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Into Africa

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I tend to avert my eyes from Africa as it seems to be an endless boiling cesspool of disease, corruption, incompetence, greed, stupidity, blood feud violence. The constant demand for emergency relief seems money down a bottomless pit of despair – I admit to full-blown compassion fatigue. Yet we need to do something, don’t we?

What David Ignatius has to say makes perfect sense to me:

    According to World Bank statistics, gross national income per-capita in sub-Saharan Africa actually declined by 0.2 percent from 1990 to 2001. Life expectancy has decreased over the past two decades, and the number of people living in poverty has increased steadily.

    It’s easy to blame globalization for Africa’s nightmare, and that’s precisely the line of many of the protesters who gathered at last week’s G-8 summit in Evian, France. But to me, it seems as if the protesters have it backward: Africa’s problem is not that it has too much connection to the global economy but too little. It needs more globalization, not less.

    In simple, financial terms, Africa doesn’t attract enough foreign capital to finance its development needs. Africa has about 10 percent of the world’s population, but in 2001, it received only about 1 percent of the world’s foreign direct investment. For sub-Saharan Africa, the investment share was only 0.7 percent, and most of that was invested in petroleum and mining.

    ….how to get Africa moving in the right direction? The most sensible suggestions I’ve seen recently are about to be released by a blue-ribbon group called the Commission on Capital Flows to Africa.

    ….The recommendations include a proposal for all products from Africa to enter the United States duty-free and quota-free. That’s discriminatory and unfair to other nations, but so what? Africa needs some positive discrimination. The commission will also recommend that the United States negotiate free-trade agreements with individual African countries and a free-trade zone within southern Africa.

    Perhaps most important, the commission will urge that over the next 10 years, U.S. taxes would be zero for repatriated profits on new investments in Africa by U.S. companies. That would instantly make investing in Africa more attractive.

    The commission estimates that if coupled with local African tax reforms, an overall reduction in business taxes of 10 percentage points could lead to a 20 percent to 40 percent increase in non-energy investment in Africa — or an extra $800 million to $1.6 billion annually.

    For every dollar lost to the U.S. Treasury, the commission calculates, there would be a benefit to Africans of five dollars. That’s the kind of tax cut I can get excited about — one that benefits poor children in Africa. [Washington Post]

Something must be done, and this seems a very positive and doable something. The “do something now” appeal is hard to resist, but the time has come to create a structure for the future where “do something now” will become much less urgent and incessant.

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About Eric Olsen