Dr. Bhaso Ndzendze — University of Johannesburg

AuthorBhaso Ndzendze

Worse than Oil?

The Geopolitics of the Banana

by Bhaso Ndzendze

bndzendze@uj.ac.za

Modern Diplomacy

11 March 2018

Photo: Banana Forest/Pxhere

Attracting encroachments to national sovereignty by rapacious Washington-connected multinational corporations and the meddling attentions of their powerful home country; stunting reform and economic development at every turn; breeding economic dependency; firmly controlled by foreign companies and giving little beneficiation to the country of production; upending and undermining political institutions; and not even sustainable.

These are ringing accusations which bring to mind one natural resource – oil. Certainly not the banana. This is somewhat understandable; oil more readily lends itself to the vilification touted in these bleak and cynical claims, and it has been the subject of visible conflict, with allegedly oil-motivated American interludes into Kuwait, Iraq and Libya being all too well known and well televised.

Nonetheless, it is one of the blights of modern political economic analysis, including those with a bent for “resource curse” theory, that in their discussion of the interaction of forces that have resulted in the paradoxical plights of some resource-rich countries, they tend to overlook one of the most important culprits, or perhaps better understood as a catalyst in a larger political process; the innocuous banana. And yet, perhaps just as much as oil, this energy source has been the fons et origo of many social, political and economic malaise in many underdeveloped countries who possess them.

This inevitable interaction with politics is only more obvious when we consider the economic significance of this product; bananas are the world’s fourth most consumed food crop, after rice, wheat and corn, with some 350 billion bananas consumed every year. Figures of this magnitude rarely rack up by market forces alone and nominally hint at a set of vested political and economic hands at work.

In this brief article, a slice of the long and storied history of the politically-derived banana’s impact on the economies of numerous states which were in possession of it, particularly regarding Latin America, the Caribbean and sub-Saharan Africa through the prism of the unholy alliances between big corporations and dictators, as well as the battle for market access.

Unholy Alliances: Dictators and Corporations

United Fruit

The South American country of Ecuador rarely finds itself on the top 3 list of any global rankings. Yet it occupies that very spot when it comes to world production of the banana. Some 18% of the bananas traded worldwide during the 1970s and 1980s originated from Ecuador, and this number expanded to 30% in the 1990s. Banana production and trade in Ecuador gives direct employment to an estimated 380 000 people.This tells something about the history and geography of this fruit on two particular points; why Ecuador and why now? The road to this present-day reality is an interesting and entangled one through which we gain insights into the nature of globalization as a performative process and its structures with implications far beyond Latin America.

In order to flourish, banana plants require rich soil, combined with 9 to 12 months of sunshine along with constant, heavy rains of to 80 to 200 inches a year. This is a demand level unmatchable by artificial irrigation if the given plantation is to compensate for the production costs and still have the ability to sell at the low price for which the banana is known. This gives us an important clue as to the Ecuadorian presence among the top producers in the world. But that is only a partial aspect on a bigger picture.

For one, how did the bananas get to Latin America, when they are said to be native to the tropics of South and Southeast Asia, and are likely to have been first domesticated in Papua New Guinea? And how did one particular variety of this fruit, the Cavendish, conquer the world market when there are thousands all across the world? The answer to these questions are political and are to be found in the early half of the nineteenth century.

The mass production of the banana such as we know today commenced specifically in the year 1834 and saw an explosion in the late 1880s and from the beginning reaped political consequences. Prior to the 1870s most of the land that bananas were grown on in the Caribbean had been previously used to grow sugar, and indeed before then bananas were virtually unknown in the United States. But this quickly changed and just 30 years later, Americans (then totaling at 70 million people) were consuming over 16 million bunches a year. Like all rapid expansions and enormous profits, this came at a high cost, and perhaps none bore it more than the producing populations.

The odyssey started in 1871 and, indicative of those twists of fate with which history is so littered, not with anything to do with agriculture but the construction of a railroad in Costa Rica overseen by an ambitious 23 years-old Minor Keith, born in New York. The mega project sees hundreds lose their lives, including the lives of Keith’s two brothers. Bur Mr. Keith is undaunted. While building the railroad in Costa Rica he was also hatching a far grander plan. As construction made progress, he ordered the planting of bananas on the land easements to either side of the tracks. The bananas flourished and once the railroad was brought to completion it was possible to economically transport the bananas to Americans who were beginning to acquire a taste for the exotic fruit. By the next decade, Keith owned three banana companies. Keith then joined up with a Cape Cod sailor, Lorenzo Baker, and a Boston businessman, Andrew Preston. The three raised the necessary capital to establish the Boston Fruit Company. By 1899, the Boston Fruit Company and the United Fruit Company (UFCO) emerged – and in their wake formed the largest banana company in the world, with plantations all over Latin America and the Caribbean, including Colombia, Costa Rica, Cuba, Jamaica, Nicaragua, Panama and Santo Domingo. The company also owned 112 miles of railroad linking the plantations with ports. To complete their Charter company-like set up, and in order to protect their interests, they also owned some eleven steamships, known as the Great White Fleet and an additional 30 other ships under lease.

In 1901, Guatemalan dictator, Manuel Estrada Cabrera granted to UFCO the exclusive right to transport postal mail between Guatemala and the United States. Thus came UFCO’s first entry into Guatemala in whose wake the country would be held custody to a fruit company. Ruled by a conservative dictator who would be a puppet to the UFCO, Keith judged Guatemala to have “an ideal investment climate”. He formed the Guatemalan Railroad Company as a subsidiary of UFCO and capitalized it at $40-million. Other countries in Central and South America also fell prey to the UFCO, which they called or “El Pulpo” (the Octopus), but no other state felt the weight of the UFCO more than Guatemala.

Why was Guatemala such an ideal investment climate for the UFCO? “Guatemala was chosen as the site for the company’s earliest development activities,” a former United Fruit executive once explained, “because at the time we entered Central America, Guatemala’s government was the region’s weakest, most corrupt and most pliable.” In Guatemala, United Fruit gained control of virtually all means of transport and communications. United Fruit charged a tariff on every item of freight that moved in and out of the country via Puerto Barrios. As if that were not enough, the company also managed to exempt itself from virtually all taxes in Guatemala for 99 years.

In 1944, the people of Guatemala overthrew the right-wing dictator then in power, Jorge Ubico, and held their first ever true elections. The man they elected president was Dr. Juan Jose Arevalo, a socialist. A new constitution was drawn up, partly based on the American version. At this time, in the highly class-divided Guatemala, only 2.2% of the population owned over 70% of the country’s land. Only 10% of the land was available for 90% of the population, most of whom were native Indians.

Most of the land held by the large landowners was unused. Jacobo Arbenz who succeeded Arevalo in another free election continued the reform process. Arbenz proposed to redistribute some of the unused land and make it available for the 90% to farm. This greatly unsettled the UFCO; the United Fruit was one of the big holders of unused land in Guatemala. The pressure mounted heavily against the UFCO and finally the company made its pleas and called on officials in the US government, including President Eisenhower and Secretary of State John Foster Dulles (whose former New York law firm, Sullivan and Cromwell, was a representative of the company), saying that Guatemala had turned communist and was susceptible to Soviet Union influence.

Fortunately for the fruit conglomerate, almost every major American official involved had a family or business connection to the company itself (Allen Dulles, head of the Central Intelligence Agency, had served on UFCO’s board of trustees while Ed Whitman, the company’s top public relations officer, was married to Ann Whitman, President Eisenhower’s private secretary). Thus with great zeal, the U.S. State Department and United Fruit, enlisting the talents of the PR genius Edward Bernays (a nephew of the pioneering psychoanalyst Sigmund Freud), embarked on a major public relations campaign to convince the American people and the rest of the US government that Guatemala was a Soviet “satellite”.

Upon Bernays’ suggestion, the company also arranged and offered to pay for the expenses of journalists who traveled to Guatemala to learn United Fruit’s side of the story, and some of the biggest outlets (and particularly The New York Times and The New York Herald Tribune) published accounts favorable to the UFCO.

The campaign was a resounding success and in 1954, with consent manufactured, the CIA engineered a coup, code-named “Operation PBSUCCESS”. The CIA set up a clandestine radio station to carry propaganda, jammed all Guatemalan stations, and hired skilled American pilots to bomb strategic points in Guatemala City. The U.S. replaced the democratically-elected government of Guatemala with another right-wing dictator that would again bend to UFCO’s will. The propaganda machine, meanwhile, portrayed the operation to the American audience as the removal of an unpopular leader and the ushering in of liberty and democracy; this has an eerily familiarity when looked at through the prism of America’s 2003 invasion of Iraq.

Cuyamel Fruit

After his firm, Hubbard-Zemurray, experienced much success importing bananas from Latin and Central America and selling them in in New Orleans, Samuel Zemurray went to the Central American republic of Honduras to expand his company into banana production in the year 1910. Honduras was deemed well-suited for growing bananas due to its proximity to the equator. These were the seeds of what would eventuate into Cuyamel.

But Cuyamel did not enter unchartered territory and the turf was already spoken for. The main player seeking monopoly status in the Honduras banana market besides was Vaccaro Brothers and Company. But both the Vaccaro firm and Cuyamel were eclipsed by the much larger United Fruit Company. Before United Fruit entered Honduras as a direct producer in 1910, the firm participated in the Honduras market by proxy through investments in both Zemurray’s and Vaccaro Brothers’ companies. Before United developed plantations of its own in the cities of Trujillo and Tela, it owned 60% of Cuyamel and 50% of Vaccaro. Even though the three companies were competitive against each other, they maintained some respective distance, and even pursued joint efforts in advertising and increasing banana agricultural outputs in Honduras.

Nevertheless, competitiveness seeps through. Zemurray had played an active role in Honduran politics since he first arrived in the country. In 1910, the administration of President Miguel R. Dávila had given the Vaccaro Brothers’ Company land for railroad construction and prohibited any other companies from building a competing railroad within 12 miles of the Vaccaro line. This had long displeased Zemurray, and he detested the Dávila government, having provided encouragement and money to a failed coup in 1908 against Dávila.

These concessions by the Dávila regime to Vaccaro further enrage Zemurray. He makes a concerted effort now to remove the regime, and has an accomplice in the person of former President Manuel Bonilla. Zemurray supplied weapons and transportation for Bonilla to launch a coup against Dávila. President Dávila fled, and Bonilla once again assumed the presidency of the nation, owing in large part to the direct intervention of Zemurray.

Shortly before Bonilla ascended to the presidency, Zemurray in 1911 transformed his company from Hubbard-Zemurray into Cuyamel Fruit Company. He acquired 5,000 acres of land for agriculture along the Cuyamel River in the northwestern extremity of Honduras, near the Guatemalan border. The firm took its new name either from this river or from the town of Cuyamel nearby. As a repayment for his support, Bonilla also granted Zemurray a concession to build a railroad between the town of Cuyamel, by the coast, and Veracruz, in the interior.

There were no more coups in the country through the end of the decade, but Zemurray’s Cuyamel Fruit was in fierce competition with Vaccaro and United. Further, Cuyamel’s development of a previously empty strip of land along the Guatemala-Honduras border almost led to an outbreak of war between the two states, but this was halted by US mediation. This incident of near-war strained relations between pro-Honduras Cuyamel and pro-Guatemala United, and this tension would not fully cool off until the two companies became one in 1929, when following the October crash of international financial markets, Zemurray sold Cuyamel to United Fruit in exchange for stock and retired, making UFCO the giant discussed in prior sections.

The Banana Wars: The Battle for the Banana Market

Africa’s banana market is a paradoxical reality. In the lowland of the Congo basin, farmers grow a greater diversity of bananas than anywhere in the world. In countries such as Uganda, Burundi, and Rwanda per capita consumption has been estimated at 99 pounds per year, the highest in the world. Uganda itself is the second-largest producer of bananas in the world after India. It is, however, one of the smallest exporters, the crops being used mostly for domestic consumption.

West African countries produce nearly all of Africa’s banana exports. Production in this region has grown rapidly over the past 15 years, now accounting for around 4% of the world banana trade. The vast majority of these bananas are sold in Europe, mainly in France and the UK, where an estimated 2.5 billion tonnes of bananas are peeled annually. But the African access raises questions and a myriad of issues about the nature of the international political economy than meets the eye.

Since 1975, African and Caribbean countries had had a quota of bananas to import into the EU market, enabling them to sell to Europe as many as they wanted to support. The official reasoning for this was that the European Union (then known as the European Community) hoped, that this would enable the economies of such developing countries to grow independently, without depending on overseas aid. Some economists, however, question the logic behind this.

To begin with, if the EU is concerned with the development of these countries and to free markets, it makes no economic sense to continue to subsidize their agricultural lobby with up to 50-billion euros per year. Secondly, the EU would remove barriers to a vast array of agricultural products from Africa – as it stands only bananas can be sold into the EU market without barriers to entry, and indeed disincentives are provided as seen in the imposition of 30% tariffs to unprocessed coffee but 60% to processed (that is job-creating) coffee from Africa.

Secondly, banana and pineapple production in Africa are dominated by two American multinational companies Compagnie Fruitière/Dole (a descendent of the Cuyamel company dealt with above) and Del Monte. In any case, US multinationals which control the Latin American banana crop hold 67% of the EU market and the US itself does not export bananas to Europe. This perhaps displays the extent to which the removal of barriers to access are motivated by US-EU alliance and not developmental concerns regarding Africa. The Caribbean is a different story, however.

Despite this, however, the US filed a complaint against the EU for further with the World Trade Organization (WTO) and, in 1997, won. The EU was instructed to alter its rules as a result. The chief outcome of this deal had been to protect banana farmers in the Caribbean from competition from Latin America, whose bananas are cheaper because they are grown on large­scale, mechanised plantations run by giant US­based corporations.

After the WTO ruling, the US government continued to argue that free trade in bananas had not been restored, while the EU argue it has changed its rules. The US has then imposed a retaliatory range of 100% import duties on European products, “encompassing everything from Scottish cashmere to French cheese” as the Guardian then put it.

The US government was allegedly pressurised by powerful US multinational companies which dominate the Latin American banana industry. “The Bill Clinton administration took the “banana wars” to the WTO within 24 hours of Chiquita Brands, a powerful, previously Republican­supporting banana multinational, making a $500,000 donation to the Democratic Party” according to journalist Patrick Barkham.

The banana wars came to a conclusion only in 2009 with an agreement between the EU and Latin American countries. The December 2009 agreement involved the EU reducing its tariffs on imported bananas from 176 euros ($224; £140) per tonne to 114 euros per tonne within eight years.

The Future and Sustainability of the Banana: A Challenge of Globalization

Like oil, the banana is not only problematic in its production and sale, but it may also not have much of a future; at least not as we know it. Researchers have declared the Cavendish to be potentially unsustainable and at risk of “imminent death.” This threat stems from the Panama disease; a deadly root fungus from the island of Taiwan. And since all Cavendishes are clones, if the fungus can kill one banana shrub, it can kill them all.

Of course the Panama disease is nothing new. It was identified at least as early as the 1950s, when it wiped out the Cavendish’s predecessor, known as the ‘Gros Michel’, or Big Mike. When the Gros Michel banana succumbed to the fungus, the Cavendish was found to be immune, at least until the fungus mutated and started its attack all over again. Starting in the 1990s, the Panama fungus began to work its way across Asia and Africa once again. The oceans have proven effective barriers for now, “but when someone with the fungus on their shoe can cross an ocean in a few hours,” National Geographic magazine warns “oceans provide little protection.”

The history of the banana has been one of deep politicisation, therefore; implicating it in the unfavourable destinies of multitudes. But the banana, and for that matter oil itself, is merely one among many problematic resources to reap these economic histories and contemporary consequences. Indeed its trysts with dictators, lobbyists and tariffs at the behest of seemingly malevolent multinationals says more about the politicised nature of international trade than the resource in question. Indeed very few resources, if at all, could undergo similar examinations and emerge unscathed to some degree or another.

Does a Smoother Silk Road Lie Ahead for Africa?

By: Dr David Monyae & Bhaso Ndzendze

11 Nov. 2017

For its part, Beijing has largely kept to its declared vision of a non- hegemonic stance, regardless of the growing number of detractors seeking to assert otherwise. Last month`s CPC National Congress, in which Xi Jinping was granted another five-year term as president, has gone a long way in confirming, in the very least, the multilateral ambitions China has for the East Asian region and the world – and by definition, for Africa.

What are the implications carried by the outcomes of the congress for the relationship between Africa and China? And how best can Africa seek to situate the continent`s interests in the comprehensive vision articulated by China in the seven-day congress? In his report to 2 238 CPC delegates from all over China, the president, who is also party general-secretary and chairman of the Central Military Commission, spoke under the theme of `Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era.`

In his three-and-a-half hour speech, in which he reportedly had to pause 72 times on account of applause, he unpacked the grand WHAT is clear after the 19th Communist Party of China (CPC) National Congress is that it is no longer business as usual. For the past 15 to 20 years, there has been an ongoing narrative among foreign policy and inter- national political economy circles that China is poised and willing to project its increasingly growing power on to the global arena. For its part, Beijing has largely kept to its declared vision of a non- hegemonic stance, regardless of the growing number of detractors seeking to assert otherwise.

Last month`s CPC National Congress, in which Xi Jinping was granted another five-year term as president, has gone a long way in confirming, in the very least, the multilateral ambitions China has for the East Asian region and the world – and by definition, for Africa. What are the implications carried by the outcomes of the congress for the relationship between Africa and China? And how best can Africa seek to situate the continent`s interests in the comprehensive vision articulated by China in the seven-day congress? In his report to 2 238 CPC delegates from all over China, the president, who is also party general-secretary and chairman of the Central Military Commission, spoke under the theme of `Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era.` In his three-and-a-half hour speech, in which he reportedly had to pause 72 times on account of applause, he unpacked the grand vision for the next 15 years.

During and immediately after the congress, many messages of congratulation came from across the world (about 900 letters and messages from 164 countries), including from African leaders of political parties and government officials. South African President Jacob Zuma was among the well-wishers, and Zimbabwean finance minister Ignatius Chombo, on behalf of Zanu-PF, of which he is secretary, stated that `we are convinced that the decisions to be adopted at the 19th CPC National Congress will positively press forward world peace and economic development not only for the Chinese nation but for the world at large`. As China is Africa`s premier trading partner and number-one creditor, such careful observation and laudatory sentiments from the continent ought to have been expected.

For the congress has come at a time when China has entered into a substantial number of commercial, security and aid agreements with Africa – most notably through the Forum on China-Africa Co-operation (Focac). Particularly glaring is the promise of the One Belt, One Road initiative in which a number of African countries have got on board (and whose long-term commercial and economic implications South Africa, as regional and continental leader, ought to seriously put under intense study and strike a balance in consideration of its own continental aims). During Richard Nixon`s visit to Beijing in 1972, the Chinese premier, Zhou Enlai, was asked about the impact of the French Revolution. Speaking of an event that took place nearly two centuries previously, vision for the next 15 years.

As China is Africa`s premier trading partner and number-one creditor, such careful observation and laudatory sentiments from the continent ought to have been expected. For the congress has come at a time when China has entered into a substantial number of commercial, security and aid agreements with Africa – most notably through the Forum on China-Africa Co-operation (Focac).

Particularly glaring is the promise of the One Belt, One Road initiative in which a number of African countries have got on board (and whose long-term commercial and economic implications South Africa, as regional and continental leader, ought to seriously put under intense study and strike a balance in consideration of its own continental aims). During Richard Nixon`s visit to Beijing in 1972, the Chinese premier, Zhou Enlai, was asked about the impact of the French Revolution. Speaking of an event that took place nearly two centuries previously, vision for the next 15 years. During and immediately after the congress, many messages of congratulation came from across the world (about 900 letters and messages from 164 countries), including from African leaders of political parties and government officials.

South African President Jacob Zuma was among the well-wishers, and Zimbabwean finance minister Ignatius Chombo, on behalf of Zanu-PF, of which he is secretary, stated that `we are convinced that the decisions to be adopted at the 19th CPC National Congress will positively press forward world peace and economic development not only for the Chinese nation but for the world at large`.

During Richard Nixon`s visit to Beijing in 1972, the Chinese premier, Zhou Enlai, was asked about the impact of the French Revolution. Speaking of an event that took place nearly two centuries previously, Zhou famously commented that it was `too early to say`; if the Chinese have a long-range view of history, then they have an equally long view of the future. Looking at the report by President Xi, China is bent on becoming an even bigger player on the international arena; indeed, the president has staked his legacy on this. Achieving this requires fledging friendships across the international arena; and in this Africa is indispensable.

Indeed while not mentioned by name, President Xi might as well have had the more than 50 states which compose the African continent, which was the subject Zhou famously commented that it was `too early to say`; if the Chinese have a long-range view of history, then they have an equally long view of the future. Looking at the report by President Xi, China is bent on becoming an even bigger player on the international arena; indeed, the president has staked his legacy on this. Achieving this requires fledging friendships across the international arena; and in this Africa is indispensable. Indeed while not mentioned by name, President Xi might as well have had the more than 50 states which compose the African continent, which was the subject CHINA WILL WORK TO STRENGTHEN SOLIDARITY AND CO-OPERATION of his international visit after coming into office in 2012: `China will, guided by the principle of upholding justice while pursuing shared interests and the principle of sincerity, real results, affinity, and good faith, work to strengthen solidarity and co-operation with other developing countries`.

The question of bringing these pledges into fruition is one ultimately of African agency on the world stage. In terms of ensuring that the developmental potential of China`s grand plans are meaningful for Africa, it is incumbent upon the continent itself to take advantage of and build upon what China has to offer, and not just in terms of material proposals, but also the monumental shift that China is bringing about to the global arena. With this shift comes the long- awaited prospect of a multilateral world in which Africa is offered `alternatives` and can make of them what it wills, on the basis of African national interest. After all, Africa is no longer interested in revitalising the pre-1989-esque tug-of-war politics.

Neither Beijing nor Washington is entirely good or bad; rather, aspects of their visions are to be weighed, and Africa ought to situate and adapt and negotiate the visions which best fit into the long-arch aims of the continent. It then bears reiteration that African agency is the matter at issue: how best can Africa act collectively to extract actual and sustainable gains from the opportunity offered by China, both as a developmental partner and as a diversifying force on the international stage? Africa should seek to piggyback on neither, but should rather seek to take its rightful place in this context of multilateralism, and increasingly democratising global institutions.

Africa is too significant and has too immense a position to be a mere recipient of offers from either side at this juncture. And moreover, the congress has offered Africa the unique opportunity to penetrate and obtain from China itself what vision China is operating under, and consequently has the opportunity to also put forward a measured response to such a vision, especially going into the next Focac meeting in Beijing in 2018.

After all, Africa is no longer interested in revitalising the pre-1989-esque tug-of-war politics. Neither Beijing nor Washington is entirely good or bad; rather, aspects of their visions are to be weighed, and Africa ought to situate and adapt and negotiate the visions which best fit into the long-arch aims of the continent. It then bears reiteration that African agency is the matter at issue: how best can Africa act collectively to extract actual and sustainable gains from the opportunity offered by China, both as a developmental partner and as a diversifying force on the international stage? Africa should seek to piggyback on neither, but should rather seek to take its rightful place in this context of multilateralism, and increasingly democratising global institutions.

At the moment African states, despite the existence of multiple regional and continental fora, act too bilaterally and there is a lack of co-ordination in third party appraisal among the states – the grand effect being one of cascaded sets of interests rather than a single and unified voice, with the advantages that come with that. Africa`s posture in dealing with Beijing ought to be one that is deeply informed about China – its workings, its visions, both immediate and long-term – and the congress has afforded Africa substantial means through which to realise such goals, as China has articulated its orientation and publicised it for Africa to make the most of.

A principal article of faith in international relations is that change is wedded on to the global system. Indeed, it is no longer business as usual. Africa`s plans for itself and its future cannot remain unaffected by the express aims articulated in the congress, and to that end Africa will need to re-look at a number of strategies, including Agenda 2063, which remains only aspirational at this point, and go beyond the strictures imposed by it, and in the end funnel out a clearer and updated set of goals, and (equally crucial) the means through which it will achieve those goals. Through painstaking analyses of the congress and much reading between the lines, Africa has a substantial vantage point from which to actuate its own visions – both immediate and long-term.

Monyae is a political analyst and co-director at the University of Johannesburg Confucius Institute, and Ndzendze is research assistant at the same institute.

Originally published in The Sunday Independent

Africa and the World Bank: Why it’s Not Too Late

By: Bhaso Ndzendze

4 Aug. 2017

Credit: The World Bank

African countries are in a developmental conundrum; they have seen economic reversals in the wake (and arguably because) of the World Bank and yet African countries, at least for the foreseeable future, need the World Bank – owing to a paucity of alternative lenders in the present. In its assessment of the outcomes of World Bank involvement in Africa’s development, this paper emerges with a mixed picture.

While the institution’s policy prescriptions saw large-scale failure in the form of cumulative debt, GDP declines and impoverishment in many African countries (for example Liberia, Nigeria, the DRC/Zaire and many others), it also succeeded in some (the two success stories often touted are Ghana and Uganda). But it would also be illegitimate to pin the failures purely on the World Bank. Ultimately, there are states – for example the DRC/Zaire, the Central African Republic/Empire of the 1980s, among others – wherein substituting the funder, and even removing the structural adjustments (which were not even wholly applied in some countries) would not have resulted in a less bleak picture. Indeed that they needed to go to the World Bank in the first place is proof enough that the countries in the region were mired in economic problems that preceded involvement with the institution.

Thus this article concludes that the World Bank has hitherto hampered development in Africa; but with the help, in many instances, of African leaders, who fostered unreceptive neopatrimonial environments and mismanaged the loans, at the expense of African citizens. Ultimately, however, it is not too late as there is nothing in this setting which does not lend itself to reversal.

‘Accelerated Growth’, Structural Adjustments, and Lost Decades: The World Bank and African Underdevelopment, 1979-Present

Despite remarkable performance in the 1960s, African economic development slowed down in the 1970s and stagnated in the 1980s, Africa’s so-called lost decade. In turn, the African states’ attempts to reinvigorate economic growth through state-led investments and import substitution industrialisation strategies were unsuccessful. And then, unable to raise funds locally, shunned by commercial banks abroad, African states opted for rescue by the International Monetary Fund and the World Bank. In effect, Western donor institutions took over as Africa’s bankers. Thus Senegal in 1979 became the first African state to obtain a loan from the World Bank predicated on structural adjustment programmes (SAPs). Soon, others followed suit. Despite their desires, and domestic pressures (interestingly, this was not always the case; as in Dar es Salaam there was virtually no opposition to austerity measures because some 90% of the population had been living off the private, informal market), to do otherwise, by 1980 some thirty-six African governments signed up; many were either on the verge of, or beyond, bankruptcy.

These structural adjustments, today so synonymous with the World Bank, included currency devaluation, elimination of subsidies, market liberalisation through removal of tariffs and quotas, decreased government spending, privatisation, low regulation of foreign enterprises and raising of agricultural prices that had been artificially kept down by governments. The idea had been to enact a series of radical economic reforms to shift African states from the state-centred approach (which had once been lauded even by the west) of the 1960s, and to give the markets a bigger role. Echoing the language of Ronald Reagan, then recently elected President of the United States, the appointer of the successive World Bank presidents, government was no longer to be looked to as the solution to economic problems, government was deemed to be the very cause of these problems.

Because of their emphasis on expenditure cuts, public support for infrastructure, education, social services, as well as for research and extension, while not attaining reciprocal agreements from the corresponding western states, these sectors suffered and rural areas, with their high proportion of poor people, were particularly hard hit. Stein argues that SAPs, as promoted by the bank as a result of their neoclassical roots, were basically a-institutional and therefore ill-equipped to promote market and institutional development in Africa. The outcomes of this were immediate and prolonged. For many scholars, the spread of the Ebola virus in West Africa in 2014 was as a result of the neoliberal orthodoxy imposed on Liberia in the 1980s which championed rolling back expenditure on, and privatisation of, health services under direction from the Berg Report, Accelerated Growth, prepared under the auspices of the World Bank. The outcome, in a situation where there was a lack of state capacity with regards to health services (precisely due to the World Bank’s directives) and no will on the part of the private interests to invest in a “clientele” which could not afford the treatment, was the transnational proliferation of what could have been a containable outbreak. Less severely, Tanzania’s medical and educational systems had ceased to function in all but name with school enrolment down from 98% (in 1981) to 76% in 1988.

Further, between 1991 and 1995, Africa’s annual real per capita GDP growth averaged at 0% for all Enhanced Structural Adjustment Facility (the below market price lending facility that funds poor states in exchange for the adoption of World Bank-directed structural adjustments) countries, whereas non-ESAF developing countries experienced, on average, 1.0% annual real per capita GDP growth. Far worse was the fact that between 1991 and 1995, sub-Saharan African countries which had adopted ESAF programs experienced an average annual 0.3% decline in terms of per capita incomes over the period of adjustment. The shrinkage is also attributable to the decline in purchasing due to World Bank-mandated structural adjustments which necessitated austerity and currency devaluation.

And in 1996, the World Bank, in response to demands for action to address the external debt crisis of poor countries, ushered in the Highly Indebted Poor Countries (HIPC) initiative. More than 80% of the countries identified by HIPC as needing debt relief were African. But the debt relief would come, in a familiar way, with conditions attached; in order to qualify for debt relief under HIPC, countries had to participate in structural adjustment programs. The HIPC program has been criticised for providing too little actual debt relief and providing it too slowly while at the same time opening up African markets to Western corporations with whom they could not yet compete due to the infancy of their own markets.

To the extent that SAPs failed to promote growth, no improvement in poverty can be expected from growth effects. The impact on poverty and food security arising from the shifting of relative agricultural prices has been mixed, but in general in Nigeria, South Africa, Kenya and Egypt, for example, the winners have been net surplus producers of agricultural products among rural households, particularly those with export crops, while the losers have been net consuming poor households and the urban poor.

What of Africa’s Leaders?

It is not only the conditionality which determine the success of World Bank involvement in Africa, but also the conditions under which these are introduced; national leadership being the key one since the loans are granted to states and not private entities.

One of the few leaders to actually implement structural adjustment was Jerry Rawlings of Ghana in the 1980s and 1990s. Coming into power through a coup in 1982, he embarked on a wholesale reform, accepting market disciplines and a reduced role of the state. He increased cocoa prices, he devalued the Ghanaian cedi, import-licensing systems were abolished, and about 60,000 public sector employees were retrenched, and Ghana’s prized Ashanti Goldfields was privatised. Despite doubling of debt between 1983 to 1988, in that period, cocoa exports increased in just three years from 155,00 to 220,000 by 1986. Equally significant, food per capita rose, and inflation fell from 123% to 40% between 1983 and 1990; increasing the Ghanaians’ buying power. Similarly, Uganda through PRSP policies reduced its GDP-debt ratio from 58.3% in 1999 to 2.1% in 2009.

Even these so-called miracles, in any case 2 out of 54 African states, have been lacklustre and are disappointing on the whole – Ghana’s GDP in 1998 was still 17% less than its 1970 levels, and Uganda’s low debt has been due to donations. And some question whether these results have clearly been linked to SAP-related macroeconomic policies. Yet, it is probable that Ghana’s GDP would be even worse without the role of the World Bank, and in a more corrupt country – such as in post-Nyerere Tanzania cited above where bribery and corruption were rife – the donations and loans received by Uganda to reduce its debt-to-GDP ratio could have been imprudently managed and not made a difference.

The issue of whether the overall disappointing performance of SAPs in Africa is due to incomplete and “half-hearted implementation”, inappropriate policy components of the SAPs, or adverse external factors lies at the heart of the debate. A review of the available studies suggests that in most cases a combination of these three factors was at work – Africa has over 50 states after all. It is certainly true that there was incomplete, half-hearted, and “stop-and-go” implementation, that there were deficiencies in the sequencing of measures, lack of coordination of policies and inappropriate policy design, and that the markets for primary products, Africa’s main export, deteriorated in the 1980s and 1990s but it is clear that the failures were in large part due to World Bank failure in vetting the countries to be granted loans, and inabilities to affect penalties for mismanagement of funds. Qualification for loans, in other words, should have been predicated on more than just a state being a Western ally during the Cold War, or the anti-terror ally today. And here lies the problem, neopatrimonialism, in such places as the former Zaire, CAR, Nigeria, Malawi and numerous others, ensured that the funds were misused, and yet the World Bank failed to recognise this, or when it did, it did not hinder it from continuing to give the loans – which in turn went into “white elephant” projects. Indeed, a shadow review by ActionAid concluded that the Bank does not have an effective plan for ensuring accountability even in the wake of the Operation Policy and Country Services unit.

Where to From Here?

In at least two African countries, the World Bank has been a facilitator of development; and in those countries where there has been debt and negative growth in spite of World Bank presence, it is still possible that matters would be even worse in its absence, as it has been one of few institutions willing and able to make concessional loans. Furthermore, World Bank granting of loans has been found to positively increase attractiveness of receptor states in the short run and causes other funders to be more willing to make investments. SAPs during periods of falling growth or no growth appear to reinforce underlying expectations for the future; they are associated with positive expectations.

And to conclude, it has to be noted that essentially, the failures of the World Bank in the continent have also come about as a result of the World Bank’s own internal structural inconsistencies as well as an unreceptive climate within countries. For example, some scholars have argued that the content of PRSP, its ideological underpinnings, and the global context in which it is situated seem to involve contradictory impulses for national ownership, governance and poverty reduction in Africa.  We may go so far as to say that the institution is essentially a paradox; it is a neoliberal institution, and yet is itself state-owned – and therefore prone to serving national interests – and, moreover, despite its profession of market-orientation, it is a lender to governments as opposed to private entities; and thereby buys out of key classical liberal truisms such as competition and room for incentives. Equally pertinent, African countries themselves need to own up the other end of the equation because they are the recipients of the funds. In the wake of the 1990s Asian crisis and recovery through World Bank assistance (especially in the case of South Korea which managed to pay back its loan ahead of schedule), it is clear that the bank can be a partner for recovery and growth provided there is prudent assimilation of these funds. But before these funds can be granted, there ought to be a revisiting of the process so as to ensure the loans do not end up in imprudent hands in the first place. Perhaps then, and only then, the World Bank can continue to facilitate development on the continent. Wedded into this is the responsibility of not only African but World Bank leaders to make the bank more responsive – something which previous presidents such as James Wolfensohn and incumbent Jim Yong Kim began to grasp in their various “listening tours” around prospective recipient states.

 

Originally published in: Modern Diplomacy

Welcome to my Professional Website

I am a researcher and assistant lecturer on the International Political Economy of Africa-China Relations at the University of Johannesburg Confucius Institute.

So far, my work has focused on the relationship between Africa and the People’s Republic of China, as well the African continent’s relationship with the United States. What has also been interesting is to look at the implications of this nexus for all three parties.

My research also extends to the following areas:

  • Africa, China, US relations
  • Chinese foreign policy
  • International relations of the Asia-Pacific region
  • Chinese economy
  • BRICS
  • Economic development and international trade
  • IR theory
  • Transnational terrorism
  • The international political economy of energy

See a list of my publications for more.