Africa’s development needs strong institutions

Business Daily Africa, June 21, 2011

By Fredrick Njehu

The emergence of new powers in global economics has changed how institutions of global governance are shaping the political economy. New institutions are being formed while the old ones have been revitalised in a rejuvenation of the South-South co-operation.

The presence of Brazil, India and China has been a challenge to the dominance of the traditional Western powers that have previously shaped the international political economy. Then there is South Africa, mostly considered as a gateway to African markets by the rest of the emerging powers.

Looking at the relationship between the emerging markets and Africa, it is reasonably clear that their interests lies in this continent once seen as manoeuvring at the margins of the global political economy. Noticeably, this comes immediately after Western powers experienced the global financial crisis of 2008-2009.

It is clear that Africa is the next resource rich frontier that the big powers will be trying to court.

So, the main ball of contention has always been Africa’s potential to reap the benefits of these engagements with both the traditional and new global powers.

Traditionally, the western powers have always utilised tools such as aid for trade, foreign direct investments and other preferential trading schemes such as those in African Growth and opportunity act (Agoa) for America, Economic Partnerships Agreements (EPAs) for the case of Europe while others such as Japan and China have utilised technical assistance in infrastructural development and technology advancement.

However, these schemes have had numerous challenges especially Africa’s inability to address the supply side constraints, low quality products as well as high adjustments costs which have ultimately aggravated African aid dependency.

It will be imperative for African governments to monitor the foreign direct investments and aid from these emerging economies and analyse whether or not they provide opportunities or threats to their economies. They should also exercise ownership from these ties in order for them to ensure a win-win situation. This could enable Africa steer clear of the traditional aid dependency that has previously obstructed its growth and development.

In a nutshell, the future of African development co-operation largely depends on its ability to devise comprehensive rules of engagement in their foreign policy dispensations, effective leadership and strong institutions for international partnerships.

Njehu is a trade analyst, CUTS International, Nairobi.

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