«Published by the Center for African Studies, University of Florida ISSN: 2152-2448 African Studies Quarterly E Staff Elizabeth Beaver Lin Cassidy ...»
Although Botswana's liberalized economy and its reputation of a stable democracy have allowed for a greater role by private foreign capital in both mining and manufacturing and helped attract foreign investment these factors alone cannot explain the economic progress in Botswana.23 This is because other factors played equally important roles. First, are the high demand and prices for diamonds on the world market, except for 1981/82 and 1992, have allowed the government to accumulate huge savings and trade surplus. Similarly, beef exports have given the government additional revenue for development programs. The Beef Protocol with the EC enables Botswana beef exports to earn substantial revenue because prices are above world market levels. The EC has granted a 90 percent rebate of the variable levy to all AfroCaribbean Pacific (ACP) beef exports and buys the largest amount of beef from Botswana compared to other Southern African countries.
Second, is the commitment to development by the political and bureaucratic elite who have pursued realistic foreign exchange, fiscal, and monetary and wage policies, all of which are attractive to private foreign investment and conducive to national development. 24 Related to this is the close collaboration between the bureaucracy and politicians to harness resources and implement developmental goals, a relationship lacking in Angola, Malawi and Zambia, and other developing countries. This 'partnership' between the political and bureaucratic elite for development has allowed politicians to seek and accept economic advice from technocrats, especially where national development plans and budgets are concerned. The politicians' support for planning and finance has been expressed by placing the two in one Ministry of Finance and Development Planning (MFDP) in the Vice-President's office.25 This has ensured congruence between planning and budgeting, effective implementation of goals, and planning and channelling private foreign investment in accordance with national goals.
Third, economic success is attributed to the efficient, politically neutral and stable bureaucracy that has meant proper utilization and allocation of resources by avoiding overexpenditure, foreign debt, and rampant inflation, while maintaining high stable growth rates.
While Botswana has been cited by Wallis as having an efficient bureaucracy because of recruitment and retention of expatriates (especially economists for planning purposes which in
turn means a slower rate of localization), the efficiency of the bureaucracy can also be attributed to relatively low levels of corruption among the senior bureaucratic (and political) elite.26 Finally, the quality of leadership and careful management of diamond revenues has greatly maximized Botswana's chances of economic development. Related to this are the skill and tact displayed by the Botswana elite in successfully negotiating with de Beers Diamond Company for 50-50 percent share ownership in Botswana diamond mines in 1975 instead of the previous 85-15 percent ownership. The 50-50 share holding gives the state influence over wage policy to allows for flexible changes in minimum wages, licensing, and operations of the mines as well as authorization to expand when necessary to the benefit of both the nation and de Beers.27
Angola: Economy in Shambles?
Angola is richly endowed with vast oil, mineral, and agricultural resources that give it tremendous potential for economic development. Its development is based on exports of petroleum and oil products, diamonds, and coffee. At independence in 1975, the Angolan state opted to transform the inherited colonial economy into a socialist one, excluding the oil industry, which continued to operate on capitalist principles.
The oil industry is the backbone of the economy having displaced diamonds and coffee in the 1970s. The government, through its national oil policy, created the national oil company called Sociedade Nacional de Combustiveis de Angola (SONANGOL), with exclusive concessions for oil exploration and production rights. Its assigned task was to coordinate and control petroleum production in the country. This pragmatic arrangement in the oil sector ensured revenues to the government. A 1978 statute allowed foreign oil companies to operate in Angola, either on the basis of a production-sharing agreement or a joint-venture arrangement, with 51 percent shares for SONANGOL through such companies as CABGOC and Texaco.
These two provisions by SANANGOL have won the confidence of foreign oil companies, with more than 15 currently operating in Angola.28 In the agricultural sector coffee plantations left by the Portuguese, who fled after independence, were nationalized with production by peasants and private estates permitted on a small scale.29 In the diamond industry, the MPLA government nationalized the Portuguese government's diamond company by acquiring 38 percent of its shares and the shares of other small holders in 1977 and 1979, thereby accumulating a total of 77.21 percent shares. However, the government relied on contractual agreements with foreign companies to mine and sell diamonds on the world market. Since 1986, a state diamond company, Empresa Nacional de Diamantes de Angola (ENDIAMA), has marketed the diamonds.
The revenue from petroleum exports has given the state tremendous resources with which to develop the economy and has given Angola the semblance of a rich, thriving economy. This is a facade, however, because after 24 years of civil war with its concurrent high defence expenditures of 20 percent of the GDP, the Angolan economy is in shambles. Oil revenue contributed 41.5 percent to the total GDP in 1991 and 79 percent to the total revenue in the 1992 budget. In spite of Angola having a 1993 GDP of $8.4 billion, and being placed in the middleincome group of countries in the world, the state has not been able to promote economic development. In 1993, for example, its external debt amounted to $10.9 billion, accompanied by African Studies Quarterly | Volume 5, Issue 1 | Winter 2001 http://www.africa.ufl.edu/asq/v5/v5i1a2.pdf 24 | Hwedi the highest mortality rate in the world of children under five years (292 per 1000), severe food shortages, infrastructural destruction, and little diversification into manufacturing.30 Although the civil war has been the most important factor in diverting resources from development, socialist centralized planning, subsidies, price controls, collectivization in agriculture, control of infrastructural facilities, and corruption have also contributed to the collapse of the Angolan economy.
The civil war, waged since independence in 1975 to the present, between the ruling Movimento Popular de Libertacao de Angola (MPLA) and Uniao Nacional para a Independence Total de Angola (UNITA), has denied the state the peaceful environment necessary for economic development. In 1993, the government mortgaged three years of future oil revenue (on very unfavorable terms) to purchase military supplies, to finance the war against UNITA, resulting in further loss of revenue for development.31 However, in fairness to the government, it is difficult to ascertain whether or not Angola would have experienced successful development in the absence of civil war, because there are other equally important impediments to its development.
The civil war negatively impacted on diamond mining when the mines were bombarded by UNITA forces and mining was temporarily halted as large diamond areas were seized. The war and smuggling of diamonds have deprived the state of revenue from diamond mining. The war has also caused serious destruction of infrastructural facilities including bridges, roads and railroads, making it difficult to transport supplies to producers and commodities to the market.
Similarly, the war has reduced production in agriculture as farmers have abandoned the sector, fleeing war and the risks associated with land mines. The production of both food export crops (e.g. coffee) has been reduced causing severe food shortages resulting in famine. Angola has become dependent on expensive food imports and food aid to avoid famine conditions and the food shortages have given rise to a thriving black market.
In addition, socialist economic policies that encourage state participation in the economy have hampered rather than facilitated the process of economic development. The state's involvement in the economy has meant a heavy role by bureaucrats. The lack of economic discipline among top leaders has resulted in a lack of congruence between plans and budgets, thus making it hard to realize the goals of development. Furthermore, state control of ports and shipping has led to their collapse because the Portuguese colonialists trained very few Angolans at the time of independence and the MPLA state was unable to retain expatriate personnel.32 Public services like education, health, water supply, sewage, and electricity also ground to a halt in the late 1980s due to lack of funds, and bureaucratic impediments.33 State companies such as utilities and those in productive areas have operated at a loss, primarily because of a lack of managerial autonomy to set profitable prices and economic production levels and political control by ministers. Subsidies given by the central government to companies to cover their losses are one example of the inefficient use of public resources.34 Corruption by top MPLA political and military leadership has resulted in state resources being used for personal aggrandisement or allocated inefficiently. In most cases there was duplication of purchases because of a lack of co-ordination and accountability for use of state funds among senior government officials.35 Undoubtedly, corruption goes on unabated because of the government's inability to prosecute the offending officials. Fourth, the fall in world oil
prices in the 1980s worsened the economic situation especially in the absence of government savings during the time of high oil prices. The government's earnings from oil exports declined from $2,000 million in 1985 to $700 million in 1987.36 To resuscitate the economy, the government was forced to introduce economic reforms. In 1987, the government announced the Economic and Financial Restructuring Program, also known as the Saneamento Economico e Financeiro (SEF). Unfortunately, the reforms were not implemented because of a lack of commitment by top MPLA officials sympathetic to a socialist pattern of development, and the dismissal of the Minister of Finance, the architect of the SEF program.37 Persistent economic problems and poor results from its socialist policies forced the government to resume the SEF in 1990. However, the resumption of the war with UNITA in 1992, following UNITA's refusal to recognize the electoral results, again blocked implementation of reforms as the MPLA was primarily preoccupied with defense matters.
Finally, in 1994, SEF was launched in an effort to revitalize the economy. Some reforms were undertaken. For example, in 1984, the government embarked on a program to increase food production to achieve food self-sufficiency by converting state farms into small-holder peasant associations in rural areas. Through agricultural stations, the government provided support in the form of fertilizer and seeds to peasants with limited success. Similarly, in 1990, the government embarked on the privatization of state-owned coffee plantations to boost output by selling 33 plantations to foreign companies. The sale proved expensive due to the old age of the trees and unattractive due to the war.38
Malawi: Frail Economy?
Malawi opted to give priority to agriculture by promoting economic development through the increase of export earnings on tobacco and tea, and to attain food self-sufficiency through increasing maize production. The state pursued a mix of private enterprise and state participation by providing economic infrastructure and investment in new economic activities such as sugar estates. To promote 'balanced' development, the government controlled and directed private sector investment, foreign trade and the location of business ventures. Its control of retail prices and workers' wages was to contain domestic inflation, reduce labour costs as an incentive to investors to use labor-intensive technology, and make exports competitive in international markets and attract foreign investment. Therefore, the government restrained the formation and operation of trade unions. In order to ensure an efficient and effective bureaucracy conducive to development, the government retained British expatriates who occupied 79 percent of senior posts at independence in 1964 because of inadequate local skills. Thereafter, the government adopted a policy of slow indigenization of the public service, as had Botswana. 39 A three-pronged approach was embarked upon to promote development. President for Life, Banda, encouraged senior party and government officials to participate in estate agriculture. The state purchased some foreign-owned estates for distribution to small-scale producers. Parastatal companies (e.g. the Malawi Development Corporation (MDC), Agricultural Development Corporation (ADMARC), and Press Holdings) and joint ventures with foreign investors were encouraged in both the agricultural and manufacturing sectors. In African Studies Quarterly | Volume 5, Issue 1 | Winter 2001 http://www.africa.ufl.edu/asq/v5/v5i1a2.pdf 26 | Hwedi reality, President Banda overwhelmingly controlled the Malawian economy as the sole shareholder of Press Holdings, whose total gross turnover was one third of the GDP and employed 10 percent of modern sector workers in the 1970s.40 In addition, the government created public utility companies to service productive sectors, especially electricity, roads, railways, and provided training for both public and private industry. The government also supported small farmers through, among other programs, four integrated rural development projects largely financed by foreign donors such as the World Bank and Britain.