World Bank Structural Adjustment Program (SAP) Destroyed African Economies.
How The IMF-World Bank and Structural Adjustment Program(SAP) Destroyed Africa.
Herbert Jauch , Labour Resource and Research Institute, Namibia
The results of SAPs in Southern Africa were similar to those of the programmes elsewhere. The effects of these policies are visible in all countries of Southern Africa, although the manifestations are different. In Angola, the war sponsored by the CIA and South Africa during the 1970s and 1980s has devastated the country. Virtually the entire industrial production base was destroyed and Angolans have to fight a daily battle for survival. In the late 1980s the World Bank and the International Monetary Fund (IMF) enforced SAPs resulting in what was described as “wild capitalism” (Brittain: 3-7). These policies have done nothing but exacerbate the already devastated economic and social structures of Angola.
In Zimbabwe and Zambia, SAPs placed severe hardships on the population while failing to lead to the promised economic recovery and reduced unemployment. ESAP, the abbreviation for ‘Economic Structural Adjustment Programmes’ is now seen as the abbreviation for ‘Ever Suffering African People’, as these programmes resulted in popular protests and food riots after subsidies for basic food items were withdrawn. The Zimbabwe Congress of Trade Unions (ZCTU) has pointed out that ESAPs worsened poverty and that export orientation further disadvantages small-scale communal farmers who still have no adequate access to suitable land (Goncalves: 6)
After 5 years of SAPs, Zimbabwe’s external debts had increased dramatically due to heavy SAP-related borrowing. It now stands at more than 100% of the GDP and the domestic debt is even higher. Due to currency devaluations the real foreign exchange value of exports in Zimbabwe declined by 2,7% a year while it had grown by 9% before SAPs were introduced. Economic growth was slow and 60 000 workers were retrenched (Saunders: 9; Goncalves:70).
In 1995 the IMF suspended the lending programme and called for even bigger sacrifices to be imposed on the population. SAPs forced the government to concentrate on budget deficits at the expense of creating employment and improving social services. Unemployment stands at 50% in some sectors and only 16 000 jobs are created per year for 220 000 school leavers. Since the early 1990s 130 companies were liquidated and a process of de-industrialisation is underway in a country that once had a relatively self-contained and integrated economy (Saunders: 8-11).
Zambia took the most dramatic steps to fully implement ESAPs and has seen whole industries disappear as protective measures were dropped. External debts are strangulating the country and between 1990 and 1993 the Zambian government spent 35 times more on debt repayment than on primary school education! (Goncalves: 7)
Mozambique is often regarded as one of the poorest countries in the world with foreign assistance accounting for two-thirds of its GDP. After 20 years of South African sponsored war, the state has virtually been destroyed and is presently trying to establish some kind of political stability.
During the 1980s the Mozambiquen leadership tried to find a way of protecting social achievements when dealing with external financial institutions like the IMF and World Bank. This did not last long and a process of ‘recolonisation’ unfolded. Privatisation hit every sphere of the country’s social and economic life: banking, cotton industry, agriculture, health and education.Today Mozambique is dominated ” not by the agents of a colonial power, but by the technically sophisticated and politically disinterested economists of the IMF , the World Bank and of bilateral aid agencies whose prescriptions are determined by economic analysis” (Plank).
They portray Mozambique’s subordination as a natural consequence of global economic trends. A Mozambiquen MP admitted that “our budget is really set by donors at the annual Paris conference” (Saul: 12-17). Privatisation which was meant to improve efficiency and reduce budget deficits often results in massive retrenchments. According to Mozambique’s trade union federation OTM, of the 502 companies which were privatised since 1989 only 25% are still operational and 37 000 workers have been retrenched (Goncalves: 6).
Under pressure form international donors, the Malawi government removed fertiliser subsidies in 1995. As a result, small-scale farmers could no longer afford fertilisers or were forced to sell their food stocks. This poses a serious threat for the country’s food self-sufficiency.
Although Namibia and South Africa are not heavily indebted and were not forced to implement SAPs, there are indications that these countries are following similar policies. After decades of sanctions and partial isolation, South Africa is re-integrating into the global economy. This is changing its domestic economy which had been characterised by protective tariffs and import substitution. It now has to face global competition. As a signatory to the General Agreement on Trade and Tariffs (GATT) and member of the World Trade Organisation (WTO), South Africa has started to dismantle tariff barriers. The government sees this as a necessary step to make domestic industries internationally competitive. The macro-economic plan known as “Growth, Employment and Redistribution” (GEAR) shows many similarities with the structural adjustment policies of other countries.
So far, the harshest effects of trade liberalisation are experienced by workers in South Africa’s clothing and textiles industry. 80% of workers in the clothing sector and 50% of those in the textile sector are women. Between 1991 and 1997, 50 000 out of a total of 200 000 workers have lost their jobs. South African companies were unable to produce goods as cheaply or at the same quality as competitors from South-East Asia and had to close down. The industry proposed a more “flexible” labour force (i.e. wage cuts) to tackle the crisis, and some companies have initiated plant-level restructuring accompanied by retrenchments, casualisation and decentralisation of production (Macquene). Another prominent feature in South Africa is the privatisation of state assets similar to what has happened in other African countries as part of SAPs. Despite opposition from the labour movement, the South African government seems to follow the demands of national and international capital to speed up the process of privatisation.In Namibia, the government is still spending a large portion of the national budget on social services like education and health, but there are signs that cuts are imminent. The Ministry of Education, for example, has already cut down on expenditure for school hostels by reducing and sometimes even abolishing the subsidies. Several hostels were privatised and the Ministry now wants to implement a programme known as “staffing norms’. This programme aims to achieve a uniform teacher-student ratio across the country and claims to achieve the following: financial sustainability; enhanced educational quality; and equity among regions and schools. The Ministry targets teacher learner ratios of 1:40 for primary schools and 1:36 for secondary schools by the year 2002 (NANTU 1997:13).
Other signs of structural adjustment policies are the government’s commitment to sweeping privatisation which is justified as a means of making state-run and state-owned companies more efficient. ‘Commercialisation’ is mentioned almost daily in the media and has become the ‘religion’ of economic policy. The Namibian government is also determined to reduce the size of the civil service and believes that economic development can only be achieved through foreign investments and export-led growth. These are definite signs that structural adjustment has arrived.
SAPs and Globalisation
Overall, SAPs have reversed some of the gains made by ‘developing’ countries in their attempt to find an autonomous development process that would suit local conditions. The rolled back some of the achievements made by African states in the post-colonial era (see Goncalves: 6-8). Countries like India, Mexico, Algeria and Brazil are now returning to their former dependency on and subordination to the industrialised world (see Toussaint and Comanne 1995: 17). Chipeta points out that this is no accident as ESAPs were not designed to promote genuine economic development. “Each policy is designed to fail so that the implementing country can enter into another programme”. In other words, an implementing country becomes permanently locked into ESAPs which are designed by the industrialised blocks to shape developing countries according to their needs (Chipeta: 11).
SAPs as a part of the broader process of globalisation have increased the manoeuvring space for Transnational Corporations to an unprecedented level. They could utilise the opportunities created through privatisation and the general economic liberalisation. However, it is important to point out that the political and economic elite of ‘developing’ countries has also played a crucial role in the adjustment process. These elites often used the initial loans for their own benefits. They continued a life in luxury while telling their people to tighten their belts. Even under structural adjustment they were hardly the ones who suffered and sometimes even benefited from SAPs. When public services deteriorate or disappear they can afford private schools and hospitals. They often benefited from privatisation by obtaining functioning enterprises at give-away prices and they benefit from low labour costs as a result of labour flexibility. Susan George has accurately summed up the results of SAPs and globalisation when she wrote about the global apartheid economy:
‘The Bretton Woods twins have become the managers of a global apartheid economy in which the transnational elite from both “North” and “South” plays the role of the “whites”; a shrinking and anxious middle class the role of the “coloureds”; and finally, at the bottom, the vast sea of wretchedness made up of “blacks”, whatever their literal skin colour’ (1995:23).
The failure of SAPs have often led to violent protests that were often repressed with great brutality. The IMF/WB have ignored all critics for years and even today continue to argue that the situation would have been worse without SAPs. In recent years, they tried to respond to public criticism by moving towards adjustment ‘with a human face’. They are now prepared to look at a very basic safety net and have allowed some countries (e.g. Egypt) to maintain some subsidies on essential food products. However, the basic philosophy and the believe in the unregulated free market have remained unchanged (see Bournay 1995: 52).
Although the relative share of the ‘developing’ countries’ debt in the world’s debt has declined, the people of those countries still have to suffer under structural adjustment programmes. They still have to pay a heavy price to ensure that the debt is paid. The same is now happening in the former countries of the Soviet bloc that are also forced to undergo structural adjustment. Debt is even becoming an issue in the rich industrialised countries as people there are now also experiencing austerity measures that are similar to structural adjustment. Industrial countries justify cuts in social spending as necessary to reduce the public debt. Toussaint and Commanne pointed out that: ‘While austerity measures imposed in the North do not have tragic consequences equal to those in the South and East, the results are nonetheless destructive’ (1995:18).