SUB-SAHARAN AFRICA AND DEVELOPMENT FINANCE ***
Reference: Document No.6,
Africa with the rest of the world is on
the threshold of the third millennium. The vision of developed economies
is for a new century having a healthy economy, steady growth and sustainable
development. In Sub-Saharan Africa(SSA) the expectation is no less high
but is dampened by bouts of depression arising from the prevalence of
political instability and the parlous state of the economies. In developing
countries, more than 1 billion people representing about one fifth of
the world population live on less than US$1 a day, a standard of living
that the United States and Europe attained two centuries ago. Africa
is engulfed in a development crises due to collapsing economies, deepening
poverty, growing hunger and pervasive mismanagement. There is also human,
political and economic crises. Only few African economies like those
of Botswana, Lesotho and Gabon may be said to be growing.
Disparity in growth rates continues to fuel debates as to the factors
responsible for the differential development in developing countries
generally. The main issues are whether the differences are due to institutional,
policy, external or other factors. In recent times, globalisation has
crept in and Africa in particular is faced with the cost of globalisation
but not its benefit. Inability to benefit from globalisation is also
being debated as traceable to various factors including those listed
One traumatic experience of development since post colonial days is
the external debt burden of developing countries. After independence,
many developing countries were worried about the capacity of the private
sector to lead the development process therefore they "looked inward"
and relied heavily on the public sector for planning and economic growth.
The assumption being that the state had better capacity to direct growth.
This development strategy emphasized the promotion of heavy industry
which was considered basic to growth of the industrial sector generally.
But because there was no capital to promote these industries they relied
on foreign capital. This reliance led to dependence on western economies
and exposed many developing countries to the adverse impact of fluctuation
in the world economy.
The excess capital needed by developing countries was found especially
from mid 70's upward due to the surplus funds available in the commercial
banks of developed countries from Organisation Petroleum Exporting Countries
(OPEC) between 1973 and 1974. Whereas in some cases external borrowing
was based on the development need of the borrower, in other cases it
was due to pressure from lenders. In the case of Nigeria for example,
the current civilian President, General Olusegun Obasanjo, was the military
head of state during the petro-dollar season. He had this is to say
of his experience with lenders during his first stint as head of state.
"In 1977 and 1978, at the time of slight dip in
the oil market, international bankers were descending upon us in droves.
They pressed the case that our economic strength was such that we
were grossly under-borrowed, especially for a nation with our type
of visionary development programme.
In consequence of such pressure, many developing
countries borrowed at rates which were then favourable but have today
become a vicious debt trap.
While developing countries were being encouraged to borrow, industrialised
countries adopted economic policies which though favourable to them
at the time, had serious implications for the path embarked on by developing
countries. Due to slow economic growth and problems of unemployment
in many developed economies, they began to place limitation on free
movement of goods and services. They limited the rate at which they
imported labour intensive manufactured goods from developing countries,
in particular clothing, textile and footwear. At the same time they
increased protection for agricultural products. In the European Union
for example, maximum barriers were imposed through the Common Agriculture
Policy while in the United States similar protectionist policy was pursued.
This simultaneous turn of events had far reaching consequences on the
debt situation of the borrower/primary agricultural products producing
countries in the long run.
This article has been written by Bolaji Owasanoye
(Associate Professor, Nigerian Institute of Advanced Legal Studies,
Lagos) for UNITAR following his participation as a resource person in
a joint UNITAR/WAIFEM Sub-Regional Workshop on the Mechanics of Loan
Agreements for West African Nations (Banjul - The Gambia, 3 to 7 May
 Mike Kwanashie "Development: African and Non African Perspective"
unpublished paper presented at International Seminar on Africa: National
Unity, Stability and Development organised by the Yakubu Gowon Centre,
Nigeria, October 1996.
 Olusegun Obasanjo "The Politics of International Debt" unpub. lecture
delivered to members of the International Debt Management Lawyers Association,
July 1992 at p.4.
 Mike Kwanashie op cit.
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