Mr Thahane discusses Asia's economic
recovery and its implications for the African Renaissance
Address by Dr Tim Thahane, Deputy Governor of the South African Reserve Bank, at the
African-Asian Society, held in Sandton, South Africa, on 5 October 1999.
* * *
1. Introduction
The recovery of Asia's economies in 1999, from the very damaging crises that began in mid-1997,
provides significant scope for the development of the African countries and a meaningful contribution
to African Renaissance. Since 1994, the African economies have on aggregate traded significantly
with the Asian economies reflecting the vast potential benefit that African countries stand to gain from
a vigorous and sustained recovery in Asian economies. Asia's trade surplus to Africa, which stood at
US$4.6 billion in 1994, decreased to a deficit of US$1.1 billion in 1997, before increasing
substantially to US$5.1 billion in 1998 following the Asian crisis.
I will comment first on Japan and then the post-crisis recovery of the Asian economies, of Thailand,
the Philippines, Malaysia, Indonesia and Korea. Second, I will define the concept of African
Renaissance and the potential contribution of the Asian economic recovery to African Renaissance.
Finally, I will briefly touch on the ability of the Asian countries to combine their culture with the
acquisition and development of the most advanced technologies and globalization process.
2. Japan's economic recovery
There is a worldwide consensus that a strong economic revival of Japan's economy would herald a
significant recovery for the Asian economies as a whole. Japan's annual real GDP growth rate, which
fell to -2.8% in 1998 is expected to increase significantly to 1.0% in 1999 and to 1.5% by the year
2000. The annual inflation rate in Japan, which rose from 0.1% in 1996 to 1.7% and 0.6% in 1997 and
1998 respectively, is expected to drop to -0.4% by the end of 1999. The annual current account
balance in Japan, which reached a deficit of US$121 billion in 1998, is expected to increase further to
US$143 billion in 1999 before falling somewhat to US$138 billion in 2000. This expected turnaround
in the performance of the Japanese economy is not only critical for Africa's development but for the
whole world.
Japan undertakes significant direct trade with Africa. Japanese imports from Africa were
US$3.9 billion in 1994, and increased to US$4.9 billion in 1996, before declining to US$3.8 billion in
1998 following the Asian crisis. Similarly, Japanese exports to Africa increased significantly from
US$5.8 billion in 1994 to US$6.3 billion in 1996, before dropping to US$4.2 billion in 1998 and
US$4.5 billion in 1999. The Japanese economy had a trade surplus of US$1.8 billion with African
countries in 1994 and 1995. It turned around to deficits of US$85.4 million and US$515.0 million in
1996 and 1997, respectively, following Japan's economic slowdown and strengthening of the yen in
1996. The challenge to African economies is to become more competitive in Asian markets, so as to
turnaround the trade surplus of US$644.0 million in 1998.
The situation is slightly different with SADC. Since 1994, Japan has operated with a significant trade
deficit. Japan's trade deficit with SADC decreased from US$476.4 million in 1994 to
US$284.6 million in 1995 and then significantly increased to US$1.0 billion in 1997 before falling
somewhat to US$747.8 million in 1998. SADC would benefit significantly from Japan's economic
revival if it were to sustain the level of competitiveness that it has attained thus far. This requires a
clear export focus and strategy vis-à-vis the huge Japanese market. It is important not to forget that
Japan is the second largest economy in the world and Japan is well-disposed to Africa at this stage.
3. Asia's economic recovery
Following worldwide crises that developed from the southeast Asian economies, recent indications
point to a promising economic revival in Asia as a whole, particularly in those countries where the
crisis was most severe: Thailand; the Philippines; Indonesia; Malaysia and Korea. The combined
annual real GDP growth rate of these countries fell from 6.6% in 1997 to 3.7% in 1998 with severe
impact on the gains that had been made to reduce poverty and generate jobs. Growth is now expected
to significantly increase to 5.3% in 1999 and 5.4% by 2000. The annual inflation rate which reached a
high of 8.0% in 1998, is expected to drop significantly to 3.1% and 3.5% in 1999 and 2000
respectively. The Asian annual current account balance, which stood at a deficit of US$51 billion in
1998 is expected to decline significantly to US$26 billion in 1999 and drop further to US$12 billion in
2000.
Net private capital flows in Thailand, the Philippines, Indonesia, Malaysia and Korea fell from
US$62.9 billion in 1996 to a negative of US$22.1 billion in 1997 and US$29.6 billion in 1998. They
are expected to improve but remain negative at US$18.1 billion in 1999 and US$8.2 billion in 2000.
Net direct foreign investment, which has remained positive, is expected to decline from
US$10.3 billion in 1997 to US$9.7 billion in 1998. It will still remain positive at US$9.4 billion in
1999 and US$8.4 billion in 2000. Net portfolio investments, which were a negative US$7.3 billion in
1998 are expected to improve significantly to positive levels of US$4.5 billion in 1999 and
US$5.6 billion in 2000. The annual current account deficits of Thailand, the Philippines, Malaysia,
Indonesia and Korea are expected to improve from a high of US$68.8 billion in 1998 to
US$49.3 billion in 1999 and US$29.4 billion in 2000.
The annual external debt of Asia, as a percentage of exports of goods and services, which stood at
118.6% in 1998, is expected to decline to 112.5% in 1999 and to 107.9% in 2000. Annual debt service
payments are expected to decline from a high of 19.5% in 1998 to 15.7% in 1999 and 14.6% in 2000.
The rapid turnaround in these Asian economies is a reflection of the determination and vigour with
which the Asian leaders and their people have tackled the challenges that faced them. The
international community has played a supportive, though important role in this process of economic
recovery. This is one of the major lessons that Africa can draw from this experience.
4. African Renaissance
The concept of the African Renaissance generally captures an array of important social, political,
economic and cultural aspects that epitomize a revival and vibrant African continent. These various
spheres, among others, include education, science and technology. A concerted effort is underway at
regional and continental forums to give content and meaning to the concept and to define concrete
action plans to bring it to reality early in the 21st century. An African Renaissance Institute to be
located in Botswana is soon to be launched. It will be followed by a launch of national chapters
including the South African chapter by the first quarter of next year. African Renaissance involves not
only governments but more importantly civil society and people at community and local levels who
seek to improve the quality of their lives and to hold their leaders accountable.
For our purposes, it would be expedient to focus on some of the economic aspects of the African
Renaissance, primarily prospects of Africa's economic growth, reconstruction and development
through enhanced intra- and inter-continental trade. In this context, African Renaissance calls for
increased economic integration within the African continent to enlarge markets, facilitate free flow of
investment, goods and labour. It calls for a more effective participation in the economic globalization
process by the African countries and people by embracing change and technology. In this context, the
relations with Asia and the lessons it provides are critical lessons for African revival and re-birth.
The economic development of the African continent as a whole lags significantly behind in terms of
its contributions to global economic output. Africa contributed only 3.3% of the aggregate world
economic GDP in 1998 - exactly what the United Kingdom contributed as a single country. Africa's
total share in the global export market of goods and services stood at a paltry 1.8% in 1998 compared
to Asia's 8.1% or the United States' 13.8%. This means that Africa has a long way to go to improve its
contribution to world trade by improving its productivity capability, competitiveness and harnessing of
technology and skills.
5. Asian recovery and the African Renaissance
The revival and sustenance of vigorous growth in the Asian economies would almost certainly
enhance the development of an African Renaissance. Since 1994 and through the crisis of 1997,
African-Asian trade has been significant. Trade account figures between Africa and Asia indicate that
total annual Asian imports from Africa almost doubled from US$7.4 billion in 1994 to
US$14.3 billion in 1997, before receding somewhat to US$9.5 billion in 1998. Imports from SADC
alone were US$4.6 billion in 1994 and almost doubled to reach US$9.0 billion in 1997 before
dropping to US$5.8 billion in 1998.
During the same period, Asian exports to Africa have been fluctuating somewhat between
US$11 billion and US$13 billion from 1994 to 1997 before increasing to US$14.5 billion in 1998.
Annual exports to SADC increased from US$3.4 billion in 1994 to US$5.6 billion in 1997 with a
marginal decline to US$5.5 billion in 1998.
The net effect has sustained Asia as being a net exporter within the Asian-African trade with a surplus
that decreased from US$4.6 billion in 1994 to a deficit of US$1.1 billion in 1997, and revived strongly
to reach US$5.1 billion in 1998. Asia's net exports to SADC were negative from US$1.2 billion in
1994 to a more substantive deficit of US$3.4 billion in 1997, before a significant improvement in 1998
when a deficit of US$333.4 million was recorded.
The development of the African Renaissance should enable African countries to expand trade with all
Asian economies so as to balance trade between the two continents. More importantly, the challenge
for Africa is to maintain and expand its market share in Asia through strategic, competitive and
targeted export drives.
6. Social policies
One characteristic feature of the Asian economies has been their ability to combine many aspects of
the Asian culture with acquisition of the highest technical skills and to participate effectively in the
globalization process. Although several studies have alluded to uniquely Asian policies that: (a) have
enhanced employee loyalties to Asian corporations; (b) emphasized Asian management systems;
(c) enhanced a culture of high saving; (d) maintained strong social support systems; etc., it is still very
difficult to tackle the concept of culture within economics. It should suffice, however, to conclude that
the policies themselves are not uniquely Asian, but are implemented by Asians in congruence with
Asian norms and values. African Renaissance must come to grips with the synergy and
complimentarity of culture and fast and sustainable growth.
The economic crisis resulted in significant output losses in affected Asian economies and contributed
significantly to increased unemployment rates. However, affected Asian economies increased their
social safety nets and public spending substantially to strengthen their social support systems and
ensure minimum support levels to those who were worst affected. In Indonesia and Thailand safety net
expenditures are expected to rise by 0.5 to 1.0% of GDP in 1999. In Korea, expenditure on social
safety nets almost quadrupled from 0.4% of GDP in 1997 to 1.7% in 1999. At the same time, the use
of across-the-board price subsidies have been significantly reduced although some - such as subsidies
on rice - remain an important component of the social policy framework. The African Renaissance
would benefit significantly if it were to study in more detail how the globally robust economies of
Asia have managed to sustain much of their distinct culture and commitment to improve the quality of
life for all their people.
7. Conclusion
My remarks focused on the post-crisis recovery of the Asian economies, with a view to drawing
lessons from the Asian economic recoveries for the African Renaissance, and to understanding how
Asian countries have managed to sustain their culture despite their economies' rigorous globalization
programs.
Available evidence suggests that the Asian economies have definitely re-established a path to high and
sustainable economic growth, and are restoring their trade with the world and the African continent.
The African Renaissance process will benefit greatly from an enhanced African-Asian trade and
cooperation at various levels: culturally, scientifically, politically and economically. There is a lot to
be learnt from how Japan and other Asian countries have been transformed through political
leadership and foresight, acquisition of skills and technology, and a contribution of cultural norms and
aggressive international competitiveness. One major conclusion to be drawn is that a robust embrace
of globalization is not inconsistent with African culture, values and norms.
Annexes - tables of imports and exports
Table 1
African Trade with Japan (US$ millions)
Japan's imports from Africa 1994 1995 1996 1997 1998
Angola 10.4 15.73 22.49 3.18 19.95
Botswana 9.77 7.97 8.47 6.09 2.44
Congo, Dem. Rep. of 82.92 80.62 82.47 53.31 44.41
Lesotho 0.05 0 0 0 0.01
Malawi 49.98 48.41 26.45 33.41 46.07
Mauritius 5.96 14.4 17.36 24.47 27.99
Mozambique 25.98 34.27 18.35 21.69 20.97
Namibia 0 0 0 0 0
Seychelles 0.52 1.71 3.27 3.36 5.26
South Africa 2,197.83 2,541.86 2,832.36 2,802.94 2,403.34
Swaziland 11.31 10.91 11.27 14.6 10.43
Tanzania 49.36 64.67 64.89 58.92 67.69
Zambia 174.16 221.84 192.11 138.53 124.55
Zimbabwe 148.46 178.8 161.57 188.73 155.26
SADC total 2,766.69 3,221.19 3,441.05 3,349.23 2,928.37
Africa 3,934.58 4,530.59 4,900.67 4,679.78 3,848.12
Japan's exports to Africa 1994 1995 1996 1997 1998
Angola 16.4 26.47 36.23 60.91 44.42
Botswana 3.1 1.43 1.18 1.49 2.62
Congo, Dem. Rep. Of 40.59 11.24 14.14 6.44 9.48
Lesotho 1.34 1.95 4.23 3.94 4.14
Malawi 28.88 13.2 18.69 19.92 28.86
Mauritius 72.22 75.42 82.12 72.19 76.74
Mozambique 37.3 18.27 20.9 31.24 21.02
Namibia 0 0 0 0 0
Seychelles 8.47 11.45 8.23 10.74 13.97
South Africa 1,859.93 2,482.52 2,071.16 1,872.15 1,772.8
Swaziland 5.79 4 5.56 2.61 8.72
Tanzania 82.13 107.83 77.25 79.14 77.55
Zambia 37.38 60.05 19.15 25.18 35.12
Zimbabwe 93.91 120.9 117.17 124.97 91.18
SADC total 2,290.34 2,936.53 2,474.45 2,313.87 2,180.53
Africa 5,777 6,330.63 4,815.26 4,164.71 4,492.16
Balance with SADC -476.35 -284.66 -966.6 -1,035.36 -747.84
Balance with Africa 1,842.42 1,800.04 -85.41 -515.07 644.04
Table 2
African Trade with selected Asian countries (US$ millions)
Asian imports from SADC 1994 1995 1996 1997 1998
Korea 590.9 1,218.48 1,701.22 2,827.45 1,171.24
Indonesia 82.18 104.07 206.22 300.12 298.94
Thailand 273.47 265.19 197.53 183.8 84.58
Malaysia 231.68 296.76 356.12 384.41 167.38
China 527.1 891.72 1,011.66 1,520.31 899.03
Philippines 86.95 96.12 0 102.25 50.78
Singapore 55.93 358.47 292.61 369.79 226.36
Total (ex. Japan) 1,848.21 3,230.81 3,765.36 5,688.13 2,898.31
Asian exports to SADC 1994 1995 1996 1997 1998
Korea 65.96 466.85 553.81 1,007.1 831.26
Indonesia 33.91 106.08 137.87 170.98 222.85
Thailand 147.65 182.61 131.75 89.35 96.85
Malaysia 219.56 337.13 354.54 362.11 389.97
China 484.17 845.09 908.7 1,050.32 1,263.04
Philippines 29.34 25.79 0 30.6 44.84
Singapore 134.42 633.92 605.45 574.61 463.86
Total (ex. Japan) 1,115.01 2,597.47 2,692.12 3,285.07 3,312.67
Balance -733.2 -633.34 -1,073.24 -2,403.06 414.36
Asian imports from Africa 1994 1995 1996 1997 1998
Korea 766.98 1,218.48 1,701.22 4,626.57 2,095.44
Indonesia 261.25 467.62 596.87 645.49 623.13
Thailand 572.68 630.43 697.61 577.2 421.89
Malaysia 293.12 396.52 552.44 550.37 295.49
China 770.47 1,353.9 1,405.42 2,390.15 1,425.35
Philippines 122.44 170.93 144 195.59 95.22
Singapore 631.55 539.4 600.83 611.87 656.82
Total (ex. Japan) 3,418.49 4,777.28 5,698.39 9,597.24 5,613.34
Asian Exports to Africa 1994 1995 1996 1997 1998
Korea 1,912.08 1,555.06 1,428.16 3,244.27 3,136.9
Indonesia 407.56 394.39 459.11 539.4 1,041.3
Thailand 697.66 854.72 679.22 613.85 640.69
Malaysia 344.15 505.42 561.76 552.64 564.78
China 1,363.72 1,990.39 2,077.37 2,640.18 3,381.39
Philippines 38.3 30.54 48 36.42 51.28
Singapore 1,394.51 1,407.47 1,415.34 1,348.38 1,225.2
Total (ex. Japan) 6,157.98 6,737.99 6,668.96 8,975.14 10,041.54
Balance 2,739.49 1,960.71 970.57 -622.1 4,428.2