POVERTY AND GOVERNANCE IN AFRICA the Presentation to the World Bank Staff at Brown Bag Lunch By: Frederick Sumaye Former Prime Minister of UR Tanzania ( 1995 to 2005 ) May 17 th, 2007.

Africa: Facts and Figures Area: 30.3 mil sq. km (11.7 sq. mls) = 20%of land area. Population: 890 mil =12% (World). GDP $ 558 bln, per capita $670. Total debt 60% GDP. Poverty <$ 1/day 36%. Composed of 53 sovereign states

Historical Perspective Oldest? Civilization Slave Trade – destruction of society Scramble for Africa – Colonization – 1884 Berlin meeting Struggle for Independence – Wars and bloodshed – Struggle for power within countries Scramble for Africa - capitalism vs communism Scramble for Africa – natural resources

Effects of Corruption Old vice (since creation?) Exist in both rich and poor countries More rampant in poor countries? Serious propagates bad governance Negatively impacts on development Unfair/differential treatment of citizens Poor accountability/inefficiency

The Cost of Corruption WB estimates $80bln/year bribery in Transnational Corporations After 1977 Corrupt Practices Act US Companies lose $30bn/year 1999 report (US) found allegations of corruption of $37bn. In 4 months Over 5 year period bribery has influenced 294 contracts worth 145 bn European Countries allowed tax deductibility of bribes as business expense (15% high corruption countries and 3% European Union) 1992/93 Corruption scandals reached highest political echelons of Belgium, Spain, Italy, Japan, France and Russia. 5 large WB clients are ranked by TI as among the most corrupt countries in the world Source: Global network to Curb Corruption: The experiences of Transparency International by Fredrik Galtung

Corruption in Developing Countries More rampant in many countries More visible – small economies More detrimental Many speakers – borrowed/grant money Who prosecutes and who judges? – In investments in minerals/oil how much taken and how much is left?

Leadership, Poverty & Corruption Poverty & corruption are indirectly related – Grand corruption - NO relation to poverty – Petty corruption – may be related Leadership in extreme poverty – Difficult & dangerous – Prone to corruption accusations – Prone to conflict – Easily confused with bad governance

Africa’s problems Real problem: Too many “can’t wait" problems – Leadership bogged down by immediate problems Too few resources – Difficult to set priorities A loser in global wealth creation – In 1990’s WT increasing at 6.7% (volume)1 – Africa’s share decreased from 3.5% to 1.5%2 – LDCs lost 80% of share in 3 decades, have only 0.5%3 Export raw commodities – low, unstable prices 1 Sources: Trade Policy for a competitive Economy and Export-led Growth, Ministry of Industry and Trade Tanzania (2003). 2http://publications.worldbank.org/commerce/catalog/product?item_id= http://publications.worldbank.org/commerce/catalog/product?item_id= political Economy of the World Trading Systems, by Bernard M. Hoekman and Michael M. Kostecki

How did we help Africa? WB and others – assisted development – Expert advice- with knowledge on the ground? – Predetermined ‘medicine’ Failure of loan repayment – Interest – simple, compounding rate? Crippling debt burden – Loan servicing eg Zambia 62%, Mozambique 57%, Tanzania 42% (of govt. spending in 2001)* – Outcome – continued/increasing poverty? * Source: UNDP/WB figures – The political economy of AIDS in Africa by Nana K. Poku, CfHIV/AIDS/ECA & Alan Whiteside

Which way forward? Help Africa were wealth is created- private sector – Production, processing, marketing Loans repaid- business profits Governments – conducive environment to business Others – Me, start a social entrepreneurship organization to help private sector do competitive trade.