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Canadian Economic Relations with sub-Saharan Africa

Recent Trends

As host of the G8 Summit in Kananaskis, Alberta, Canada is promoting renewed attention to poverty and development in Africa, leading to a G8 Action Plan for Africa. Prime Minister Jean Chrétien is responding to the call for a New Partnership for Africa’s Development (NEPAD), which has been issued by African political leaders over the past year. NEPAD seeks the eradication of poverty in Africa through "a new relationship of partnership between Africa and the international community, especially the highly industrialized countries, to overcome the development chasm that has widened over the centuries of unequal relations." Canada has responded with a $500 million Special Fund for Africa to be devoted to the G8 Action Plan as well as a trade initiative to accelerate duty free access into Canada for the products of Africa’s poorest countries.

In order to situate these initiatives, this briefing note provides some background on Canada’s economic cooperation with Sub-Saharan Africa during the 1990s. It looks in turn at Canadian policies for debt cancellation, some trends in Canadian foreign direct investment, trends in Canadian official development assistance (ODA), and Canadian trade with Sub-Saharan Africa.

1. Debt Cancellation
Canada was among the first of the G7 to agree to 100% cancellation of bilateral debt for the poorest countries and has been a leader in seeking a multilateral agreement to cancel debt. In February 2000, Finance Minister Paul Martin announced that Canada would cancel 100% of debt owed by the highly indebted poorest countries (HIPC) to the Export Development Corporation (EDC) and the Canadian Wheat Board (CWB). Sub-Saharan Africa makes up about $1.5 billion of developing country debt owing to Canada, of which $1.1 billion is owed to EDC and CWB by HIPC countries and hence covered by Canada’s above commitment to complete cancellation. Of the countries covered, Côte d’Ivoire ($250.9 million) and Cameroon ($440.1 million) are the most significant.

Canadian debt cancellation, however, is conditional on compliance by these countries with all the terms of their agreement with the IMF/World Bank Highly Indebted Poor Country Initiative (HIPC). NGOs in Africa and around the world have demonstrated that many of these conditions have deepened poverty in Africa. While Minister Martin has been calling for an easing of the terms of HIPC (without much support from his fellow G7 finance ministers), Canada has not backed away from the macro-economic policies of liberalization and privatization to which the poorest countries must comply for very limited debt relief.

2. Canadian Direct Foreign Investment in Africa
Canadian foreign direct investment in Africa is a very minor element of Canadian investment in developing countries, peaking at 5% of global investments in 1996, but less than $200 million in 1998. Throughout the 1990s there has been growing interest of junior Canadian mining companies in resource exploitation opportunities in Sub-Saharan Africa. By the end of 1996, according to research by Dr. Bonnie Campbell and colleagues at the Université du Québec à Montréal (UQAM), there were more than 170 Canadian mining companies in Africa, with African exploration expenditures amounting to more than 16% of global exploration of Canadian mining companies. Such investment has often caused harm: NGOs have been calling attention to serious human rights issues and significant negative economic and environmental impacts of mining on local communities and on the rural poor, as well as to issues relating to conflict and corruption.

Mining interests are concentrated in Ghana, Zimbabwe, Tanzania, South Africa, Burkina Faso, Botswana, and Mali. This investment has been facilitated by liberalization policies promoted by the World Bank and IMF and sometimes directly by the Canadian aid program. Since the late 1990s, in Zimbabwe, for example, CIDA has been supporting a computerized mine titles system in the Ministry of Mines, environmental mapping, technical training and the drafting of new mining legislation.

3. Trends in Canadian Aid Relations with Sub-Saharan Africa
Aid has been declining overall in the 1990s, and aid to Sub-Saharan Africa from the 22 official donors has fared even worse. Despite a rhetorical focus on poverty reduction, most donors gave no priority to this region where poverty has grown in the past decade. Reality of Aid 2002 (authored by an NGO network from around the world) reports that aid to Sub-Saharan Africa in the last four years has never been lower since 1984.

Donor Performance on Aid to Africa
Comparing 1999 to 1988/89 (in 1998 dollars),

  • total aid for developing countries from all sources is 4.3% lower in 1999; but total aid to Sub-Saharan Africa from the 22 official donors is 11.2% lower; and
  • total aid to Sub-Saharan Africa from the G7 donors is 18.8% lower!

In their review of donor aid commitments, the authors to Reality of Aid 2002 characterize northern donors as "never richer, never meaner",

Wealth per person in donor countries has doubled since 1961, approaching $30,000 in 2000, while their aid given per person is less than what is was 4 decades ago.

  • The G7 donors, who seek to play a "leading role" in the global economy, give a pitiful share of their wealth in aid – 0.19% of their Gross National Income (GNI) in 2000, while non-G7 donors gave 0.46% of their GNI, against a UN mandated target of 0.7%.

Canadian Aid to Africa

Prime Minister Chrétien announced in Monterrey that Canada would be increasing its ODA by 8% each year. While this is welcome news, Canada has reduced its aid very severely since 1990, falling from 0.48% of GNI to 0.25% today. It will take at least six years at 8% growth in Canadian aid to reach even 0.35%, one half of the UN target.

How has Canadian aid to Sub-Saharan Africa fared over the past decade?

Between 1990 and 2000 Canadian ODA to Sub-Saharan Africa has declined by 34.4% (in real 1999 dollars), while overall Canadian ODA declined by 31.2%. Sub-Saharan Africa was neither protected during the cuts to Canadian ODA in the mid-1990s, nor has been given any special priority in the small increases to Canadian ODA since 1998.

In fact, over these 10 years, cumulatively, more than $1.6 billion has been lost to Sub-Saharan Africa from Canadian aid, assuming aid to this region had been maintained at the level reached in 1990. In this context, the $500 million Special Fund for Africa, announced in the December 2001 budget, to be allocated over three years, is a small step in regaining these losses.

In 2000/01 emergency food aid and international humanitarian assistance (IHA) accounted for more than 10% of total aid disbursements to Sub-Saharan Africa. But Sub-Saharan Africa accounted for 43% of world-wide IHA disbursements and 54% of world-wide food aid disbursements, which is indicative of the scale of the humanitarian crises in the region.

Programming in Sub-Saharan Africa is spread over a number of sectors, with the social sectors and commercial/business oriented sectors each representing more than 40% of disbursements, and with capacity building institutional support at about 18% (CCIC calculations on 1999/2000 project disbursement data). Canadian NGOs and Institutions accounted for 32.8% of CIDA bilateral disbursements for Sub-Saharan Africa in 1999/2000.

CIDA will be implementing new approaches to Canadian aid relationships in Sub-Saharan Africa over the next two years, with particular focus on coordinated donor approaches to sector wide strategies in health and education (SWAps), guided by Bank/IMF inspired Poverty Reduction Strategy Papers. There are currently 12 SWAps or SWAp-like activities currently approved or being developed within the Agency in Sub-Saharan Africa. NGOs are concerned that SWAps orient CIDA almost exclusively towards interaction with government officials. They tend to ignore important contributions to gender equality, basic education, primary health or small-scale agriculture at the community level through civil society partnerships in these areas, sustained over years by Canadian NGOs with substantial CIDA support.

4. Canadian Trade with Sub-Saharan Africa
While the US is by far Canada’s most important trading partner, Canada has seen important growth in its trade with developing countries, with exports to developing countries growing by 3.4% annually and imports by 15.7% in the last decade. But most of this growth is concentrated in Asia and the Americas, with Mexico and China accounting for 54% of developing country imports into Canada in 2000.

Trade with Sub-Saharan Africa is extremely marginal, even in relation to Canadian trade with other developing countries. It makes up only 3.2% of imports from developing countries into Canada and 4.1% of exports from Canada to these countries. Crude petroleum and other mineral oils represented 46% of imports from Africa in 1999 and used clothing is a top Canadian export to many African countries.

The Canadian government initiative to extend duty-free and quota free access to exports of the Least Developed Countries (LDCs) is welcome. African countries make up the majority of the LDCs and might be expected to benefit. But the proposal is expected to have very limited benefits for poverty reduction in Africa, because it will have most impact on increased access for textiles and clothing, and most trade interest in the latter is found in South Asia and China.

Gains for poverty reduction are also influenced by conditions for employment and investment. Imports of clothing from Lesotho for department stores in Canada, for example, have been challenged by Canadian NGOs because of concerns for workers’ rights in the factories producing this clothing. Support to women’s rights and women’s organizing is particularly critical given the dominance of women in many of these export sectors.

Canadian NGOs have also pointed out that measures to reduce Canadian tariffs will have limited impact on poverty reduction without concerted action by Canada to reform current trade rules and democratize the process for trade-rule making. Existing trade agreements must allow developing countries more scope to pursue their development needs, in agriculture and food security or affordable medicine for example.

May 2002
Brian Tomlinson, Program Officer, Policy, CCIC








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