DeniAfrica

The NYTimes writes

Development bankers estimate that some $10 billion of remittances could be saved or invested — if people had access to banks and were encouraged to use them. By banking part of their remittances, recipient families could earn interest, establish credit and provide money for local investment. The result would be more resources to help pay for schooling, starting small businesses or home ownership. Such saving and investment lead to economic growth. And growth at the bottom of the economic scale is the surest way to actually lift people out of poverty. As it is now, most banks in Latin America that receive remittances simply dole out the sums to recipients, after collecting part of the fee paid by the sender. They make no attempt to turn the recipients into bank customers. Bank officials and the politicians that oversee them need to do more to educate the poor about banking and to offer them services. Banks need to be reminded that such lending can be profitable — and will further broader national goals for economic growth. To that end, remittances deserve a more prominent place on the agenda at the meetings of the World Bank, the International Monetary Fund and the Group of 8 leading industrialized nations. Unless those billions in remittances are banked, money that could fight poverty will be left on the table.

BusinessinAfrica reports on the progress of privitization in Tanzania:

“Privatisation creates jobs in long run. You have to bear in mind that we had companies that were failing and privatisation reopened them and created employment where there would have been none. In other cases you had companies that were overstaffed with resultant retrenchments and redeployments. And then there’s employment created downstream outside the companies themselves. For example, the Breweries in its three companies employs a total 700 people directly. But outside the companies they employ about 320 000 people in downstream activities like distribution and retail outlets.” Although the number of employment opportunities created by privatisation is, in Kavishe’s words, “a moving target”, the quality of jobs has certainly improved. “When the Breweries was privatised, the minimum wage was 5000 shillings. It is now twice that,”says Dr E Kavishe coordinator of Presidential Parastatal Sector Reform Commission.

Presented at

The African Capacity Building Foundation (ACBF)

and

International Organization for Migration (IOM)

Workshop

Prepared by

F.W. KWOBA

US-AFRICA BUSINESS COUNCIL

P.O. Box 441994

SOMERVILLE, MA O2144 USA

TEL: (781) 648-2535

Email: frederickkwoba@hotmail.com

African Diaspora as Key Partners in Sustainable Development of their Home Countries

This paper is based on the premise that no single person or institution has a monopoly of solutions to Africa’s development challenges. What is worse, “business as usual” has not helped Africa in the last 40 years and is not going to help Africa in the foreseeable generation unless we change our way of thinking. We need to “think outside the box” for new ideas. A great deal of creativity and innovation is going to be needed from Africans, both at home and abroad, as well as from friends of Africa and Africa’s development partners, to tackle our multiple problems if we are going to achieve the MDGs by 2015. Although Africa has a lot of sympathizers around the world, Africans cannot just sit back and expect to be spoon-fed by the international community for ever. Neither can we afford to blame others indefinitely for our malaise. We ourselves as Africans both at home and in the Diaspora must ultimately assume the greater burden of our destiny. Speaking as one African to another, we need to advance breakthrough ideas and map out viable implementation strategies on agreeable solutions to enhance the quality of life of our people who look to us, the elite, for salvation from poverty and the misery of underdevelopment.

Poverty Reduction

The phrase “poverty reduction” has gained currency in development discourse and many people use it glibly even in situations that contribute nothing to poverty reduction. Here is my rendition of it as it jibes with conventional wisdom. The usual gauge of how rich or poor the citizens of a country are, is not improved roads, free education, free healthcare, or even the elimination of corruption, important as all these variables are in a healthy society. It is something called “per capita income” which is the average annual income of individuals in the country. What this means is that even if some magical donor were to enable the government to provide its citizens with better physical infrastructure as well as free education, free health and other goodies (all worthy of MDGs), the citizens would still be as poor as they were before the arrival of the mythical benefactor. What is amiss? None of these freebies puts money in individual pockets of the masses. And there is the rub. On the other hand, if a magic wand created millions of new jobs, entrepreneurs and asset owners, it would most certainly lead to a rise in the per capita income. The citizens would be better off. The tax base would expand, meaning more sustainable revenues for the government. From the taxes, the government would have more money for those roads, schools and hospitals.

How do Western countries address poverty in their own ranks? In the US alone, there are numerous poverty alleviation programs such as Social Security, SSI, AFDC, OASDHI, CETA, OAA, AB, APTD, WIN, FELA, CVC and UI (Unemployment Insurance) – all of these in the state sector - never mind the ACRONYMS. There are just as many in the private sector. And there are just as many such programs in the EU countries as well. All these programs have one characteristic in common. They put real money (cold cash) in the hands of the poor by design to maintain aggregate consumption levels for a robust economy. Why can’t the West apply their age-old proven techniques to poverty-stricken countries in the Third World? Not one of their programs is being promoted in Africa. Is African poverty different from Western poverty? Suffice it to say that the HIPC Program has been in existence since 1996 with successful implementations in a number of countries. Yet, no one can identify any post-HIPC countries where poverty reduction has been recorded and by how much. People know poverty when they see it; they also know prosperity when they see it. We need an agreeable definition of poverty reduction based on standard measures that everybody can see. Nobody, not even in the World Bank, has come up with a concise definition of poverty reduction and how it is measured. So first things first, we need to participate in the definition of this concept and set the parameters that we can all agree on. The “symptomatic economics” (the tendency to address symptoms instead of causes) arises from the school of thought that sees money as the cure of poverty or food as the solution to hunger. A lack of money is a symptom, not a cause, of poverty. Poverty is cured not with money but by gaining access to the productiveness – the skills, tools and assets, in that order – required to earn money.

Migration and the African Diaspora

The ten million and six million African expatriates living and working in America and Europe respectively today are Africa’s most precious and under-utilized resource. These individuals are not only earning money abroad and sending some of it back to their families, but much more importantly they also represent an incredible human resource of expertise, knowledge, education, experience, entrepreneurship and enthusiasm that can be deployed creatively on a host of development fronts back home, if only we could create ideas with attractive incentives. We need ideas that put the nationals of the country in the “driver’s seat” under the premise that development is a do-it-yourself proposition. One such ingenious idea is called DENI and is alluded to below. No one can develop Africa but Africans themselves. The growth of private enterprise in Africa can best be nurtured by international agencies like ACBF engaged in facilitating public-private partnerships such as called for in DENI.

We are all fully cognizant of the fact that for a long time, African leaders have been gathering in high profile Summits of their own to discuss African crises on their own terms, but no results have been apparent from the top. Their ineffectiveness may well lie in their official neglect to engage their own people in a national dialogue. The challenge of our underdevelopment is too big to leave it to the politicians alone. We, too, as Africans in the Diaspora, have been conducting our own well-attended conferences in various Western capitals (Washington, London, Paris, Geneva, etc) propounding all kinds of solutions that never see the light of day. Articulating our problems is the easy part. Our heads of state are doing it and we are doing it too. There is no point in rehashing African problems at every forum. Who doesn’t know the “Anatomy of African problems?” The hard part is agreeing on solutions. This is precisely where international agencies like ACBF can play a useful role by bridging the gap between us (the African elite, both at home and abroad) and the African capacity deficit. Hindsight is always easy. It is thinking ahead that is hard. The African Presidents who are the prime movers of NEPAD, have called for a credible plan to involve the African Diaspora in NEPAD. They are right. Africans in the Diaspora are clearly underutilized. They can do a lot more, if offered the right incentives. This is the community whose aggregate remittance to their home countries far exceeds all forms of foreign aid combined. Yes, we are willing to work closely and constructively with NEPAD. Africans in the Diaspora could serve a dual function: as a base for external resource mobilization and also as a lobbying group in Western capitals (Washington, London, Paris, etc) to promote increased inflows of foreign direct investment (FDI). It stands to reason that foreigners cannot be enticed to invest in Africa if Africans themselves are not investing there.

Remittances:

With the economic development plan based solely on grants and loans from foreign sources, Ghana has recognized the importance of its Diaspora community as the major source of foreign exchange. This view was confirmed by Ghana’s current Foreign Minister, Hon. Nana Addo Dankwa Akufo-Addo, during a speech he delivered at the Nkrumah University of Science and Technology in February of this year in which he noted that “money transfers for last year alone were around $4.5 billion. Family members abroad sending money home constitutes over 40% of our total GDP.” The current Ghana Commissioner of the Internal Revenue Service, Mr. Daniel Ablorh Quarcoo, said on July 20, 2006, while speaking at a Media Dialogue on ‘The Tax Net as it Affects Micro and Small Enterprises’ that “slightly over 1 million Ghanaians are taxpayers.” That is 1 million out of 20 million of Ghana’s population, clearly not enough of a tax base to fuel the economy. And no amount of financial reform can improve on this dire situation when the bulk of the population is living on less than a dollar a day. Between January and March this year, Ghanaians are estimated to have sent home $1.6bn. There is more where this came from.

Remittances stimulate the economy by increasing currency flow and consumer purchasing power. These are literally life saving injections, but we can’t help everybody individually in the whole country. That is not possible. Instead, when we help our countries economically through ingenious programs and the economies improve, the effects spill over to EVERYBODY IN THE COUNTRY. That is what DENI is all about. It is the next logical step to remittances. With the DENI program, we can mobilize expatriate Africans to pool their remittances to purchase one or more of the state-owned enterprises (SOEs) slated for privatization, resulting in widespread ownership of these assets by the nationals of the country and the ploughing back of their dividend earnings back into the economy, leading to massive economic stimulation, accelerated growth and poverty reduction. The African Diaspora constitutes the most indispensable catalyst in the accelerated development of their home countries because they have a permanent vested interest in the well-being of their people. The ever growing African Diaspora is poised for this unprecedented role by virtue of its ever growing remittances which are already a significant portion of the GNP of several countries. The volume of these remittances now exceeds all forms of foreign aid combined. We, as Africans both at home and abroad, along with our development partners, are only limited by our creativity in terms of how best to exploit this external resource of private funds. DENI is one such example of creativity designed to enhance the development impact of remittances that Africans in the Diaspora have embraced wholeheartedly.

Ownership Culture

There is no sustainable way to poverty reduction unless Africa widens the base of economic participants. When knowledgeable people speak of indigenous capital “ownership as the sine qua non of sustainable development,” they point to the right solution. Even former World Bank President, James D. Wolfensohn, conceded this point but did absolutely nothing to create a culture of ownership in Africa during his long 10-year tenure at the Bank - a missed opportunity that was disastrous for Africa especially following the “lost decade of the 80s.” I have in mind a specific new development paradigm, based on broad participation of the population in market driven economic activities. This paradigm is discussed thoroughly on DeniAfrica.com where it does not only postulate but provides a road map of how Africa can create millions of entrepreneurs and business asset owners and not just a handful of millionaires. The ingenuity of this concept, called Direct Expatriates Nationals Investment (DENI), is to widen the base of Africans participating in the revival and stimulation of their economies. There is no massive program anywhere in Africa that is attempting to do this. DENI was first introduced at the Benin Conference on Remittances last February and it deserves mention here because this forum is also calling for ideas to harness the flow of remittances for development purposes. It is the first and one-of-a-kind project that positively impacts the people at the grassroots, precisely where poverty is concentrated.

Initiatives such as NEPAD pride themselves in looking for African solutions to African problems. But there is nothing in the NEPAD documents that speaks of prosperity sharing. Lest it be misunderstood, NEPAD has a lot of laudable goals but based on the wrong premise – that money is the cause of development, not the effect. The truth of the matter is the other way around (see Poverty Reduction above). The strategy should be to impress upon African governments to support a privatization and commercialization model that advances broad-based indigenous ownership of income-generating assets – and not simply make the rich richer. Specific and transparent policy initiatives, in this regard, are likely to be more fruitful and the results more robust, if all those focusing on poverty reduction insist on a steady broadening of asset ownership to correspond to a steady and measurable alleviation of poverty. That is the litmus test of a value-added contribution. An asset ownership strategy – as yet an overlooked component in country PRSPs – holds great promise in turning assetless citizens into proactive stakeholders in the stability of their country.

The virtues of ownership espoused here are not unique to Africa. Tony Blair has been espousing his own “opportunity society” in Britain while President Bush has been espousing his “ownership society” in the US. These two world leaders recognize that to continue to reduce poverty in their capitalist economies and hold it down to miniscule levels, they need to constantly find new themes to advance the concept of prosperity sharing. This is exactly what we should be preaching and doing in Africa. People create wealth, not the government. This is a classic example of an anomaly where all the planned expenditures on government programs can be met under the MDGs and yet the people will still be poor. This is the hidden danger we see facing the MDGs in the African region. NEPAD has failed to inspire ordinary people because of its lopsided emphasis on government programs, not on people-driven initiatives. Governments do not create wealth, people do. We can’t say it enough. We should commit ourselves at this forum to delivering this message relentlessly and unapologetically to both our governments and our people.

Development

It is now widely acknowledged that Africa’s development in linked to its ability to attract investment capital in terms of both money and skilled people who are technologically savvy and who can develop robust private sector economies in Africa. The challenge facing Africa, which DENI addresses, is to raise the level of private investment to promote development, particularly in infrastructure and technology. But foreign direct investors (FDI) are not going to invest in Africa if Africans themselves are not investing in their own economies. So, Africans both at home and abroad must lead the way and show that we have full confidence in our economies. This is the only reliable way to create jobs and wealth thereby eradicating poverty. Foreign Direct Investment follows a modicum of development, it does not precede it.

Until DENI came along, no program had ever been designed with this kind of enormous potential to bring about a long overdue paradigm shift in the economic development process in Africa. The Debt Forgiveness Campaign spearheaded by Jubilee2000 inadvertently stymied Africa by infusing the African leadership with the obsession that debt forgiveness is a panacea for all our development problems. It is not. And now we are learning the hard truth that the debt forgiveness that so many fought for has not resulted in poverty reduction. Thus, poverty will continue even with the cancellation of debt. Debt can be cancelled with the stroke of the pen, but poverty cannot be cancelled by the stroke of the pen. Hence the need for DENI as we continue to “think outside the box” in order to make any economic headway and eradicate poverty. DENI is an African solution to an African problem. Had DENI received half as much attention as forgiveness has, we would have long solved a host of our problems and our economies would be booming by now. What is needed is a long-term self-help recovery strategy based on people-driven programs such as DENI that will turn Africa from aid dependency to trade dependency. That is how all nations developed. No nation has ever developed by aid alone. History tells us that most successful nations (even small ones) relied on trade and commerce. Africa cannot be the exception.

GhanaWeb reports on the budgetary gap in the countries development programme, a shortfall that DENI would be able to address:

After taking into account the domestic fiscal efforts with respect to revenue enhancement and expenditure realisation as well as the relief funds from HIPC and Multilateral Debt Initiatives(MDI), a resource gap of $2.04 bn still remains to be financed, Deputy Finance and Economic Planning Minister Anthony Akoto-Osei said…out of the total amount of $12.7 bn projected to finance the second phase of the Growth and Poverty Reduction Strategies, Government intends to raise about $2.7bn from domestic sources while relying on the $4.5 bn pledge from the development partners including the $544m grant from the Millennium Challenge Account.