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Sub-Saharan Africa is the only region in the world where the population is worse off today than it was 20 years ago. Thus, global interest has shifted away from Africa, and Africa is referred to as the 'marginalised continent'. But is this decline inevitable or is it reversible? The papers in this book attempt to answer this question, examining policies to avoid marginalisation and ensure that Southern Africa, the most promising part of the continent, and South Africa, its engine of economic growth, become competitive in the new world trade order.



Overview: Avoiding Marginalisation

Overview: Avoiding Marginalisation

Sub-Saharan Africa was the only region in the world where the population ended the 1980s worse off than at the beginning of the decade. Per capita income had fallen and the region was producing less food to feed its population, which continued to grow rapidly. SSA’s economic slide, which has largely continued into the 1990s, is in marked contrast to continued economic progress in South-East and South Asia as well as in Latin America. At the same time, the newly emerging democracies of Eastern Europe have attracted considerable world attention. Thus, global interest and concern have shifted away from Africa, and it is more and more referred to as the ‘marginalised continent’.
Gavin Maasdorp

Marginalisation in the Global Economy


1. Why is Africa Marginal in the World Economy?

Recent slowdowns aside, the last three decades were good ones for the world economy. The average world economic growth rate—both total and per capita—over this period was higher than at any previous time in history. This growth rate translated into huge improvements in the quality of life everywhere, developing countries included. The world rate of infant mortality in 1990 was one third of the rate in 1960; median life expectancy in all countries rose from 50 years to 65 years. Yet there was one region that was conspicuously left out of the worldwide boom of the last three decades: Africa.2
William Easterly

Regional and National Marginalisation


2. The Changing International Economic System

The current evolution of the global economic environment presents serious challenges for many developing countries. In the short term, global adjustment to the economic and political turbulence of the past decade has left a legacy that points uniformly to a more adverse international environment for developing countries. In the medium and longer term, the evolution of more deep-seated global structural factors suggests a much more mixed prospect for different developing countries. It is not, however, a prospect that would justify an optimistic prognosis for Southern African countries in the absence of determined and effective policy responses on their part.
Peter Robson

3. Can Regional Integration Help Southern Africa?

This paper is written in the context of four recent developments. These are:
the establishment of the WTO in January 1995;
the commencement, in November 1994, of the renegotiation of the SACU Agreement between South Africa, Botswana, Lesotho, Namibia and Swaziland;
the transformation, in December 1994, of the PTA into COMESA; and
the decision of SADC, taken in Windhoek in 1992, to transform itself from a body concerned only with sectoral cooperation into a trade integration arrangement.
Gavin Maasdorp

4. Small Countries within Regional Integration

This paper is concerned with the determinants and alleviation of marginalisation in the context of regional integration in Southern Africa. The working premise on which the analysis is based is that there is no superior alternative for small countries but to belong to an economic integration arrangement.1
Michael Matsebula, Vakashile Simelane

5. Migration and the Brain Drain

A democratic South Africa brings with it new challenges and opportunities to the political and economic relations that have prevailed for decades in Southern Africa. The nature of inter-state alignments during the apartheid years reflected both the general political determination of the region’s states to isolate the minority-ruled South Africa and, ironically, the economic realities that obliged the less developed economies to maintain closer economic ties with the despised regime in Pretoria. With respect to labour migration, considerable numbers of people, mainly unskilled, had traditionally trekked to the South African mines for wage employment. Botswana, Lesotho, Mozambique, Malawi, Swaziland, Zimbabwe and, to a lesser extent, Zambia maintained this type of relationship with South Africa both before and after their political independence.
Oliver Saasa

Marginalisation within Countries


6. Income Inequality and Poverty in South Africa

In the context of the South African economy, where the apartheid system existed as a malevolent invisible hand which severely distorted the distribution of income, an encompassing perspective of marginalisation is best given by examining those households which are marginal to the economy in terms of their incomes. This paper describes the distribution of income and then examines the extent of poverty before analysing the characteristics of households in the lowest deciles of the income distribution.
Mike McGrath

7. Public Expenditure and Poverty in Namibia

This paper examines the Namibian case of marginalisation, relating it to government expenditure particularly on education and health. This is done in the realisation that Africa still suffers from domination in the psychological sense: Africans behave as an appendage of the Western system, economically, culturally and socially. The designs of political leaders differ from the needs, expectations and aspirations of the people, and this weakness is partly responsible for Africa’s marginalisation. This situation will not be corrected until the direct involvement of the people is apparent through participatory democracy. If sub-Saharan Africa is to ensure economic security and sustainable livelihoods for its people, it needs to follow social and economic policies which address the most fundamental needs of the people, particularly vulnerable groups like women, youth, children and the rural and urban poor. The overall message of the Namibian experience of marginalisation is that patterns of public expenditure in the post-independence period largely fail to address these needs.
Irene Tlhase, Tjiuai Kangueehi

8. Provincial Marginalisation: KwaZulu-Natal

This paper discusses marginalisation and strategies to overcome it at the provincial level in South Africa, focusing on KwaZulu-Natal. The paper discusses the developmental status of KwaZulu-Natal and outlines possible strategies for the promotion of sustainable development.
Nick Wilkins

Choosing Winning Policies


9. Asian Lessons in Sustainable Development

The sharp contrast in recent decades between the accelerated growth of economies in East and South-East Asia and the apparent economic retrogression in much of sub-Saharan Africa has drawn much analytical and policy-making attention. Although it is important to understand why this wide disparity has occurred, the more pertinent question may be: are there any lessons from the Asian experience which may prove relevant for African policy-makers as they seek to promote development and to avoid marginalisation?
Seiji Naya

10. The Real Exchange Rate and Reserve Management: Latin America in the 1990s

The ending of apartheid in South Africa has led to the start of a new era. The obstacles to integration into the world economy have been removed and the ability to take advantage of this opportunity depends mainly on what South and Southern Africans can do for themselves. The Latin American experience of the 1990s, with large capital inflows and appreciation of the currencies, offers some pertinent lessons.
Felipe Larraín

11. Currency Convertibility and External Reserves

This is a topic of potential and growing importance to Africa as a whole, but especially to Southern Africa. The paper is intended to be both introspective (examining the current position in the region in these areas) and prospective (where the region should be going as the 21st century dawns). It looks, first, at the question of currency convertibility, making clear distinctions between this and other forms of convertibility; secondly, at the principles and objectives of external reserves; thirdly, at the interface between, and implications for, currency convertibility and the management of external reserves; and lastly, at specific proposals for the future of Southern Africa. Eight Southern Africa countries are examined: Botswana, Lesotho, Mauritius, Namibia, South Africa, Swaziland, Zambia and Zimbabwe.
Laurence Clarke

12. Internationalisation of Capital Markets

The opening of a market is easy, but the process of ‘real’ inter-nationalisation is slow and painful. It becomes even slower and more painful when government regulators fail to recognise that it is market-driven. Very often, they are reluctant to solve the principal problem causing disorder in the financial system because they fear losing their authority over the market. Rather, only minor problems are addressed, creating unnecessary rules and regulations. Asian experiences in internationalising capital markets indicate that numerous problems are caused by government regulators: countries frequently experience a painful transition because government authorities fail to adapt to the dynamic environments of the capital markets or take the necessary actions after the fact. This paper reflects upon past Asian experiences and identifies some lessons which may be applied to the development of capital markets in the Southern African region.1
S. Ghon Rhee

13. Macroeconomic Policy Lessons from Africa

The early tradition in economics made little distinction between economic growth and economic development. Accordingly, a country’s advancement was, as a matter of practice, almost invariably measured by the level of real per capita income, and it was only subsequently that clear distinctions began to be made between growth and development. Indeed, it was Seers (1972) who stressed that among the key questions to be asked about a country’s development should be: what has been happening to poverty, unemployment and inequality? Indeed, he went on to caution that if one or two of these central problems grew worse, and especially if all three did, it would be strange to call the result ‘development’ even if real per capita income had soared. In today’s circumstances, Seers would probably have added at least three other questions to his list, namely, what has been happening to the environment, to sex equality and to human freedom?
Anselm London

14. Macroeconomics and Marginalisation: The Triumph of Hope over Experience

The search for appropriate macroeconomic policies to entrench recovery and restore growth to sub-Saharan Africa is increasingly bedevilled by disputes over the trade-off between economic efficiency and equity. In the two decades prior to Africa’s widespread adoption of structural adjustment, macroeconomic policy ‘unmarginalised’ a number of economies—Angola, Nigeria, Zambia, Zaire—for limited periods, while marginalising the poor. Resource-intensive development of plantation agriculture, energy or mining achieved growth of an enclave economy nature with very little, if any, trickledown to the poor, especially the rural poor.
Tony Hawkins

15. Effective Investment and Competitiveness

The importance of sub-Saharan Africa’s competitiveness, and of the effectiveness of investment, for donors, governments and investors is evident as one looks at the disappointing results of development strategies pursued to date. Africa’s disappointing economic performance has not been for want of donor assistance: net ODA nearly doubled between 1985 and 1992 from US$9.5 to US$18.3 billion, increasing from 5.1 to 11.3 per cent as a share of GDP. This assistance has failed to promote rapid and sustained economic growth, and donors must therefore rethink their strategies. Governments in Africa are showing increasing interest in the concept of competitiveness and realise that this is critical in attracting the private investment which is necessary for generating the new employment required by a growing population. Many investors and corporations do not perceive Africa to be an enticing investment location. Yet, on closer observation, it is evident that money is being generated in Africa and that opportunities are indeed emerging in various sectors.
Michael Unger

16. Improving the Business Environment

An important question for South Africa is whether the business environment is sufficiently conducive to private sector activity to promote investment at levels which will result in growth rates high enough to eradicate the poverty in which a large section of the population lives. If it is not, then the consequences are serious because there is substantial experience that the state cannot replace the private sector in bringing prosperity to its citizens. State ownership of resources or of productive units has invariably been associated with low productivity and high cost which has harmed rather than helped economic activity. Further-more, the possibility of aiding the less fortunate through wholesale redistribution of wealth is not a sustainable option: there is ample evidence that, while the state can confiscate wealth, it cannot redistribute it. Therefore, the private sector, which is made up of firms and markets, has to be the engine for growth. This paper examines the business environment in South Africa through the perspective of the experience of Latin America over the past 30 years.
Paul Holden

17. Avoiding Corporate Marginalisation

The theme of this conference is a subject of great concern to the Clinton administration. The United States has traditionally focused its international economic and commercial policy on Europe and Japan but, while the industrial nations will continue to be its largest markets for decades to come, the US Department of Commerce has recognised that another category of country holds far more promise for large incremental gains in exports. It has designated these nations the ‘Big Emerging Markets’ (BEMs) and has identified them as China, Indonesia, South Korea, India, Turkey, Poland, Argentina, Brazil, Mexico and South Africa.
Millard W. Arnold

18. Technology and Unmarginalising

In many respects, the relationship between technology, global competitiveness and marginalisation addresses some of the core issues of development. Past and current development problems of most African economies, not least the failure to resolve the problem of absolute poverty for so many people and to provide productive employment for the working population, are closely linked both to the manner in which technology has been used and to the way that recent changes in technology have not been taken up. Africa’s development prospects will be determined no longer in terms of choosing whether to adopt new approaches to technology and production processes, but in choices focused increasingly on how to do so.
Roger Riddell

Some Southern African Issues


19. South Africa’s Economic Reforms

The fear of many policy-makers is that the sub-continent, by virtue of a combination of events, many of them in the form of external shocks and political upheavals, has been marginalised. The crisis in Africa has been characterised by stagnating or negative economic growth, balance-of-payments difficulties, fiscal problems, sluggish agricultural growth and rapid population growth. Many countries have undertaken structural adjustment programmes, often at the behest of the World Bank and IMF, and often in a climate of crisis but with the hope that these programmes could not worsen the economic situation. The verdict is still out on the efficacy of these programmes for Africa.
Merle Holden

20. The South African Labour Market

The South African labour market has performed extremely badly in recent years in terms of creating employment. In the second half of the 1980s, for example, only 7 per cent of school-leavers could expect to find formal sector jobs. This has meant that increasing numbers have had to enter the informal sector in order to eke out some sort of a living. It has been estimated that average income in the informal sector was under R500 per month in 1989 as against R830 for Africans in the non-primary modern sector. Moreover, the distribution of income in the informal sector was highly skewed, with 27 per cent earning less than R150 and 44 per cent less than R250 per month. Taking into account also poor working conditions and insecurity, it is safe to assume that the majority would have preferred formal sector jobs. It should also be borne in mind that the informal sector includes criminal activities such as car theft and drug peddling, and that many of those drawn into these areas may be permanently lost to society as productive contributors to its net wealth. The poor performance of the labour market, therefore, has meant the economic marginalisation of an increasing proportion of the population. Dealing with this problem, and preventing its further growth, is perhaps the most serious challenge facing South Africa today. Without a solution, even Pacific Rim-type growth will at best provide the means to buy off the discontented and disillusioned masses with hand-outs of various types. Without such growth, the future is bleak indeed.
Julian Hofmeyr

21. Labour Legislation and the Zimbabwean Economy

Zimbabwe became independent in 1980 and, as in other post-colonial economies, there were many socio-economic disparities that needed to be redressed. The new government, with its stated socialist outlook, sought to do just this, and one field in which it took early action was that of labour legislation.
Joe Foroma

22. Helping Small and Medium Business

It is well documented that small and medium enterprises (SMEs) play a critical role in a successful economy. In Southern Africa, where countries are typically capital-poor and labour-rich, the emergence of the small, medium and micro-enterprise (SMME) sector provides opportunities for investment in industries with higher labour absorption at a lower cost of capital. The role of the SMME sector is also essential for technical and other innovation, which is so vital for the challenges facing the sub-continent. This paper addresses the contribution made by SMMEs to the South African economy, and the policy constraints facing the sector.
Marlene Hesketh

23. Health, Education and Productivity

Productivity has become something of a catchphrase in South Africa in recent years, but there is no denying its importance in enhancing the competitiveness of a firm or country. Productivity may be defined, in the widest sense, as representing
the relationship between physical output and the capital, labour, materials and energy required to produce that output. That is, productivity is a physical output per unit of capital, unit of labour, unit of energy and unit of raw materials. Productivity improvement involves the better and more efficient utilisation by management of all production resources to ensure maximum output at minimum cost. (NPI, 1994: 1).
Alan Whiteside


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