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BUSINESS IN AFRICA™
STRATEGY AND ECONOMIC ANALYSIS

LESS THAN10% ANNUAL GROWTH-RATE?
THAT'S PEANUTS FOR EMERGING COUNTRIES
HOW TO REACH DOUBLE-DIGIT GROWTH-RATE

(Part 3)
This delivery is the continuation of our paper entitled:
"Strategy for African Countries"

Locations of visitors to this page

- The Strategy exposed in this delivery is now available since January 2013 as an eBook, Africans, Stop Being Poor! The Roadmap to Prosperity for African Nations Either in Amazon Kindle format or in DNL eBook Format.
Interested parties to make contact with Dr. Quenum through the Support Console available at this link

Contact through the support console will get quickest reply from Africabiz Online's staff, than contact by emails. Click here for contact information.

© Copyright Dr. B.M. QUENUM December 2001 - All rights reserved
SYNOPSIS

After two decades (1980-2000) of heavy financial inputs into sub-Saharan African countries' economic system, Structural Adjustment Programs (SAP) - sponsored by the IMF and the World Bank - failed to initiate the take off of African economies.

The failure is now implicitly recognized by SAP' sponsors as one reads, here and there, that the IMF and the World Bank's new assistance policy will put emphasis on Education and Health. At first glance, that sounds good.

However, one could remark that Education and Health - in developing countries - are not economic sectors that directly produce wealth and riches. In the contrary, they spend revenues generated by other economic sectors - agriculture, industries and services. Therefore, focusing financial assistance direct on Education and Health would not trigger any sustainable developing.


Direct financial assistance to Education and Health in African countries will only inject survival means into the economic system of those countries. Doubtless, the final result will be the same as with SAP: No poverty reduction will be achieved and the economic situation of African countries will further deteriorate.

We recommend reading the following delivery: A case study on how to reach double-digit annual economic growth rate that is a continuation to this one.

Economic Myths / Consensus Decision-Making / Planning Advisory Council / Which Scheme? / Regional Economic Catalysts / Integrated Development Scheme /

Click here for the "Synergetic Impact Factor" in action

For Part1 Click here
| For Part2 Click here | For Part3 Click here
Frequently Asked Questions

SOME ECONOMIC MYTHS TO BE DISCARDED

Before the description of a developing scheme capable of generating double-digit annual economic growth rates, one has to review some prevailing economic dogma or myths, to see their relevance or irrelevance in achieving the target in African countries.

In Part - 1 were discussed some of these myths. Particularly, the problem of the state's involvement in the developing process was analyzed. The screening revealed that the successful strategy carried out by Taiwan to boost the economy was not based on unbridled free entrepreneurship (liberalism). That finding is in total contradiction to the policy enforced by the IMF and the World Bank in African countries submitted to Structural Adjustment Programs.

Therefore, African policy-makers are entitled to consider the dogma that rules out the involvement of the state in the developing process as a true dogma, which lacks credentials as the unique way to develop emerging countries. Said dogma is the first myth African policy-makers have the sovereign right to discard when planning for the developing of their countries.

Based on Taiwan experience, one is entitled to recommend to African governments and national developing agencies to play a powerful driving part in the developing process. What should be avoided is the establishment of a state-controlled economy. African governments should work hand in hand with private sector. The latter being in charge of management of all projects and realizations. That way, any mismanagement would be immediately penalized by the market.

Let us now consider another economic myth:

The Narrowness of African Nations' Consumers Markets or the alleged Weak Purchasing Power of the populations

In most African countries 60% to 80% of the population live in rural areas. They represent the poorest percentage of the populations that lives on meager annual income in the range of maximum US$ 200 per year. That is the sad fact. They do not spend much. They cannot afford it.

Therefore, remains 20% consumer base. Ninety per cent of that consumer base is composed of civil servants who earn monthly wages and salaries within US$ 100 - 500 bracket - if they got paid as in some African countries, the state owes 20 months of salaries in arrears to civil servants. These people cannot be spendthrifts.

The remaining 10% of the above defined consumers- base is composed of businessmen and businesswomen, high rank civil servants. These are the "privileged" people who can afford rubbing one dollar against one.

Based on these findings, some economists drew the conclusion that African countries' consumers-base is too narrow to establish profit making industrial plants in individual African country, and consequently boost the developing. Therefore, they advocated for regional groupings to increase the consumers' base.

Above outlined analysis needs some screening. It is true regional groupings are a vital necessity for Africa's economic future. These groupings help members states harmonize economic development and assist them to develop regional trade and other exchanges. Does that mean, however, that all investment's decisions should be taken at regional level?

Establishing regional groupings in Africa, that way, one is sure to have some countries - the most populous - drawing the whole carpet and letting many others bare of vital infrastructures and industrial concerns.


It is a well known fact in mathematics that weak portions of a unit frail the entire system. To have a strong "Unit," all portions should have build-in strength. Otherwise, the whole system may collapse for lack of cohesion. That is one of the reason the European Union edited strict economic convergence rules to be adhered to by candidates to the Union.

Sure, the populations' purchasing power in any single African country is weak. However, is it correct to consider the problem of consumers market's narrowness in African countries as the consequence of the weakness of the purchasing power of the populations?

The author of this delivery is of the opinion the analysis and the conclusion reached - the recommendation to set up regional groupings - are flawed at the onset. One is entitled to speak of the weakness of the purchasing power of the populations. However, that is not the only possible assumption. Indeed, one could also speak of the lack of purchasing power of the populations.

Due to the facts exposed in the first delivery of this series titled: "We Need Double-digit Annual Growth-rate" that showed the insufficient performance of the economy in African countries, one is entitled to speak of lack of purchasing power of the populations instead of weakness of said purchasing power. Populations in any single African country lack purchasing power because the economy is performing so badly that first, there is no jobs' creation to cope with demand, and, second, the minority of the populations who has jobs is paid low salaries and wages.

If African countries just wait for the purchasing power to emanate from the void; to pop up as godsend gift, they would be waiting for ages, turning in circles looking at the economy sinking deeper and deeper into pernicious anemia. The purchasing power should be created, buildup, and, consequently, a strong consumers-base would then emerge.

Through the execution in each single African country of adequate developing schemes that blend together agriculture, industries and services, billion would pour into the rural world; industries generating also related added value in billion. The same for services - storage, transport, insurance. Click here review a Case-study

A relatively prosperous national economy would then emerge in each African country. Farmers - who represent 60% to 80 % of the populations - emerging also as the driving force of the economy. They will start buying seeds, fertilizers, equipment. They will build better houses, dress with more refinement and indulge in entertainment. Consequently, the problem of the lack of purchasing power would progressively disapear together with the narrowness of national consumers' markets.

One sees that, for a country starting its developing process and executing the adequate developing strategy - that is a scheme capable of triggering the economy's take off - the purchasing power of the populations creates the consumers market and not the contrary.


With arguments above exposed, one is entitled to definitely shed off following false economic myths and concepts below briefly summarized:

1 - The non intervention of the state in planning the economic development in African country as advocated by international financial institutions.

2 - The alleged weak purchasing power of the populations in each individual African country that is viewed as hindrance to establishing industrial units in each individual country and considered the main reason to setup Regional Groupings.

Let us move a step further and review how the economic development scheme -here briefly exposed - could be set up.
NATIONAL BRAINSTORMING AND CONSENSUS DEMOCRACY

Brainstorming

Brainstorming occurs when a group of people get together and input as much as they can in relation to the meeting's objectives. The exercise is not strategic planning as such. It concentrates solely on ideas' generation. Every participant is encouraged to input as much ideas as possible. Thinking big is not forbidden and objections are welcome. A time limit is put on the gathering.

Consensus Democracy

Consensus Democracy as opposed to Technocracy or Bureaucrats' Democracy. In technocracy, decisions are taken by civil servants, politicians and experts working in seclusion in their offices and "delivered," without consultation and feedback, to people concerned by the decisions. In the contrary, in the framework of a consensual democracy, an agenda is agreed upon between all parties concerned followed by debates to reaching final resolutions and decisions.

Brainstorming and consensual democracy go together and are the best decision making processes for problem of national interest. Both processes are certainly the most suitable to rally the populations and particularly for the subject under consideration: the development process to be executed to trigger the economy's take off in African countries.

Representatives from all sectors of the economy should be invited to the brainstorming session: farmers, trade unionists, chambers of commerce members, industries and agriculture delegates, national development agencies, local financial institutions and banks, government's representatives. That is a large assembly. A good preparation of the brainstorming meeting is then essential to reach effective decisions and resolutions in a short span of time. Hence the imperative to set a time limit to the debates and discussions.

The process above briefly outlined is the one adopted by South Africa to tackle the crucial problem of land reform.. People concerned by the reform, Emerging South African Black Farmers, are involved in the decision-making's process. Therefore, they would not be inclined to follow suit Zimbabwe's scenario of invading white owned farms. The consequence of that consensual debate is very important for the future of the country. Doubtless, South Africa's economy will evolve and grow without the disruption of existing white owned farms operations.

Once the exercise of brainstorming and consensual democracy finished, the establishment of a national body in charge of the execution of the strategic scheme would be necessary.
NATIONAL ADVISORY COUNCIL FOR INVESTMENT PLANNING

Starting from the independence days, sub-Saharan African countries' governments launched development scheme to bridging the developing gap. Ministries of planning and economy used to list developing projects backed by brief financial and economic analysis. Then, Round Tables were summoned to which institutional investors were invited together with private investors. That way of operating had not, since the 1960's, yielded good results. Most of the projects seeking financing end up in limbo.

It would be more efficient - taking into account the experience of Asian Tigers that successfully planned their take off:

- To consider business opportunities one by one.

- To thoroughly analyze projects and drafting comprehensive feasibility reports and business plans.

- To search for local and regional investors.

- And finally to scout for foreign investors - private and institutional - if necessary.

To accomplish this, a national body would be necessary to carry out the execution. Let us name it: the National Advisory Council For Investment Planning - NACIP. NACIP statutory members would be:

- 1 - The representatives of private sector - Chambers of Commerce, Agriculture and Industries. and services.

- 2 - Government's representatives - Ministries of Planning and Economy - Finance and Budget - Agriculture - Industry and Trade - Foreign Affairs and International Cooperation .

NACIP would have statutory meetings to evaluate business opportunities, to follow-up projects' execution, to advise for redirection of planned investments, to suggest modification to the national economic development scheme in relation with technology evolution, new business opportunities, national, regional and international political events.
WHICH ECONOMIC DEVELOPMENT SCHEME?

After reviewing:

- 1 - The economic myths and dogma that are hindrances to boosting up each single African country's economy.
- 2 - The decision making process that is the best suitable to winning the support of the populations.
- 3 - The Supervision Body in which government and private sector work together as strategists and guardians of national interests.

One can now consider the one all-important question: How to achieve double-digit annual economic growth-rate? Which economic development scheme to implement to trigger the take off of any African country?

There is no doubt the basis for any success story is a detailed and accurate definition of the aims, the systematic appraisal of existing conditions and of means available to reach the target; scouting for additional support if necessary, setting a rigorous implementation' schedule, building up various strategies and the will to keep on persevering.

As a close observer of the development process of African countries, one is struck by the fact that, most of the time, projects included in their developing scheme are not linked together. They are carried out without any inter-coordination. Each project is established as a single and independent entity and project managers snub each other.

That paradox is one of the reasons for the failure African countries experienced with their development policies.

To be able to perform high economic growth-rates and trigger the economy's take off, African countries need to set up programs with inherent synergetic capacity to create enterprises from a fusion of agriculture, industries and services as here exposed

As the majority (60% to 80%) of African country's citizens live in rural areas, strengthening economic activities in these areas, will, undeniably, boost the global economy. One way of achieving this vision is to create economic activities in rural areas that act as "economic catalyst" in said area. That is to say to set up cash crop operations capable of generating forecasted and planned revenues and substantial cash flow, year after year.

Currently, in most sub-Saharan African countries cash crops operations are based on classic agriculture cash crops - coffee, cocoa, tea, cotton and palm oil. Etc. The products are sold, most of the times, as bulk raw materials, at uncertain and erratic international prices. Therefore, these "classic" agriculture cash crops cannot be relied on to trigger double-digit growth rates and provide substantial revenues to African countries' national budget.

The selling prices of classic cash crops could be improved through industrial processing to increase their market exchange value. One should bear in mind, however, that a whole set of factors have an impact on the selling prices of these classic cash crops. Namely: crop reports, international and national economic news, political unrest and civil war. Even in normal times, African decision-makers (private entrepreneurs or governments) have absolutely no say in the setting up of the purchasing prices of classic cash crops.

Local consumers' market being marginal - in the range of one percent of the global world market - the selling prices of classic cash crops are regulated by independent international decision centers in London, Paris, Amsterdam, Chicago and Tokyo. Countries like Ghana, Ivory Coast, Kenya, Burundi experienced, during the 1990's, the negative impact on their national budgets of uncertain or volatile commodities prices.

Thus, the setup of a cash crop operation for a rural community is not sufficient to have a launching pad for a sustained growth of the economy. Said cash crop operation would boost the economy only if it has an intrinsic catalyst's role to generating substantial cash year after year.

The following conditions would be necessary to establish economic activities in rural areas that could act as driving force to the global economy:

- 1- To choose economic operations, which products (bulk and industrially processed) have a ready consumers' base - on local, national and regional marketplaces. In other words, to reverse the trend of selling up to 99 percent of productions on the international marketplace, in order to control international speculators' role in depreciating selling prices.

- 2- To choose economic activities, which generate cash money on a monthly basis. (Cash crops such as cocoa, coffee, tea do no have that advantage.)

- 3- To establish and operate these economic activities on a strict professional basis; productivity objectives being clearly defined and monitored by a dynamic accounting system.

- 4- To valorize wastes and by-products - not leaving a single stone unturned and harvest to the fullest the economic activities' potential.

For more on how to select which economic catalyst operation to promote in a regional territory you may read "Economic Building Power For An African Community".

Developing various agriculture productions, establishing crops processing units and valorizing wastes is the surest way of having an integrated development scheme in which agriculture, industries and services are closely linked.

For instance, if cereals - corn, rice and sorghum are the main productions, processing operations should be established to produce flour, semolina, parboiled rice, breakfast meals based on these cereals and sorghum beer Etc. Straws generated from the harvesting should be used as fuel for power generation or sold to corrugated tar saturated cardboard's producers. Straw could also be added to wastes generated by the following catalyst operation and used as animal feed for cattle ranching. Fresh meat could be processed into salted, dried or smoked meat. In brief, one should make sure all products, by-products and wastes are used to the limit and processed into marketable products.

Table below summarizes the potential of many crops suitable for industrial processing that could be established as regional economic catalysts:

CROPS
FINISHED PRODUCTS
Tobacco Plant
Tobacco products.
Forests
Wood, natural rubber, cellulose products, delivery houses buildings, furniture.
Corn, Sorghum, Millet
Starch, alcohol, glucose, saccharine, glues, paints, plastics, synthetic fibers garments, fuel, chemical products.
Sweet Potato
Saccharine, chemical products, medicines.
Linen, Cotton, Hemp
Natural textile fibers, Clothes and dressing materials.
Animal breeding
Wool, bones, leather, glands, milk, collagen's products, extracts, proteins, fatty acids, paints, glues, plastics, chemicals, composite materials, detergents, lubricants. Etc.
Flowers plants
Extracts, perfumes, medicines, house plants, cut flowers.

The network of "regional economic catalyst operations", all over the national territory, will then become an integrated development scheme linking agriculture, industries and services

Graphical table below shows the dynamic interrelation between activities of the primary sector (agriculture), secondary sector (industry) and tertiary sector (services) in a total fusion

SYNERGETIC IMPACT FACTOR
Fertilizers
Manure
Oil Meals
Animal
Breeding
Agriculture
Schools
Crops
Processing
Edible Oils
Industrial
Oils
Nurseries
Plantations
Chemical
Industries
Mechanical
Industries
Research
Institutes
Agro-Allied Foods Industries
Power
generating sets / Renewable Energy
Hydraulic
Power
Irrigation
Rural
Electrification

© 2000 Dr. Bienvenu-Magloire Quenum. All rights reserved

Now would that scheme generate double-digit annual economic growth-rate when put into action in any African country?

The delivery related to following link and titled: "Case Study on How To Reach Double-digit Annual Growth Rate" discusses the matter.

© Dr. BM QUENUM
Investment and Business Planner

2001 Dr. Bienvenu-Magloire Quenum. All rights reserved
TOP
Locations of visitors to this page

- The Strategy exposed in this delivery is now available since January 2013 as an eBook, Africans, Stop Being Poor! The Roadmap to Prosperity for African Nations Either in Amazon Kindle format or in DNL eBook Format.
Interested parties to make contact with Dr. Quenum through the Support Console available at this link

Contact through the support console will get quickest reply from Africabiz Online's staff, than contact by emails. Click here for contact information.