Total Year in Selected Fertility Which Countries 1950 1980 2000 2025 2050 2100 Rate, 1983 NRR = la Cameroon 4.6 8.7 17 30 42 50 6.5 2030 Ethiopia 18.0 37.7 64 106 142 173 5.5 2035 Ghana 4.4 11.5 23 40 53 62 7.0 2025 Kenya 5.8 16.6 37 69 97 116 8.0 2030 Malawi 2.9 6.0 11 21 29 36 7.6 2040 Mozambique 6.5 12.1 22 39 54 67 6.5 2035 Niger 2.9 5.5 11 20 29 38 7.0 2040 Nigeria 40.6 84.7 163 295 412 509 6.9 2035 Tanzania 7.9 18.8 37 69 96 120 7.0 2035 Uganda 4.8 12.6 25 46 64 80 7.0 2035 Zaire 14.2 27.1 50 86 116 139 6.3 2030 Other Sub-Sahara 59.8 121.7 218 381 524 651 6.5 2040 Total Sub-Sahara 172.4 363.0 678 1202 1658 2041 6.7 2040 Other Africa 42.6 89.6 148 225 282 319 5.5 2025 Total Africa 215.0 452.6 826 1,427 1,94C 2360 6.5 2040 aNRR refers to net reproduction rate. When NRR = 1, fertility is a replacement level. The projections are based on the estimated population size in 1980 and its sex and age distribution. They incorporate the as- sumption that mortality improvements in the future will track the historical experience of the more advanced countries in moving toward higher levels of life expectancy. The nature of the more crucial fertility assumptions is summarized in the last two columns of the table. Starting with the estimated level of fertility in 1983 (expressed in terms of the total fertility rate, that is, the number of children an average woman would have during her lifetime), the projections stipulate a decline to replace- ment-level fertility by a date that is specified for each country sep- arately. Replacement-level fertility means a level of childbearing in which each couple on average replaces itself in the next generation. If sustained over a substantial period, this would result in zero population growth. But when replacement-level fertility is reached in a society, it does not mean that the population immediately ceases to grow. It 13 may continue increasing for decades, depending on the society's age structure. Compare, for example, the current age distribution in Nigeria (which is typical of that in most developing countries) and Sweden. Nigeria, 1980 Sweden, 1980 4i 4,, 1 44 4 5 ' , 4' ,5 I o