Well, the much-vaunted G8 summit has come and gone. Five African leaders were, for the first time, invited to attend in order to facilitate a whole day’s discussion on the problems of Africa and the way forward. The African leaders set the agenda themselves – a welcome development in contrast to so many previous meetings where the West had dreamed up an agenda and then invited us to talk to it.

What did we get out of the meeting? Pretty much what we had expected to get – a pledge that the G8 leaders would continue to put up about US$6 billion a year in official development aid and a small (US$1 billion) offer of new debt relief for the heavily indebted countries that meet certain criteria. The G8 leaders also said they would help with trade negotiations under the WTO and that they would help with encouraging investors to finance projects and new enterprise in Africa.

We have not seen the version of Nepad that was presented to the G8 so we do not know what was offered by the African leaders in the form of the standards and rules of governance and human rights that they would pledge to uphold in Africa. Nor do we have any details of the "peer review" process by which these standards will be enforced. All we have at this stage is what they wanted us to see and hear and that is pretty general. Much more detail must have been in the G8 document or they would not have had the kind of detailed discussion that must have taken place.

Whatever happened in reality, it’s a welcome development that the most powerful leaders in the world take time to sit down with the key leaders in Africa, to debate what to do about a continent in crisis. Just how deep a crisis can be seen in the following statistics: - we have a total population on the continent of just under 700 million, 30 million are infected with HIV/Aids and 200 million live on less than US$1 per day. We have 140 million young illiterates and the percentage of young people going to school is falling – especially for girls. Incomes have fallen steadily for the past three decades and in the past 10 years; average economic growth has been close to zero. The entire continent commands less than 2 per cent of world trade and the formal sector GDP of the continent, including all the leading states, is less than the GDP of a small country in Europe. 150 million Africans live in countries at war with themselves and at least half the population of the continent is suffering from the side effects of conflict.

Yet we are one of the richest continents in terms of resources. We have also had very favorable trade conditions for at least 30 years under Lome and other international trade arrangements. In the past 30 years the west has poured into Africa some US$600 billion in ODA (Official Development Assistance) and probably three times that in soft loans and World Bank affiliated facilities. In many African States, ODA represents the largest single element in national budgets. The majority of African States are now approaching their first half-century as independent, self governing countries. What has gone wrong? Will Nepad make a difference?

I want to suggest that Nepad will make little or no difference if rogue leaders like Mugabe are allowed by the AU summit in Durban scheduled for next week to continue to get away with his outrageous behavior on all fronts. Let’s just look at the issues of corruption and bad macro economic policy – what might be called the economics of cronyism.

There are four main areas of corruption and cronyism in Zimbabwe and I am sure this could be applied to many other states. These are: -

1. The theft of public resources through state controlled agencies. If we take the issue of the prices demanded on the sale of liquid fuels purchased through state monopolies. The world market price of liquid fuels today is equal to about US14 cents per litre. At the official exchange rates here that is Z$7.70 per litre – we pay 9 times that at the pump and no matter how you calculate the costs, it means we pay a mysterious premium of over Z$30 per litre in Zimbabwe. That is a cost to Zimbabweans of Z$38 thousand million a year – Z$3 200 per capita. This is equal to US$700 million per annum – enough to import all the food needed for the entire country.
2. The imposition of artificial rates of exchange for foreign currency sold to the official banking system under duress. If we assume that the private sector is being forced to sell US$1 billion a year to the Reserve Bank at 55 to 1 and that the real exchange rate should be a conservative 200 to 1 (the parallel market rate is 700 to 1), we get a informal tax on foreign exchange receipts of Z$145 billion or US$2,6 billion a year at official exchange rates. This is equal to Z$17 400 per capita in Zimbabwe. If that money was paid into the accounts of the business organisations that actually created the wealth in the first place, they would be highly profitable – no problem with encouraging investment under those circumstances!
3. The adoption of soft money policies through the formal banking system. Current interest rates are about one third of the rate of inflation – on state borrowings alone this represents an informal tax on the private sector and individuals with savings, of nearly Z$30 billion a year, or Z$2 500 per capita.
4. The pursuit of bribes and special margins on all state controlled contracts and services. If we assume that the State in Zimbabwe is spending at least Z$100 billion a year on goods and services, we can estimate that corrupt contracts absorb at least 20 per cent of this sum. It is probably much more. But if we assume Z$20 billion a year the cost to Zimbabweans is Z$1 700 a year.

The total of just these four items is Z$24 800 per capita as an annual cost of bad governance – at official exchange rates this is equal to US$450 per capita – slightly less than our official income per capita for the year. In US dollar terms this represents a staggering US$5,4 billion per annum – virtually our current GDP. This means that if corruption and bad macro economic policy was eliminated in Zimbabwe, we would double our GDP overnight – without any external assistance at all. The total cost of the MDC recovery programme is US$2,5 billion over three years – half of what we ourselves steal from each other EVERY YEAR.

Extrapolate these figures across the continent – the sums are staggering and this is a self-inflicted problem totally under our control and management. Then look at the issue of investment – what businessperson in his right mind would invest in a continent where a man who steals billions of dollars in real assets from private investors in the 21^st century is treated as a liberation hero by his colleagues. What company anywhere would invest in any sector if he knew that with the stroke of a pen a political leader could take up to 80 per cent of his revenue flow away from him overnight, and still expect him to maintain employment and business activity? Now you know why the only real investment taking place anywhere in the continent is in energy resources that can be exported and the hard currencies kept under company control. (Even if you have to pay the leadership of the country up to 30 per cent of gross revenues into foreign bank accounts.)

No, Nepad will not make any difference unless it tackles these fundamental problems that are at the heart of the African crisis. It’s not about trade, or aid, it’s about sound policies and honest government that is accountable to the people through democratic structures. Will the AU deliver in Durban – not if Mugabe and his henchmen have anything to do with it and you can be sure he is working flat out behind the scenes to ensure that Nepad fails at this hurdle. The G8 was a pushover – they want to do the right things, the real test is the AU. What Africa needs is Chinja Maitiro – change, fundamental change, in the way we do things. We support Nepad as a means of achieving that goal, but will its sponsors bite the bullet on the real issues?

Eddie Cross

Bulawayo, 29^th June 2002