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Editorial Comment
Some New Economic and Social Challenges in Africa
John Kuada
Editor, AJBER
Contact email: kuada@business.aau.dk
Africa has been characterized as the world's poorest continent - a continent plagued with diseases, conflicts, corruption, weak governance and debt. More than that, it is the continent worst hit by the HIV/AIDS epidemic - a disease that has contributed substantially to the erosion of the already limited wealth of several African nations. Understandably, the sheer scale of the problems creates a socialized hopelessness through out the continent, thereby producing a spiral of negative energy channeled into internal strife of different degrees of magnitude in different parts of the continent. Some economic commentators have observed that most African nations need to grow at an annual rate above 7 percent annually for several decades to reverse the downward poverty spiral. The papers included in this issue of AJBER focus attention on some of theses problems and offer some suggestions for addressing them.
The general premise of the studies is that economic growth strategy is the most cost-effective way of dealing with poverty. This statement is true for two fundamental reasons: first, growth lifts many of the poor out of poverty; second, it generates the government revenues necessary for anti-poverty measures (Fafchamps et al, 2001). Where resources are scarce, every entity and individual is expected to contribute to the development process. It is this collective endeavour that would accelerate the tempo of an African nations development. Thus, African businesses must be guided by keen awareness of their social responsibilities to all stakeholders in their societies if they are to serve their societies optimally.
This is an issue taken up in Dan Oforis paper with the title: Business Corporate Social Responsibility: Theory, Opinion and Evidence from Ghana. The paper explores the extent to which Ghanaian businesses have a socially responsible disposition in their business practices. To do so, he compared the views and actions of local Ghanaian companies in various areas of corporate social responsibility with those of foreign owned companies operating in Ghana. The key findings of the study were that, international firms tend to be guided a lot more by strategic and moral considerations about their social responsibilities than local Ghanaian firms. Granting that the results can be generalised for other local firms in Ghana (and, by extension, local African firms in general) Oforis study raises important questions with regard to the contributions that these firms make to the attainment of the developmental goals of their nations and policies that could be crafted to guide them to broaden their views on their social responsibilities. It also suggests a need for increased research into this subject not only for purposes of improving academic knowledge, but also to provide useful guidelines for policy and strategy formulation for African nations.
The second paper by Gbadebo Olusegun Odularu with the title HIV/AIDS and the Agricultural Sector: Implications for Human Development Policies in Nigeria, directs attention to another socio-economic problem area. The paper reminds us that HIV/AIDS is not just a health problem. It is, in fact, the biggest single challenge to Africa's development to date. Nigeria is the third nation in the world with the highest number of HIV/AIDS victims after South Africa and India. Estimates suggest a doubling of HIV/AIDS cases in Nigeria in the next 5 years. This, without doubt, has devastating consequences for individual families and the agricultural sector of the country as a whole. The paper discusses the economic implications of the high number of HIV/AIDS in Nigeria with reference to the classical dual economy model, where growth in the agricultural sector is required to fuel growth in other sectors of developing economies through resource transfers. The problem is that if HIV/AIDS results in a negative spiral of social and economic devastation, the expectations that 7 percent growth would pull Africa out of poverty needs to be quickly revised. Evidently, this is one of Africas problem areas where external assistance is greatly required. It is a problem that Africa cannot solve by itself irrespective of how committed and determined all its citizens are. The author provides a list of policy guidelines for the Nigerian government to address the agricultural problems that HIV/AIDS engenders. His suggestions are equally valuable to governments in other African countries as well.
Education represents another area in which government initiatives lag behind the needs of African nations. Governments have therefore accepted the challenge of liberalising the educational sectors of their countries and invited private investors to supplement government efforts at all levels. But the dearth of qualified teachers poses another serious problem within the educational sector. Constantine Imafidon Tongos paper provides some insights into this problem. The paper has the title: Exploring the Demographic Determinants of Organizational Commitment among Nigerian Academics: A Case Study of a Private University. He argues that in situations of shortage of highly qualified teachers, university administrators need to have a good understanding of factors that influence the degree of commitment and loyalty that their teachers have to their jobs. The results of his study show that age and level of educational qualifications are two key determinants of commitment. Younger lecturers show higher levels of job mobility than those in their middle ages. Furthermore, the best educated teachers are likely to seek better career opportunities elsewhere if avenues of promotion are lacking in their current jobs. On the other hand, where prospects of promotion are good, lecturers are likely to show greater degree of loyalty. These results are consistent with what one would expect in other private business sectors. It therefore indicates the need for professional management within African educational institutions in order to motivate teachers and raise their productivity. Substantial investments within the educational sector are required to stimulate other sectors of the economies and provide positive spillover effect within both private and public sectors of African societies.
The fourth paper by Charles Adjasi builds on current economic debate about the extent to which export sector development is the most suitable approach to rapid economic growth in Africa. The overarching argument is that African firms must engage themselves in internationalisation and become fully integrated into the market driven global economy in order to make optimum use of available local resources and achieve the full growth potentials of their nations. The theoretical rationale underlying this argument is that internal demand in individual African countries and for the continent as a whole is too weak and volatile to sustain growth. The small size of local demand also means that aggregate increasing returns and agglomeration externalities generated by local demand are small. The fact that Africa represents a tiny fraction of world trade and that its exports are in many cases below their level of three decades ago means that the potential for expansion is enormous (Fafchamps et al, 2001).
Charles Adjasis paper has the title Are Exporting Firms Really Productive Evidence from Ghana. The literature suggests that exporting firms would be more productive than non-exporting firms, based on the assumption that by competing on international markets, exporting firms are compelled to remain up to date in production, sourcing, and marketing techniques i.e. exporting firms learn more rapidly through their involvement in export activities. Furthermore, greater capacity utilization and economies of scale would reduce unit cost of operations and improve overall performance of such firms. If these assumptions are valid in practice, it would make sense to devote a substantial proportion of a nations economic resources to supporting these exporting firms so that they would in return propel the economic growth process. The study found no statistically significant relationship between productivity and exports. Stated differently, Ghanaian exporting firms appear not to be more productive than their non-exporting counterparts.
Export sector development is the theme in Aboagyes paper as well. Using Ghanaian data over the period 1960 to 2000, this study conducted multivariate cointegration analysis to try to establish the existence or otherwise of cointegration and causality among the stocks of physical capital, human capital and other variables on the one hand, and export earnings on the other. The analysis showed that exports, domestic savings, development assistance and foreign private commercial capital and human capital are positively related. But the variables did not directly influence export growth in any significant manner. Export growth was however found to impact domestic savings.
The results from Adjasi and Aboagyes studies are important since they challenge the wisdom inherent in the export-led growth strategy. How can we explain these findings The export marketing and the international value chain literatures may provide some hints.
Export marketing literature has shown that a long list of internal and external factors limit the export potentials of firms in developing countries. The external barrier frequently cited in the literature include high relative cost of financing exports (Czinkota and Ricks 1983), lack of market information (Katsikeas and Morgan 1993), logistical constraints (McAuley 1993), and limited capacity of small exporters to handle export documentation (Rabino 1980). Added to this, several studies have shown that the requirements of major importers of fresh fruits and vegetables in Europe and North America act as an effective entry barrier to small exporters and producers from Africa (Humphrey and Schmitz 2000; Dolan and Humphrey, 2000; Humphrey, 2001). These requirements now include trimming, washing, packaging, labeling and barcoding of vegetables that are sold in EU supermarkets ((Dolan and Humphrey 2000). Furthermore, the high concentration of distributors within the retail sector in these countries gives them tremendous leverage over small exporters from Africa (Dolan et al 1999).
The external impediments to private business development in general (and exports in particular) are compounded by internal hindrances such as inability of African firms to meet quality standards expected by local and foreign customers (Rabino 1980), poor packaging (Czinkota and Ricks 1983), lack of competent staff (Kaynak and Kothari, 1984) and problems of knowledge absorption and innovation in African companies.
Kuadas paper dwells on the difficulties of learning and knowledge transfer from developed country firms to African firms. He identifies three key determinants of knowledge transfer outcomes: (1) cultural sensitivity (2) transfer and learning/absorptive capacity of partners, and (3) the strategic importance and uniqueness of the relationships. Based on empirical evidence drawn from Danish-Ghanaian inter-firm collaborations, the paper argues that the impact of culture on managerial behavior in knowledge receiving organizations can influence the learning capacity of the employees in the organizations. An awareness of this impact by knowledge providers is very helpful in designing the knowledge transfer process. Furthermore, sensitivity to cultural rules of communication is essential in every cross-cultural knowledge transfer process.
Together, these papers highlight some of the economic and social challenges that African nations and businesses face. As would be expected, the authors have not provided any one best solution to these problems. But they have teased out highly valuable policy and strategy implications from their studies and provide useful guidelines for future research.
References
Crick, Dave and M. R Czinkota, (1995) Export assistance: another look at whether we are supporting the best programmes International Marketing Review Vol. 12 No. 3 pp: 61-72
Czinkota, Michael R. and D. A. Ricks (1983) The use of a multi-measurement approach in the determination of company export priorities Journal of the Academy of Marketing Sciences Vol. 11 No. 3 pp: 283 - 91
Czinkota, Michael R. and Ilkka A. Ronkainen (1990) International Marketing 2nd Ed. (Chicago, The Dryden Press)
Dolan, C., and J. Humphrey, (2000) Governance and Trade in Fresh Vegetables: The Impact of UK Supermarkets on the African Horticulture Industry, Journal of Development Studies, Vol. 37 No 2 pp: 147-176
Fafchamps, M., F. Teal, F., and J. Toye, (2001) Towards a Growth Strategy for Africa REP/2001-06 Centre for the Study of African Economies Department of Economics, University of Oxford
Humphrey, J., and H. Schmitz, (2000) Governance and Upgrading: Linking Industrial Cluster and Global Value Chain Research, IDS Working Paper 120, Brighton, Institute of Development Studies, University of Sussex
Humphrey, J., (2001) Opportunities for SMEs in Developing Countries to Upgrade in a Global Economy Paper written for the ILO's In Focus Programme on Small Enterprise Development (IFP-SEED) Institute of Development Studies University of Sussex.
Katsikeas, Constantine S. and Robert E. Morgan (1994) "Differences in perceptions of exporting problems based on firm size and export market experience" European Journal of Marketing Vol. 28 No. 5 pp: 17-35
Kaynak, E., and V. Kothari (1984) Export behaviour of small manufactures: a comparative study of American and Canadian firms European Management Journal Vol. 2 summer pp: 41-7
McAuley, Andrew (1993) The perceived usefulness of export information sources European Journal of Marketing Vol. 27 No. 10 pp: 52-64
Rabino, S. (1980) An examination of barriers to exporting encountered by small manufacturing companies Management International Review Vol. 1 pp: 67-73
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AJBER is a high quality, peer-reviewed international academic journal.
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