Valores en la familia

UNIT 5 GLOBALISATION AND AFRICA

3.0MAIN CONTENT 3.1What is Globalisation?

To an expert, “globalization in its liberal sense is the process of globalizing, transforming of some things or phenomena into global ones.

It can be described as a process by which the people of the world are united into a single society and functioning together. This process is a combination of economic, technological, socio-cultural and political forces”. Other experts see globalization as the integration of economies throughout the world through trade, financial flows, the exchange of technology and information and the movement of people and services.

The extent of this new phenomenon is clearly reflected in the volume of trade that takes place among nations of the world. The rising importance of the trade and capital flows is reflective of the significance of this trade. An increasing large volume of trade and increase in GDP is generated in activities linked directly or indirectly to international trade. There has been a tremendous cross-border financial flow, particularly in the form of private equity and portfolio investment, compared with the past.

A lot of families, especially in the third world countries benefit from a lot of remittance from developed world. In addition, the revolution in technology and other communication have made communication easier and better than hitherto. The much improved technology in communication has enabled individuals and corporations to base their economic choices more on the quality of the economic environment in different countries. Economic success in today’s world is based not on relative resource endowments or geographical location as it used to be in the past. Market perception and predictably of economic policy now take precedent over other considerations.

Globalization is first and foremost a result of the expansion, diversification and deepening of trade and financial links among nations of the world, especially in the past ten years. The indices of these are multilateral trade tariff reduction and trade liberalisation efforts.

Increasing trade, a benefit from globalization, has given consumers and producers a wide choice low-cost goods, which attract more advanced technology and facilitated a more efficient use of global resources.

Greater access to the international market allowed countries, even third world countries, to exploit their comparative advantage to produce more goods and services for the international markets.

The rapid increase in capital and private investments flows has raised the resources available to countries. This in turn has also accelerated their level of development beyond a perceived pace. The openness to foreign investments, especially in the developing economy has increased the capital flow from such countries. It has also increased employment rate too.

3.2 Effect of Globalisation on Africa

African countries have no known good macroeconomic policy. Those countries that have good macroeconomic policies are able to take advantage, respond quickly and appropriately to changes in the international environment. Certainly, those countries that are open to trade and capital flows on a free and fair basis; and are able to attract international capital benefit more from globalization.

While globalization rewards good policy, it also punishes bad policy or increase poverty in countries with poor policy. This underscores the importance of flexible and well-informed policy-making, of solid, articulated institutions and transparent governance. Countries especially African countries are sometimes bypassed by the gains of globalization because of bad policy and an unarticulated financial set up to achieve the gains of globalization.

The trade that now emerges is built on an unacceptable level of social inequalities to vulnerable communities and groups, or causes global ecological or environmental damage and disregard to our future generations cannot be said to be conducive to sustainable development.

Established and large companies especially the Trans National Corporations (TNCs) came in to Africa and brought in the finished goods at cheaper rates than goods produced in Africa. In some cases, they established industries in African nations, employed cheap labour and produced goods that compete favourably with African articles. In Zimbabwe and Nigeria, the textiles industries were worst hit. Today, most industries in these countries have been closed down because of the competition with foreign textiles. The tyre and battery industries in Nigeria suffered the same fate. This led to the retrenchment of workers that worked in these industries. These workers were family breadwinners with children in schools and house rent to pay. The importation of second-hand clothes from Europe has forced many workers out of business.

In Kenya, the women who were involved in the local production of local bags were negatively affected when bags were produced en masse in Japan and sold in East Africa. Many second-hand bags, shoes and belts

flooded the Nigerian markets too. Companies that produced these goods have been closed down. This created a lot of unemployment in the country. Though many Nigerians are involved in the sale of these goods, government cannot get tax from most of these traders, and besides, most of these goods are smuggled goods.

In Mali, foreign investors have taken over the major revenue earning enterprises such as tobacco and textile industries. In Nigeria, the oil sector is dominated by external investors. The only airline in Mali was taken over by foreign investor. The African markets have become a dumping ground for European goods and from the East, all in the name of free trade. In Zambia, the spirits, motor and textile industries are dead.

Massive unemployment is a commonplace in Africa. In Zambia for example, retrenchments and industrial close down has led a staggering number of over 200,000 people out of employment over a period of five years since 1992. In Nigeria alone, there are over about five million unemployed persons. With 93 universities in Nigeria, more graduates may join this train very soon.

3.3 The Challenges of Globalisation for Africa

Globalization will continue to increase interdependences among different countries and regions. It may also reinforce partnership between the advanced countries and the rest of the world. In order to sustain this relationship, the advanced world could open up their markets for products from developing nations, especially the goods they have comparative advantage to produce. In addition, the reform efforts of the African countries will need to be adequately supported by funds from the international organisations based on concessional terms.

The World Bank must accept the proposal of debt forgiveness presented by poor nations to it. This will enable these countries to solve their financial problems. World Bank has recently begun implementing the framework for action to resolve the external debt problems of heavily indebted low-income countries including their large multilateral debts.

Three African countries – Burkina Faso, Cote d’Ivoire and Uganda are among the countries to be considered. Nigeria has also enjoyed debt forgiveness from Paris and London Clubs, after negotiating its way out of the debt peonage by paying up a substantial part of the debt, and having the rest forgiven.

The challenge facing African nations is their inability to design public policies so as to maximize the potential benefits from globalization and to minimise the downside risks of destabilization or marginalization.

The Sub-Saharan Africa has made substantial progress toward macroeconomic stability:

• “There has been continued improvement in overall growth performance. Average real growth has increased from less than 1 percent in 1992 to over 5½ percent in 1996, and this positive trend is expected to continue;

• There has been some successes in bringing down inflation – many countries have already achieved single digit inflation rates, and for the region as a whole, average inflation is expected to fall from the peak of 60 percent in 1994 to 17 percent in 1997;

• Countries have also reduced their internal and external imbalances.

The external current account deficit has fallen from an average of 15½ percent of GDP in 1992 to about 9 percent projected for this year, while the overall fiscal deficit has been cut from almost 12 percent of GDP to 6 percent over the same period”.

African governments have also made considerable move in opening their gates to world trade. To lend credence to this, 31 Sub-Saharan African countries have accepted the obligations of Article VIII of the IMF’s Article of Agreement since 1993. Most countries have moved ahead with trade and exchange liberalisation. They have also eliminated multiple exchange rates and non-tariff barriers, and also lowering the degree of tariff protection.

A study by IMF, African Department shows that the number of countries in Sub-Saharan Africa with “restrictive” exchange rate regime declined from 26 in 1990 to only 2 in 1995, while the number of countries with a “substantially liberal” trade regime rose from 26 to 28 over the same period.

In Africa, the restructuring of many countries economy is gaining currency. Throughout Africa, government intervention in economic policy is on the decline. Price control activities, which interfere with price mechanism has been reduced and agricultural marketing has been liberalized, especially in Nigeria where government has adopted privatizing state businesses. Private individual and organisations have been enjoying this policy. Fiscal policy has also been encouraged. Steps are being taken to rationalize tax systems, to reduce exemptions and enhance administrative efficiency. Attention is now shifting from white elephant projects to channelling expenditure to key social services, particularly in health and basic education.