Dialogue on the Future of Africa!

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The Sierra Leone Digest

In sponsoring the Sierra Leone Digest, the Center for Alternative Development Strategies (CADS) Sierra Leone aims to meet the need for a journal of significant thought and opinion on social, political, economic, cultural and development issues in Sierra Leone.

The digest of difference views represent the opinions of the contributing authors and does not necessarily reflect the center's
viewpoint or position.

The sponsorship of the Sierra Leone Digest by the Center is in line with its journalistic program to research and propound issues of developmental value to the Government and people of Sierra Leone, and foster interdependence and international cooperation, protect human rights and promote Sierra Leonean cultural interest and creative achievement in the world.

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BALANCING THE BUDGET
OR UNBALANCING HUMAN LIVES: STRUCTURAL ADJUSTMENT IN AFRICA- AN ANALYSIS

This is an article on IMF and world bank sponsored Structural Adjustment Programs in Africa. It gives a theoretical and historical background to structural adjustment in Africa.

The relentless debate and discussions of the virtues or otherwise of Structural Adjustment in Africa by multilateral agencies, government and non-governmental aid organizations etc, indicate a wide gap between theory and practice. Africa countries have gone through a number of development decades and tries many development strategies (most of them externally-induced) since the 1960s and few of the strategies seem to have achieved the desired objectives. Not only has Africa failed to catch up economically with the industrialized west, but more importantly, the economic and social situation in Africa is in a dismal state, as vividly reported, for instance, in UNHCRs well-publicized study, Adjustment with a Human Face.

LAGOS PLAN OF ACTION

By the time African countries entered the third development decade in the 1980s most African leaders were convinced of the externally-induced development paths their countries had followed in the last two decades. In a determined effort to reverse this trend, African leaders at their annual AOU Summit in Monrovia, Liberia in 1979 proposed a self-reliant development strategy for the continent. A year later the United Nations Economic Commission for Africa (ECA) and the OAU met in the Nigerian capital, Lagos, to synthesize the Monrovia Summit proposals. The result was the "Lagos Plan of Action" whose main features were: self sufficiency in food production; self reliance in industry, transport and communications, human and natural resources, and science and technology (DeLancey, 1992:87-121).

Meanwhile, African Central Bank Governors had in 1979 sent a Memorandum of the World Bank requesting that a special report be written on the economic problems facing Sub-Saharan Africa countries. The World Bank put together a team headed by Elliot Berg which subsequently produced a document in 1981 titled Accelerated Development for Sub-Saharan Africa: An Agenda for Action. The document (which is sometimes called the Berg Report) accepted in principle the main features of the Lagos Plan of Action, but insisted that African countries should pursue their "comparative advantage" by striking to improve production for export - a policy which in the past had worked mostly to the benefit of the industrialized countries (Ibid. 97-99).

This was unacceptable to the African leaders, but they had little choice as aid from bilateral and multilateral donors was dwindling fast. And African leaders needed a lot of financial resources for the implementation of the Lagos Plan. It was in the midst of this predicament that some leaders turned to the IMF and later to the World Bank for economic 'salvation'.

Structural Adjustment

The IMF and its sympathizers analyzed Africa's economic woes for a purely internalist perspective. They theorized that the economies of African states lack the capacity to generate rapid growth because of certain inherent weaknesses. These are: excessive public expenditure especially for administration and for subsidizing domestic consumer products and imported goods which benefit the well-to-do; over-valued exchange rates which make imported food cheaper than local produce, protection of local industries which stifle competition, and government investment in public companies (Berg Report, 1981, Chege, 1987). The solution to these problems, according to the IMF, lay in structural adjustment.

It is conceded that the actions of many African leaders are responsible for the continent's malaise. Some of these are:

a. corruption and mismanagement by the ruling and governing elites (Chazan et al 1988; Wunsch and Oluwu, 1990);

b. heavy taxation of the agriculture sector of support urban services (Lipton, 1980; bates 1981; and

c. political instability.

However, external factors have equally played havoc with African economies. They include:

a. decline in the value of primary exports in the international markets;

b. the oil crisis in the 1970s;

c. recession and protectionism in the capitalist world which has reduced the demand for Africa's products;

d. decrease in foreign aid from western governments and loans from international commercial banks to African countries;

e. Africa's debt burden and the need to service these debts with scarce resources (Delancey 1992; Goncharove 1988).

Structural adjustment as a reform policy was founded on the premise that removing distortions and providing proper incentives to the private sector would lead to recovery of production, achieve a more efficient use of resources , and promote a higher rate of investment.

Phases

There were two phases of structural adjustment. The first phase (which was sponsored by the IMF), was from 1981-84. During this phase the emphasis was on Stabilization policies. These policies aimed at restraining aggregate demand an public expenditures, achieving sustainable budget and current account balances, and reducing price inflation through tight monetary and fiscal control (Roth 1991; ADB 1990; Daniel 1986; Harris 1986).

The second phase was from 1984 during which the World bank played a more dominant role. The bank retained most of the earlier policy instruments of the IMF, but advocated a more forceful market reform, policy. There were four broad policy themes:

1. devalue over over-valued exchange rates to increase export competitiveness;

2. remove price distortions in commodity markets to stimulate production and export;

3. eliminate food subsidies and producer input subsidies to reduce budget outlays; and

4. downsize public sector employment and eliminate inefficient state enterprises through privatization to increase growth and to curb government expenditures (Roth 1991).

African Reactions

At least thirty African countries have adopted structural adjustment programs (SAP) since 1980. But these programs have never been popular in African countries for a variety of reasons. In the first place, they are imposed from outside, they challenged certain established institutions , and are too harsh as they have the effect of severely limiting the provision of social and other basic services which could be politically detrimental to the governing elites. Secondly a good percentage of the loans given by the IMF and other international lending institution to countries instituting stabilization programs goes toward paying interests on debts to western institutions (ECA 1989). Thirdly many Africa leaders see an element of hypocrisy in the IMF conditionalities, because these conditionalities are not applied to western countries, despite their huge deficits. Fourthly, although advocates of structural adjustment insist that each of the arrangements are tailor-made for each country, these policies are derived from one dominant diagnosis which leads to a standard set of prescriptions whose leitmotif is "getting prices right" (Kanesa Thasan 1981; African Development 1985, Lawrence 1986). Fifthly, structural adjustment programs and policies are not gender neutral in operation or effect. In other words, these policies and programs affect men and women differently (Gladwin 1191).

Critics of structural adjustment also point out that the programs have failed to stimulate economic growth or recovery in Africa. They have not succeeded in eliminating urban bias and in redistributing income. These programs, in spite of their rhetoric to help the agricultural sector, have actually worsened significantly increase the price of imported agricultural-related goods (Gladwin & McMillan 1989).

High Price

Indeed many African leaders understand the need to balance budgets, to cut public spending, etc. but they are also painfully aware of the high price they have to pay, such as rising unemployment, political and social unrest, and so on. The major dilemma posed by structural adjustment has been "the challenge to balance budgets without unbalancing human lives".

Some World Bank officials like Uma Lele (1991) are aware of the social and economical problems created by the SAP. She has noted that SAP has not only entailed cuts in public expenditures on essential medical, educational, and other services, but has also led to increased cost recovery in the form of school fees and charge for visits to health clinics. Shortages of foreign exchange have encouraged black (illegal) markets and privileged access to essential imported supplies such as medicines, production inputs, consumer goods, and transport services. The adverse impact of these developments is bound to be greater than average on poor women-headed households who tend to have less privileged access to such special channels and may not be able to spend the time necessary to obtain scarce goods.

But Lele dilutes her concern by arguing that "the current unsatisfactory scenario must be compared, however, with the even worse consequences of not adjusting." She goes on to say that the primary issue in adjustment is thus not whether to adjust, but the speed of adjustment and the mix of measures needed to ensure that growth is resumed, which minimizes the burden placed on the poorest households and which increased the labor productivity of these households so that they can better reap the benefits of national growth.

Social Dimensions

It is now being increasingly appreciated that the social effect of structural adjustment cannot be ignored. Africa needs a stable political system but more importantly a healthy and vibrant population for the success of structural adjustment. To this end, UNICEF began to lay emphasis on the social aspects of adjustment in the mid 1980s. UNICEF and other agencies, principally the African Development Bank, United Nations Development Program (UNDP) and the ECA, persuaded the World Bank to address not only economic issues but also social issues in the implementation of structural adjustment programs. Consequently, the World Bank initiated the Social Dimensions of Adjustment (SDA) Project in 1986. Some twenty-seven African countries are now participating in this project (World Bank 1990).

An Interview With Dr. James Jonah -- Chairman, Interim National Electoral Commission (INEC)
As the date scheduled by the NPRC regime to return Sierra Leone to democratic civilian rule draws closer, increased attention is being focused on INEC, the body on which so much depends to transform this objective to reality. Read what the head of INEC then, Dr. James Jonah, told the Sierra Leone Digest -- August 1994.

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