Select Committee on Foreign Affairs Minutes of Evidence

Written evidence submitted by Action for Southern Africa

1.  SUMMARY

  1.1  Action for Southern Africa (ACTSA) is the successor to the Anti-Apartheid Movement in the UK. Since 1994, ACTSA has been challenging decision-makers in the UK and Europe to support peace, democracy and development across Southern Africa (as defined by membership of SADC—the Southern African Development Community).

  1.2  ACTSA is a campaigning organisation with a membership of roughly 3000 individuals and 250 affiliated organisations—trade unions, church groups, local ACTSA groups, and others. Our membership is based in the UK and most of our funding comes from membership fees, affiliate fees and donations.

  1.3  ACTSA works in solidarity with the governments and people of the region to raise awareness of their perspectives, needs and priorities. Our main focus is on educating and mobilising the British public, and on lobbying the British government and the EU to secure progressive policies towards the region.

  1.4  ACTSA's work builds on its close ties with South Africa's liberation movement. We have also developed close relationships with mass-based movements emerging to tackle South Africa's new challenges. We believe that, wherever possible, the people of the region should directly represent themselves, and have organised for delegations of South African representatives, including government ministers, regional premiers, MPs, trade negotiators, representatives from Jubilee South Africa, South African Churches, the Congress of South African Trade Unions (COSATU) and various of its affiliate unions, the Treatment Action Campaign (TAC) and community groups affected by UK owned asbestos mines, to:

—  address public meetings;

—  brief the media;

—  lobby parliamentarians, ministers and officials representing the FCO, DTI and DfID in the UK, the EU and the Commonwealth; and

—  build relations with civil society groups in the UK, including churches, trade unions and NGOs.

  1.5  ACTSA's campaigns include: lobbying for fairer trade deals between Southern Africa and Europe; calling for the cancellation of apartheid-caused debt; campaigning for greater international commitment to the war on AIDS; and building support for peace and democracy in countries including Angola and Zimbabwe.

  1.6  ACTSA welcomes the Foreign Affairs Select Committee's decision to carry out an inquiry into UK foreign policy towards South Africa. We would like to submit, for the Committee's consideration, the following comments. These comments do not purport to represent the views of the above-mentioned South African organisations, although they are informed by ACTSA's relationships with them. We would encourage the committee to seek submissions of evidence directly from South African governmental, political, civil society and academic sources. We would be happy to advise on potential sources of information and witnesses for the committee's investigation.

  1.7  This submission:

—  Provides a brief sketch of political and economic progress as South Africa approaches its first decade of freedom (Section 2);

—  Considers the role of international actors in shaping and constraining the choices open to the newly free South Africa as it seeks to overcome the legacy of apartheid, including through the EU's Trade and Development Co-operation Agreement (TDCA) with South Africa, (Section 3);

—  Reflects briefly on South Africa's response to this international environment, and its foreign policy, including South Africa's approach to the crisis in Zimbabwe (Section 4) and its promotion of a new partnership between Africa and the rich world (Section 5);

—  Asks whether the UK has a diplomatic or political strategy towards South Africa, and what that might involve, (Section 6);

—  Looks in some depth at the UK's response to calls for a new partnership between Africa and the rich world, and at the G8's "Africa Action Plan", (Section 7) focusing on what the UK should do to promote a more just global trade regime (Section 8), achieve debt cancellation (Section 9), de-link aid from structural adjustment conditions (Section 10) and meet the challenge of the AIDS pandemic (Section 11); and

—  Concludes that if, as the FCO claims, NEPAD is a "key plank of the foreign policy of Tony Blair's Government,"[15] that policy and government have failed decisively. We propose a number of policy recommendations to the FCO that we hope the Foreign Affairs Committee will support (Section 12).

2.  SOUTH AFRICA'S FIRST DECADE OF FREEDOM

  2.1  The South African people fought a long and bitter battle for the sovereign right to mandate their own political authorities, to shape their own futures and for a fair share in the wealth generated by the country's farms, industries and resources.

  2.2  During apartheid, racism and inequality were enshrined in law and affected every aspect of life. Black South Africans could not vote, own land or property outside certain designated areas, could only work in certain areas and in certain jobs, and could not marry outside their racial group. State institutions—the police, army and public administration—were geared towards the protection of white privilege at all costs.

  2.3  Since 1994, South Africa has been grappling with the daunting task of unravelling institutionalised racism in every sphere of society. The greatest single tribute to the success of that struggle is the fact that South Africa is one of the most democratic countries in the world. Democratic in the formal sense, with a free and fair electoral system, an independent judiciary, a free press and one of the most progressive constitutions in the world. But democratic also in the sense that millions of people, in their communities and workplaces, are actively engaged in grassroots political activity, mobilising, educating, protesting, sometimes denouncing, and certainly influencing the government, the rich and the powerful. South Africa's three trade union federations between them claim almost 3 million members. South Africa's streets are often witness to the mobilising capacities of a diverse range of social movements—against debt, privatisation, evictions and war, and for worker's rights, a basic income grant, land redistribution and the free public provision of electricity, water, housing and healthcare.

  2.4  As a result of the power and diversity of these and other social movements, major political decisions in South Africa are subject to heated public contest and negotiation. For example the recent announcement of a national AIDS treatment plan comes after many years of bitter struggle, led by groups representing people living with AIDS, supported by the trade unions and a wide-ranging political coalition. TAC and its supporters piled pressure on their Government, using every democratic tool in the box. They mobilised and educated communities across the country, targeted the media, established their constitutional rights through the courts, exercised their rights to civil disobedience, and engaged with and influenced the local structures of the ANC. In the end, a majority cabinet decision over-ruled well-documented resistance to the plan. We should welcome this development and act to support the implementation of the plan.

  2.5  Sceptics have discussed the ongoing struggle between factions within the ruling "tripartite alliance" as if the contradictions within the alliance represent a weakness of South Africa's political system. However, it could equally be argued that the alliance itself, between the African National Congress (ANC), the South African Communist Party (SACP) and the countries biggest trade union federation, COSATU, and the dissent and open debate that it generates, tolerates and mediates, represent an almost unique, and triumphant, expression of democracy.

  2.6  South Africa's National Economic Development and Labour Council (NEDLAC) also provides an innovative statutory forum within which government, business, union and community representatives engage in a form of social dialogue. Although this process has its weaknesses and will not always deliver concrete results, NEDLAC has played a role in negotiations over the recent Growth and Development Summit (GDS), which debated the Government's controversial privatisation strategy, and in discussions over the national AIDS treatment plan.

  2.7  Despite the incredible political achievements of the new South Africa, the comparable economic "miracle" that many dreamed of, has not been fully realised. Since 1994 there have been many advances for South Africa's poor majority. In November 2002, Statistics South Africa released a major report comparing household earnings and spending for October 1995 and October 2000.[16] The report finds that Government led social investments and programmes have delivered a major expansion in free or subsidised basic services, including health care and schooling. The proportion of people with access to clean water climbed from 79% to 83%. Those with access to electricity for lighting rose from 64% to 72%. Those with access to telephones rose from 29% to 35%. People living in formal housing rose from 66% to 73%. Further gains have followed since 2000.

  2.8  However, in each of these areas, significant percentages of the population still do not have access to the essentials of a dignified life. Furthermore, ordinary workers and poor communities face an ongoing economic crisis. Unemployment is approaching 40%. One million formal sector jobs have been lost in five years; work has been casualised and informalised.

  2.9  The Statistics South Africa report finds that, in terms of income, the average South African household became significantly poorer between 1995 and 2000. The poorer half of South African households slipped backwards in these five years relative to the richer half, and while the average African household experienced a 19% fall in income over the period, the average white household experienced a 15% increase. The report also found that operating profits exceed the entire wage bill going to labour as a proportion of GDP.

  2.10  These dry statistics do little to bring to life the desperate situation in which millions of South Africans continue to subsist. However, the social tensions that they inevitably generate are everywhere to be seen in the world's second most unequal country. While wealth and land remain heavily concentrated in the hands of a minority, factory workers, miners, farm labourers, rural and urban communities, facing rampant unemployment and a massive AIDS crisis, struggle to support themselves and their families. As in most poor countries, poverty in South Africa disproportionately affects women, children, the elderly and the disabled.

  2.11  Whilst few underestimate the enormous challenge of overcoming the legacy of apartheid, it is unsurprising that South Africans continue to debate the wisdom of government policies to do so. For example, trade unions have argued that most progress has been made in those areas where the Government has pursued policies explicitly condemned by the neo-liberal economic model. These include: the maintenance of parastatal companies with clear development mandates, such as electricity and telecommunications; freely provided services such as water and electricity, and active social subsidies, such as housing policy.

  2.12  Critics add that, in many areas, progressive advances in social services have been undermined by policies more attuned to international pressures for "labour market flexibility", and "liberalisation"—short hand for low-wage, insecure work, and privatisation of state monopoly companies. For example, guided by its public sector developmental mandate, and assisted by its temporary fixed line monopoly, Telkom has built 2.67 million new telephone lines, many to poor communities. However, over two million of those lines have been cut-off because the poor communities to which they had been delivered could not pay for the service. This was related both to the income poverty of the general population, and to pressures on Telkom to reduce international call prices (the niche market most likely to face competition under a planned privatisation package), a policy that has been balanced by hiking call prices in the domestic market.

  2.13  The Government recently responded to fierce criticism of their privatisation policies by convening the Growth and Development Summit. The summit saw some shift away from an economic development strategy premised on privatisation, liberalisation and attraction of FDI as the principal drivers of growth, and an increased focus on the mobilisation of domestic resources. It also announced increased investment in infrastructure, expanded public works programmes and the building of co-operatives. As President Mbeki put it, "It is sometimes argued that higher rates of economic growth, of 6% and above, would, on their own, lead to the reduction of the levels of unemployment in our country. This is part of a proposition about an automatic so-called trickle-down effect . . .None of this is true. . . To get to this point will require sustained government intervention."[17]

3.  INTERNATIONAL PRESSURES AND CONSTRAINTS

  3.1  Whatever one thinks of the economic, social and foreign policies being pursued by the South African Government, it is clear that they are the subject of a legitimate process of democratic debate within the country. However, it is similarly clear that this process is subject to a range of illegitimate pressures and constraints. These pressures are similar to those imposed on all theoretically sovereign African countries by the international economic system and the institutions tasked with running that system—including the World Bank, IMF and WTO. They militate not only against the "sustained government intervention" in the economy advocated by President Mbeki, but also, by eliminating alternative economic and political models, against democratic decision making. Both the international economic system and these institutions are significantly influenced by UK government policy, and by the EU.

  3.2  South Africans have been extremely closely attuned to these dangers since before the transition to democracy. The ANC's "Reconstruction and Development Programme" (RDP) of 1994, reads, "Relationships with international financial institutions (IFIs) such as the World Bank and the International Monetary Fund must be conducted in such a way as protect the integrity of domestic policy formulation and promote the interests of the South African population."[18] However, the IFIs themselves have also been well aware of South Africa's riches, and have been extremely keen to influence the country's development strategy to secure maximum openness to international financial flows and investors. From the mid-1990s, IFI "reconnaissance missions" made regular visits to South Africa, seeking to influence decision-makers and policy.

  3.3  And indeed, the IFIs have many reasons to be pleased with the progress of their agenda in South Africa. Corporate taxes have dropped from 48% to 30% from 1994 to 1999, while import tariffs have also dropped, as have controls on capital flight.[19] This integration into the global economy has delivered significant international investment in the South African economy. However, it has also led to much greater vulnerability to unpredictable trade, investment and financial flows. In 2000, President Mbeki noted, "The globalisation of the economy, resulting from among other things rapid movements of huge volumes of capital across the globe, objectively also has the effect of limiting the possibility of states to take unilateral decisions."[20]

  3.4  South Africa's new vulnerability, and resulting economic instability, was exposed particularly cruelly by the currency crash of February 1996 (emanating from a "sell" report from Zurich bankers who falsely believed Mandela to be ill). A direct result of the crash was the adoption by the government, under pressure from investors and the IFIs, of the Growth, Employment and Redistribution (GEAR) policy in June 1996. The policy introduced a "homegrown" structural adjustment programme for South Africa, effectively replacing the RDP. In March 1998 a second crash hit the rand and in recent years the currency has experienced continuing instability.

  3.5  At the same time, it must be recognised that South Africa has remained considerably more independent of the international financial institutions than any other sub-Saharan African state. Making sure that it remains that way requires international policies that allow South Africa to avoid the slope to dependence on heavily conditioned aid and trade deals down which so many other African countries have slipped.

  3.6  A major opportunity for European countries to support South African efforts to establish its economic independence was provided by negotiations, concluded in 1999, for the Trade, Development and Co-operation Agreement (TDCA). Europe is South Africa's main trading partner, with around 40% of South Africa's exports sold to European countries, so this deal was of enormous significance. The European Council described the agreement as "a symbol of the strong links of friendship and solidarity between the people of Europe and Southern Africa."

  3.7  The deal contained a number of welcome elements, including the elimination of tariffs on most of South Africa's industrial goods, special protection for sectors South Africa considers sensitive, and EU support for the Southern African Customs Union (SACU) countries who are suffering serious adjustment costs as a result of the deal. However, the process of negotiations, and the final agreement, far from meeting the promises made to South Africa at the end of apartheid, illustrated the self-interest and aggressive promotion of narrow interests that dominate the EU's trade negotiating process and agenda.

—  In 1995, the EU refused South Africa's request to negotiate trade relations alongside the 71 African, Caribbean and Pacific countries with which the EU negotiated under the Lomé Convention (now Cotonou Agreement). The EU insisted that South Africa negotiate a Free Trade Area. Such bilateral deals, negotiated between partners of unequal strength, rarely deliver significant development benefits. By splitting South Africa off from the wider Southern African region, in which it is already significantly integrated economically, the deal has also increased tensions between South Africa and her poorer neighbours.

—  South Africa also wanted to include European commitments to reform the Common Agricultural Policy as part of the agreement. The EU refused to negotiate on this issue. The refusal of the EU to negotiate an end to the CAP continues to poison trade discussions in the WTO and under the Cotonou Agreement.

—  The negotiations promised to improve access to European markets for South Africa's agricultural products. However, Europe insisted that certain products be put on an "exclusion list", meaning they would not be discussed, and South African goods would continue to face the high tariff barriers that were a legacy of the apartheid era, and are higher than those paid on goods entering Europe from more wealthy middle-income countries.

—  Other difficult issues during the talks included the insistence, mainly by Spain, on linking the deal to a separate agreement on fisheries. In the final stages the most contentious issue was the appellation of South African port and sherry.

  3.8  It is markedly difficult to dis-aggregate the impacts of any particular trade deal on growth and development. However, the EU has claims that the TDCA helped stimulate a 50% increase in South African exports to the EU since 1999. However, factoring in movements in commodity prices and exchange rate fluctuations tells a different story. For example, the price of platinum, which accounts for 7% of SA exports to the EU, has gone up 40% in the last 2 years. Secondly, most of South Africa's major exports are denominated in dollars. Between 1999 and the end of 2001, the value of the Euro against the dollar fell 24%, generating an automatic increase in the Euro value of South African exports. A realistic assessment of the TDCA requires moving beyond headline figures to look at the impact of the deal on the restructuring of production. The questions we should be asking are: does "free trade" enable South African industries to add more value to products locally, create employment, and move away from dependence on declining commodities towards new products with higher demand growth and higher price trends? Only by achieving this can we expect to transform the basis of South Africa's integration into the world economy, and thus tackle poverty and promote sustainable development.[21] Finally, despite some compensation, the Southern African Customs Union (SACU) countries have suffered severe losses of customs revenue under the deal. For Swaziland the customs duties collected from European imports and shared out between the customs union members accounts for up to 40% of government revenue.

4.  SOUTH AFRICA IN THE WORLD—DIPLOMATIC POLICIES, INCLUDING TOWARDS ZIMBABWE

  4.1  South Africa has recognised that one African country cannot tackle a hostile international context alone. South Africa has thus sought to engage with the diplomatic challenges of its region and to strengthen institutions and agendas capable of facing the rich world in a united manner.

  4.2  South Africa has engaged energetically with the multilateral system since the isolation of the apartheid years, re-entering the Commonwealth in 1994, taking over the Chair of the Non-Aligned Movement in 1998, and playing a prominent role in both the Organisation for African Unity, the African Union and the Southern African Development Community. South Africa has also played an active diplomatic role in African conflicts, notably in the Democratic Republic of Congo and Burundi.

  4.3  However, South Africa's policy on the crisis in Zimbabwe has been extremely controversial. Many British MPs have argued that South Africa bears the heaviest responsibility for a solution to the Zimbabwean crisis, and appear to expect Zimbabwe's neighbour to adopt draconian tactics—from switching off the power supply, imposing widespread economic sanctions, or even sending in troops—to tackle the regime. We believe that all of these options are both unrealistic and would prove counter-productive in the struggle for peace, economic recovery and democracy to Zimbabwe. If the Foreign Affairs Committee wish, through this enquiry, to contribute to this struggle, they will need to approach this issue with caution.

  4.4  In order to understand, and to engage constructively with South Africa, the UK Government will require a sensitive understanding of the debate on Zimbabwe within Africa, and much of the rest of the developing world, where Mugabe's rhetorical stand against the imperialistic west is frequently applauded. It is also important to understand the historical roots of the crisis—and the responsibilities and lessons for future policy which this history implies. ACTSA's May 2002 submission to this Committee's ongoing enquiry into UK Foreign Policy on Zimbabwe goes into significant detail on this issue.[22] However, here we draw out just four key issues that should be considered.

  4.5  Firstly, the overthrow of white minority rule in Rhodesia was not only a victory for the Zimbabwean liberation movements, but a critical turning point in the other struggles in the region. Up to 80,000 Zimbabweans died in the fight for freedom. Independent Zimbabwe's continuing solidarity with the struggles in South Africa and Namibia cost it dear in more lives and economic hardship. This history stands in stark contrast to many of the western nations who stood by or actively supported the apartheid regime, and cast a heavy shadow over international attempts to promote democracy and human rights.

  4.6  Secondly, from 1987, Zimbabwe's donors, led by the UK and US, used independent Zimbabwe's debt crisis and aid dependency to pressure for economic liberalisation. The subsequent process of adjustment and recession imposed on Zimbabwe reversed post-independence social and economic gains, and sowed the seeds of the current political crisis.

  4.7  Thirdly, while land is only one element of Zimbabwe's complex crisis, it lies in some ways at the root of the problem. As the Crisis in Zimbabwe Coalition recently noted, an equitable land reform process continues to be "stuck between the British dodging of its commitments, government's lack of transparency, the commercial farmers" blinkered view of the issue, and a large but voiceless majority in favour of redressing the ills of the past."

  4.8  Finally, it must be recognised that South Africa's size, wealth and diplomatic strength concern many African countries, including Zimbabwe. South African diplomatic efforts are constrained by suspicion of a potential regional hegemonic power.

  4.9  As a result, ACTSA believes that UK should adopt the following principles in its engagement with the Zimbabwean crisis, and thus in its dialogue with South Africa on these issues:

—  Respect the need for a negotiated solution to the crisis that results from an internal political process reflecting the needs and perspectives of Zimbabwean people.

—  Recognise the deep suspicions within the region towards British motives in Zimbabwe, resulting from its colonial legacy and its continuing economic stake in the minority white domination of key parts of the economy.

—  Recognise that a solution to the crisis will not be achieved through Euro-American pressure, or indeed through bilateral South African interventions, and that regional actors and multilateral bodies must lead international engagement with Zimbabwe.

—  Recognise that inequality and underdevelopment, for which international actors bear a significant responsibility, must be addressed if a lasting solution is to be found. Future economic support for equitable land reform, reconstruction and development should be provided without attaching the kind of strict economic conditions that have contributed to Zimbabwe's economic collapse and political crisis.

  4.10  In recognition of these realities, South Africa has opted for what it describes as "quiet diplomacy" throughout Zimbabwe's current crisis. Happily, British ministers have also broadly recognised these realities, and have generally respected the fact that careless rhetoric can have damaging diplomatic and political outcomes. Ministers have also recognised the importance of taking a multilateral approach to dealing with Zimbabwe. The Foreign Secretary stated in May 2003, "I welcome the efforts of South Africa to deal with the problems of Zimbabwe. Last week's visit to Harare by Presidents Mbeki, Obasanjo and Muluzi was an important event. Like those Heads of State, we want to see resumption of dialogue between ZANU-PF and the opposition; an end to intimidation and violence; a tackling of the major issues in Zimbabwe of governance, human rights and the rule of law; and a path back to a democratically elected and accountable government, pursuing policies that benefit all the people of Zimbabwe. We will work with South Africa and the region to achieve this."[23]

  4.11  Whilst ACTSA is broadly supportive of these lines, neither South Africa nor the UK have always got it right on Zimbabwe.

  4.12  South Africa has not always been consistent or balanced in its quiet diplomacy (keeping disappointingly silent on human rights violations while offering loud support for land redistribution). What is needed from both South Africa and the UK is more consistent diplomacy that is even-handed and balanced. South Africa is in a unique position to play the role of a trusted facilitator in negotiations, and to support more active engagement by SADC, the AU and other African actors. To play this role effectively, South Africa needs to acknowledge that the crisis is multifaceted, and is not just about land. South Africa should then promote dialogue and negotiations without preconditions or preconceived notions of the best solution, and in the firm belief that it is Zimbabweans who will need to lead and design the way forward.

  4.13  ACTSA believes that the UK should do all it can to avoid a bilateral exchange with Zimbabwe—such exchanges play into Mugabe's characterisation of the country's deep crisis as resulting solely from a spat with Britain. Just as South Africa needs to regionalise its response to Zimbabwe, the UK needs to continue working internationally, including through the Commonwealth. Despite domestic pressures for megaphone diplomacy, this should be done quietly, not through the media. Where pride, a sense of moral superiority or defence of perceived British interests in Zimbabwe have been allowed to influence policy and presentation, damaging mistakes have been made, splitting international organisations. The UK must explicitly and publicly refuse to increase diplomatic pressure on African mediators by threatening Western support for Africa, through NEPAD or any other mechanism. Similarly, it would be self-defeating for Britain to put pressure on South Africa to resolve the issue. In order to retain influence within African forums, South Africa cannot be seen to be heeding such pressure, and in any case does not agree with an interventionist approach.

  4.14  Finally, and crucially, the UK must recognise its historic contribution to the crisis and announce a genuine and significant package to support land reform and unconditional support for reconstruction. This would strengthen the UK's credibility with African mediators.

5.  SOUTH AFRICA'S RESPONSE TO THE INTERNATIONAL CONTEXT—ECONOMIC POLICIES

  5.1  Beyond the immediate Southern African context, the South African government has also recognised that South Africa will not flourish unless it plays a part in revolutionising patterns of international economic relations that have disempowered the African continent. In August 2003, South African President Thabo Mbeki wrote passionately of his concerns about the ability of African governments and people to develop and pursue their own political and economic projects. He argued that following the vibrant political and civil debate that emerged at the end of the colonial period, "It seems to have happened that the African period during which the hundred flowers bloomed came to an end. The contending voices representing the hundred schools of thought fell silent. . . So dependent did we become on foreign donors that we felt obliged to proclaim as loudly as we could, the messages, the words and phrases the donors needed to hear, so that they could approve official development assistance for the following year. And so we studied the textbooks and the manuals, to understand what the benefactors wanted of us. . . we end up as the voice that gives popular legitimacy to decisions we neither made, nor intended to make, which our "friends" made for us. . . The matter in contention is—who will set the national and continental agenda!"[24]

  5.2  At least rhetorically, British politicians accept the power of this challenge. Speaking in South Africa, Baroness Amos recently argued, "At the heart of our foreign policy, therefore, is co-operation, not colonialism. . . Colonialism is about the imposition of values by force, the exploitation of resources by force, the domination of one race by another. Those days are gone."[25] Whether or not we accept that "those days are gone", Baroness Amos" statement also begs a question: does the absence of force in relations between countries imply that values are not being imposed, that sovereignty is respected, that there is an absence of coercion?

  5.3  As President Mbeki suggests, the imposition of values continues not only by force, but through economic coercion. In particular, the imposition of conditions on aid and debt relief, and unfairly negotiated trade rules, narrow the policy space available to African governments. And "capacity building" programmes for governmental and non-governmental actors can be designed to generate consent, even active support for Northern agendas. This is also a critique that the UK Government seeks to pre-empt. In January 2002, Baroness Amos described the objectives of the Africa Action Plan thus, "We want to address the policy constraints that inhibit Africa's development. This means taking concrete measures in the areas of trade and investment, aid and debt."[26] This is an agenda that ACTSA fully supports. However, it is far from clear that it either reflects the Africa Action Plan or UK policy. The question that we believe the committee should seek to answer is whether these laudable objectives are reflected in UK Government policy and practice in relation to both South Africa and NEPAD. We now move on to examine these questions in turn.

6.  UK STRATEGY TOWARDS SOUTH AFRICA

  6.1  Naturally, this committee's principle concern is with FCO policy and practice. However, we believe that effective engagement with South Africa implies that the FCO will need to develop pro-active policies across a wide range of issues, including investment, trade, aid and debt. FCO will also need to promote cross-departmental coherence with DfID, DTI, the Treasury, No 10 and in some cases, DEFRA. This section talks to these diverse agendas.

  6.2  The UK is the single largest source of both tourism and foreign investment into South Africa. 750,000 UK citizens are also resident in South Africa. The UK imports 7.6% of South Africa's exports and UK exports make up almost 10% of South Africa's incoming goods. Relations between our countries are both close and historic.

  6.3  British investment is thus very important to South Africa, particularly in two key sectors: tourism and mining. Tourism is a fast growing industry, contributing to the South African economy through job creation, foreign exchange earnings and infrastructure development. It is estimated that, for every 8 tourists who visit South Africa, one new job is created. However, although British tourism to South Africa is booming, much of the money spent by British travellers to the region never reaches the South African economy. It is British tour operators, airlines and multinational hotel chains that benefit the most with much of the holiday money "leaking" out of South Africa. Because of the type of holidays that they go on, British visitors contribute less per day to the local economy than visitors from other European countries, and only half that contributed by visitors from other parts of Africa.

  6.4  While investment in tourism and mining has created employment, many British companies pay poverty wages, adopt the lowest possible health and safety standards, and do little to promote black empowerment, training and education. The mining industry in particular is notorious for its lax employment conditions. ACTSA recently campaigned in support of a legal battle that eventually forced British company Cape plc to pay compensation to South African workers dying from asbestos-related diseases. As Archie Palane of the South African National Union of Mineworkers told ACTSA, "Too many multinational companies neglect the health and safety of their workers in the raw pursuit of profits. This case should offer a valuable lesson to those companies who continue this form of exploitation."

  6.5  British investment has real potential to contribute towards South African development. However, the South African Truth and Reconciliation Commission"s final report called for business to do more to overcome the legacy of apartheid. UK policy appears at the moment so concerned with the "rights" and "opportunities" available to British capital that the rights and opportunities of South African people are ignored.

—  The Government should encourage economically beneficial and socially and environmentally responsible investment by British companies in South Africa. Furthermore, as global leaders, British companies investing in South Africa can and should do more than the legal minimum to contribute to addressing the legacies of apartheid and building a more equal South Africa.

—  The UK Government should encourage British companies that profited from apartheid, and ensured that it lived longer than it would otherwise have done, to acknowledge their historic responsibilities and contribute towards community reparation funds.

  6.6  Nonetheless, a reading of key policy documents of various UK government departments with responsibility for relations with South Africa does not give any clear sense of how the government understands its strategic objectives for the relationship.

  6.7  One does not have to read very far beneath the headlines of the Foreign Office website's description of UK relations with South Africa to understand that the FCO understands its strategic objectives in South Africa primarily in terms of the corporate interests of UK multinational companies. The FCO expresses considerable concern about the generation of "economic opportunities" through the promotion of an aggressive privatisation strategy, and maximum economic openness towards European investors. The Foreign Office shows some awareness of the highly political nature of its agenda, commenting, "Political difficulties in pushing privatisation forward have been reflected mainly through the left-leaning and union elements within the ANC Government, who are strongly opposed to handing control of state assets to what is still a white dominated business sector. The ANC's alliance partner, the Congress of South African Trade Unions (COSATU), has pledged to resist any move on restructuring that the Government is likely to make."

  6.8  Despite this, the FCO is happy to report, "There has been a strong emphasis in our activities on the opportunities likely to arise from the privatisation programme and the promotion of PPPs (Public Private Partnerships) in South Africa. These include amongst others the water, airports, ports, healthcare and railways sectors. Other priority sectors include education & training, IT, and the automobile industry. The free trade provisions of the EU/South Africa Agreement came into force on 1 January 2000. The UK is the second largest European trader with South Africa (after Germany). The Agreement has already boosted South Africa's prospects in Europe, and liberalisation towards free trade over the 12-year transition period will strengthen the UK's commercial position in South Africa."

  6.9  In contrast, DfID claims that its £30 million annual budget in South Africa is focussed on poverty elimination. This objective, and certain elements of DfID's new 5-year strategy, agreed in 2002, are to be welcomed. This includes the commitment of up to 30% of DfID-SA's budget to an AIDS programme designed to broaden and strengthen the responses of key South African institutions to AIDS, aiming towards a reduction in the number of new HIV infections and of the impact of AIDS on individuals, families and communities.

  6.10  ACTSA does not believe, as some have argued, that a "poverty focus" in aid programming necessarily implies reduced assistance to "middle-income countries" like South Africa. Rather, aid to South Africa should be targeted at pockets of deep poverty. We also do not accept that aid to middle income countries, or anywhere else should focus on "policy influence". There is a clear danger that doing so diverts from humanitarian objectives and towards the economic or strategic self-interest of donor states.

  6.11  In this context, we are concerned that the single largest contract issued by DfID in its January 2003 contracts round was worth £6,363,435 (the next largest was just over £1.3 million and no others topped the £1 million pound mark). The contract was issued to the Adam Smith Institute (International Division), to "Support Services for Public Enterprise Restructuring in South Africa"[27] We believe that the committee would be well advised to investigate this award more closely, and to question Ministers as to its value and contribution to a South African led development strategy. This contract could do with being tested against Baroness Amos' claim that, "The days when the UK's aid was supply driven are over. We no longer say—Britain will give you this because we think you need it."[28]

7.  UK STRATEGY TOWARDS THE AFRICAN CONTINENT

  7.1  Prime Minister Tony Blair has provided effusive backing for a "new partnership with Africa". The engagement of the G8 with this proposal, and the production of an "Action Plan on Africa", represents an historic opportunity for the leaders of the world's richest nations to turn their grand rhetoric into concrete change for poor people in Africa.

  7.2  The crucial test for the G8, and thus for the UK, is whether they can deliver on their own responsibilities, rather than blaming Africa for its poverty. Any plan for "African development" must redress the policies that create and sustain an unequal relationship between Africa and the G8. Otherwise, rather than ending the failed international supervision of African development, a "new partnership" risks being used as yet another form of conditionality, shaping African societies and economies for the benefit of the G8, instead of Africans.

  7.3  The G8's Action Plan on Africa is their response to the "New Partnership for Africa's Development" (NEPAD), an initiative by African leaders, headed by the Presidents of South Africa, Nigeria, Algeria, Egypt and Senegal. NEPAD is a "call to the rest of the world to partner Africa in her own development on the basis of her own agenda and programme of action". [29]

  7.4  Africa has paid a high price for the imbalances of its relationship with the rich world. The continent has become a laboratory for a series of social, economic and political experiments, directed by international institutions. These experiments are widely recognised to have failed. Africa has lost out in the globalisation process. International negotiations have established unfair rules for trade and international institutions have enforced inappropriate policies on African countries. Africa's dependence on international aid has enabled rich country donors to force on African governments economic policies that have reflected the interests of the rich world and their multinational companies rather than the interests of Africa's people. These policies have contributed to economic collapse and massive increases in poverty in Africa. By the year 2000, average income in Africa was 10% below the level in 1980.[30] 48% of the continent's population live in absolute poverty.[31] Sub-Saharan Africa is the home to two thirds of the people in the world living with HIV/AIDS, and because of AIDS, average life expectancy in Africa has been cut by 15 years, currently standing at just 47.[32]

  7.5  The approach of blaming Africa for its problems, thereby ignoring its exploitation by the rich world, has been all too evident in the G8's engagement so far. The G8 now need to recognise and address their historic and contemporary contributions to underdevelopment, corruption, conflict and undemocratic politics. We believe that the UK should push the G8 to move beyond a generalised debate on governance, and hazy promises of aid, and to deliver concrete change to:

—  Secure the benefits of trade for Africa;

—  Make real progress on debt cancellation;

—  End structural adjustment conditionality; and

—  Kick start the war on AIDS.

  As part of their response to NEPAD, the G8 should provide significant new aid funding for Africa. But NEPAD is too important to become yet another tool that is used to enforce the Washington consensus on Africa.

  The UK should act bilaterally:

—  to support the NEPAD process with substantially more funds,

—  do so without adding yet more political or economic conditionality.

  The UK should encourage other G8 states to follow its lead.

8.  SECURING THE BENEFITS OF TRADE FOR AFRICA

  8.1  From colonialism to the present time, Africa has been heavily involved in the global economy. The continent's plantations, farms and mines have exported raw materials (primary commodities) to the rich countries, where processed products are made and then sold back to Africa. This ensures that the rich countries receive the vast majority of the wealth generated by an international economic system that relies on African raw materials and low wage labour.

  8.2  This system has been enforced by the IMF and the World Bank. They have encouraged African countries to focus on producing a narrow range of "cash crops" for export. Because they give the same "one size fits all" advice to many countries, there has been a huge increase in the supply of commodities such as tea, coffee and cocoa as well as minerals such as copper. When the supply goes up, the price goes down. The system has ensured a steady supply of cheap products to the rich North, but repeated declines in world prices for commodities have done huge damage to the aspirations which people had for development at the time of independence. Africa generates nearly 30% more exports today than in 1980, yet their value has crashed by more than 40 percent.[33] It is scarcely credible that these consequences were not predicted by institutions that are staffed mainly by economists.

  8.3  African farmers have also been badly hurt by the subsidies which G8 countries pay to their farmers. These subsidies encourage G8 farmers to grow more food than is needed in their domestic markets. The resulting surpluses, like the EU's "butter mountain", are then exported to Africa (dumped) at prices lower than those for locally produced food.[34] The plight of African farmers forced off their land by such unfair competition has been largely ignored in the slanging match between the US, the EU and Japan over whose system of subsidies is the worst. The value of agricultural subsidies by the OECD, the "rich countries club", is greater than the entire GDP of sub-Saharan Africa.[35]

  8.4  To add insult to injury, the G8 use international trade rules to encourage African nations to open up their markets, stopping them from defending themselves against dumping. African governments were well aware of the limitations of exporting primary commodities and, at independence, many countries tried to "diversify" their economies by moving into manufacturing. To get off the ground, new African industries needed protection against foreign imports, because of the disadvantages they had against international competitors in terms of transport, scale and lack of infrastructure. But the G8 countries' insistence on market openness meant that African countries were unable to protect new industries. Rapid reductions in tariffs and quotas decimated the new industries, leading to massive unemployment.[36]

  8.5  Building a base of internationally competitive industries is essential for African nations. It is a long-term challenge that needs active government involvement. But the G8 are denying African countries the rights to use policies that have been tried and tested both in East Asia and in the G8 countries themselves. There are few, if any, examples of countries that have developed simply by "getting the prices right".

  8.6  However, African governments are now facing more and more restrictions in their development options through IMF and World Bank conditions and WTO agreements.

  These restrictions include:

—  limiting the use of import barriers;

—  prohibiting the use of conditions on investment (for example, requiring textile factories to buy locally grown cotton);[37]

—  limiting the copying of products from overseas;[38] and

—  limiting the preferences that can be given to local industries over foreign multinationals.[39]

  8.7  This list will get longer if the EU is successful in overcoming the opposition of African trade negotiators to start WTO negotiations on issues such as investment. African resistance to this agenda caused the collapse of the 2003 WTO Ministerial in Cancun. If the multilateral trading system is to regain the trust of African negotiators, the EU must re-think its approach. The UK could play a pivotal role here, bringing European trade negotiators back under the guidance of member states, and re-working their negotiating mandate.

  8.8  Meanwhile, the EU, and other rich nations are protecting their own companies from competition from more efficient African producers. Import barriers in the EU concentrate on agricultural produce such as dairy products, vegetables, nuts, fruits, wheat and rice and on labour intensive industries, such as textiles, clothing and footwear. These are exactly the goods that African producers could export competitively.

  The barriers which prevent them from doing so include:[40]

—  high duties ("tariff barriers") that raise the cost of exports from Africa and other developing countries trying to enter the European market;

—  quotas that control how much African produce can enter EU markets; and

—  "non-tariff barriers" such as technical requirements or unnecessary product standards.

  8.9  Shamefully, the structure of the EU's trade barriers also inhibits Africa's efforts to industrialise and diversify. Processing or manufacturing the food that African farmers grow within the region, the timber extracted and the minerals that are mined could provide a significant number of local jobs and foreign exchange earnings. Yet, tariff barriers on processed goods entering the EU countries are often higher than on raw products. For example, the European tariffs on orange juice are much higher than those on oranges. Similarly, there are low tariffs on cocoa beans, high tariffs on partly processed cocoa butter and prohibitive tariffs on chocolate.

  8.10  A recent report by the UN Conference on Trade and Development shows the way that African and other developing countries are marginalised in world trade through the combination of tariff escalation and the domination of commodity industries by a small number of multinationals.[41] Their bargaining power ensures that most of the profits are captured by the multinationals and the well paid, skilled jobs remain in the rich nations.

  8.11  The EU have repeatedly broken their commitments (such as those made under the last round of trade negotiations—the Uruguay Round) to open up to agricultural imports from the developing world. One exception is the EU's "Everything but Arms" initiative which provides duty free access to Least Developed Countries, covering approximately 93% of their exports—and has been a useful step forward. However, the poorest countries are the least well placed to take advantage of such preferences. And many other countries, like Zimbabwe and Namibia, that might be able to benefit, are not classified as "least developed", and are thus excluded. The EU says that it cannot extend the Everything But Arms initiative to all developing countries because it wants to stay within existing WTO rules. But such a scheme would be hugely welcome, and forthcoming negotiations on regional integration agreements present an opportunity to change the WTO rules themselves. These are examples of concrete policy initiatives that the UK should seek to promote within both the WTO and the EU.

  8.12  The hollowness of rich country promises to reform their agricultural policies have been consistently revealed by the lack of progress in reforming the EU's Common Agricultural Policy. This is an area where the UK shares an agenda with development campaigners—but has so far failed to deliver concrete results.

  8.13  The UK and the EU are already devoting considerable political energy to securing access to Africa's markets for their multinational companies. The range of institutions and policies used to promote this agenda includes:

—  the IMF and World Bank;

—  the EU's Cotonou Agreement;

—  bilateral trade and investment treaties; and

—  WTO negotiations on the General Agreement on Trade in Services (GATS); and

—  Proposed new WTO agreements on issues such as investment and government procurement.

  8.14  NEPAD was conceived to challenge the logic of a system that has driven Africa into poverty. The UK must resist the temptation to use the Action Plan for Africa as a means to make NEPAD into yet another tool to achieve its market access aims.

  8.15  The UK must recognise that trade rules are unfair to the poorest nations and must convince rich countries within the WTO to act unilaterally to redress the imbalances. They must ensure that their trade policies promote genuine development. Recent rounds of trade negotiations have been based on the refusal of the rich nations to make concessions unless developing countries agree to allow foreign companies more access to their markets. The WTO must be reformed to give Africa an equal place at the negotiating table and stop undermining Africa's efforts build a stronger regional bloc. The UK should energetically pursue an agenda in bilateral and multilateral trade negotiations that:

—  allows Africa to develop its ability to trade by protecting key sectors and promoting diversification;

—  tackles the crisis in commodity prices;

—  agrees an ambitious timetable to phase out subsidies that result in dumping of agricultural products and subsidised over-fishing in Africa's waters;

—  ends tariff escalation that prevents Africa processing its raw materials; and

—  removes the barriers that stop Africa selling to G8 markets.

9.  MAKING REAL PROGRESS ON DEBT CANCELLATION

  9.1  During the late 1980s, Africa's inability to trade its way out of poverty led to a crisis of debt payments. The prospect of debt default presented a serious threat to the survival of high street banks and significant Wall Street players. In response, the World Bank and IMF played a central role in supervising African economies to ensure that the debts were paid.

  9.2  The costs were high to Africa's people. Debt repayments are having a devastating impact on African development. African countries are forced to spend almost $15 billion per year repaying debts to G8 countries and the international financial institutions, crippling development programmes, health and education investments and efforts to cope with the devastating impact of the HIV/AIDS crisis.

  9.3  In many cases, the debts which African governments are repaying can be described as "odious" in the first place. According to international law if a loan is "used against the interests of the local populace" then it is "odious" and need not be repaid. In 1973, the United Nations began to describe apartheid as a crime against humanity. Nevertheless, the international financial community continued to make loans to South Africa's apartheid regime. The Archbishop of Cape Town has said that South Africa's debt "should be declared odious and written off".

  9.4  The apartheid regime not only oppressed its own people, but waged a full-scale war against Mozambique and Angola, made raids into all the neighbouring states, and imposed an economic blockade on Lesotho, Botswana, Zambia, Zimbabwe and Malawi. The suffering was immense. Faced with a sudden loss of income and the need to protect their people, the governments of the region borrowed heavily from international agencies like the IMF and the World Bank. Campaigners in Southern Africa have called for recognition that this £28 billion of "apartheid caused debt" is illegitimate and should be written off completely.[42] A movement is now growing to call for reparations for the impact of loans to support apartheid and corrupt regimes.

  9.5  The tyranny of compound interest rates resulted in huge repayments on Africa's debts. Sub-Saharan Africa's foreign debt rose from US$60 billion to US$206 billion between 1980 and 2001. Over the past three years, debt repayments by sub-Saharan African countries has been US$16 billion greater than incoming loans. [43]

  9.6  The world-wide Jubilee movement emerged in response to this immense human crisis, and the mobilisation of millions of people succeeded in focussing the minds of the G8 on debt. Unfortunately, the G8's response to the debt crisis, the Highly Indebted Poor Countries initiative (HIPC), is woefully inadequate and under-funded.

  9.7  HIPC is based on the idea of writing off that part of a country's debt that the governments will never be able to afford to pay off. The macro-economic calculations involved fail to recognise either that many countries have now paid back the original loan several times over, or the illegitimacy of much African debt. Many African campaigners therefore argue that it is not a question of "can't pay, won't pay", but rather "don't owe, won't pay".

  9.8  Even if it was working, HIPC would provide just enough debt reduction for African countries to meet their debt service payments, but no extra money for the poorest nations to invest in their people and their economy and to escape from the vicious cycle of debt and poverty.

  9.9  But the World Bank and the IMF have acknowledged that the HIPC is failing, even according to its own criteria:

—  of the five countries that have passed Completion Point (i.e. the point where countries receive final debt stock cancellation), the debts of at least two will not be "sustainable".

—  8-10 of the 21 other countries that have passed Decision Point (i.e. those that have qualified to enter the HIPC process and received initial reduction in their debt service payments) will not have "sustainable" levels of debt even after Completion Point. [44]

  9.10  The current "top-up" approach to the HIPC Trust Fund merely acts as a temporary measure for those countries that have already failed the debt sustainability ratio. It is far below the level of relief needed for the poorest countries to achieve sustained economic growth. And it is even further from the full cancellation that many African campaigners demand and that is required to achieve the internationally agreed Millennium Development Goals, such as halving the proportion of the world's population living in absolute poverty.[45]

  9.11  The initiative for NEPAD emerged largely from African civil society demands for debt cancellation. In 1999 the OAU kicked off the NEPAD process by tasking Presidents Mbeki, Obasanjo and Bouteflika to seek a renegotiation of the debt deadlock. In the eyes of African campaigners, the G8 will have failed if it does not deliver unconditional debt cancellation. The UK should represent these demands within the IFIs and the Paris Club meetings:

—  endorsing the principle of full debt cancellation,

—  providing a financing plan for its achievement.

10.  ENDING STRUCTURAL ADJUSTMENT CONDITIONS

  10.1  Africa's relationship to the rich world was transformed by the debt crisis. During the 1980s and much of the 1990s, the World Bank and IMF attached more and more strings to new loans, aid and debt relief. These Structural Adjustment Programmes (SAPs) assumed that liberalisation policies would stimulate economic growth, which would reduce poverty. Since publication of the UNICEF report, "Adjustment with a human face" in 1987, NGOs and researchers have revealed the high costs of structural adjustment on the lives of African people.

  10.2  UN agencies have also criticised SAPs and exposed the degree to which they have failed, even according to their core criteria of promoting economic growth. The UN Conference on Trade and Development (UNCTAD) recently reported that "while structural adjustment programmes have been applied more intensively and frequently in Africa than in any other developing region, barely any African country has exited from such programmes with success. . . This is true not only for countries which are said to have slipped in implementation of stabilisation and adjustment programmes. . .but also most of the core and good adjusters."[46]

  10.3  African governments have been forced to adopt these policies because they desperately need new loans—not least to pay back previous debts. The pressure to comply with structural adjustment policies is also increased by the fact that the IMF has come to act as a "gatekeeper" for all international aid. All other major national aid donors, like USAID, the UK's DfID and the EU look for the IMF's "seal of approval" before providing assistance.

  10.4  This conditionality has also led to the globalisation of African politics and has had a corrosive impact on democracy.[47] Until very recently, new loans from the World Bank and IMF to African countries were negotiated under conditions of secrecy. The documents, which were devised and written in Washington, were rarely prepared in local languages, and have not normally been disclosed, let alone subjected to parliamentary scrutiny or public debate. The hollowing out and globalisation of African politics has contributed to political decay in many countries. This lies at the root of much poor governance in Africa. The G8 would do well to remember this when berating Africans for their lack of attachment to democracy.

  10.5  Facing popular resistance to austerity policies imposed by the IMF, many African governments have resorted to authoritarian means to suppress civil society and trade union movements. Until very recently Western donors congratulated these governments for showing the "political will" to impose policies which did massive harm to the poor. In the face of massive popular resistance to adjustment in poor countries, the World Bank have argued that adjustment has failed, not because of they had misdiagnosed Africa's economic illness, but because the patient was refusing to swallow the medicine.

  10.6  So in 1999, the World Bank and IMF announced that SAPs would be replaced by Poverty Reduction Strategy Papers (PRSPs). The new PRSP framework focuses on "building ownership" by giving developing country governments the initiative in designing programmes and insisting on the involvement of civil society organisations in the process. These reforms have been widely welcomed by some, including the UK, which has adopted the PRSP as the centre-piece of its development assistance strategy.

  10.7  However, we believe that this enthusiasm for PRSPs is misplaced. The real choices that developing country governments are "allowed" to make remain constrained by orthodox prescriptions, with core macroeconomic policies still mandated by the IMF. Some PRSPs had to go back and forth between the HIPC countries and the IMF/WB up to six times before they were to be finally approved. New-found concerns with "ownership" and "poverty" appear to have more to do with spin than delivery. [48]

  10.8  The internal governance of the IFIs is also an issue of significant concern. Within the World Bank, all sub-Saharan African countries are represented by just two directors, while eight rich countries enjoy a director each and the US maintains veto power by holding more than 15% of the votes. The IMF/WB chief executives are chosen from, respectively, the EU and US, with the US treasury secretary holding the power of hiring and firing. South African Finance Minister Trevor Manuel has argued, "We simply do not seem to have the right sort of institutions for effective multilateral discussion and agreement between states. While the Bretton Woods Institutions nominally operate by consensus, they are steered quite convincingly by their major financial backers. This can have significant implications, for example, in deciding which countries the Fund should assist when financial contagion breaks out in several regions at once. Another example, and one that is especially pertinent in Africa, is how conditionality is applied to adjustment loans to a country hit by a decline in commodity prices."[49]

  10.9  The UK is a major shareholders in the IMF and the World Bank. The UK should publicly acknowledge the failures of past conditions attached to aid and loans. They should argue and vote for:

—  removal of the powers of veto of the IMF over economic policy;

—  policies that ensure that future aid and loans support development priorities established through internal, democratic processes; and

—  Proposals to rebalance voting shares and governance structures to ensure the accountability of these institutions to poor countries.

11.  THE WAR ON AIDS

  11.1  In the West medical care for people with HIV/AIDS is continually improving, but in Africa people are dying because they cannot afford to invest in the healthcare or medicines that could save their lives. AIDS is spreading fast, with 3.4 million new infections in Sub-Saharan Africa in 2001[50]the equivalent of an estimated 7,000 new infections per day in Zimbabwe alone.[51]

  11.2  The crisis presents a fundamental challenge to the international community. In response, the richest countries in the world agreed at their Group of Eight (G8) meeting in June 2001 to support The Global Fund to Fight AIDS, Tuberculosis & Malaria. The announcement raised high expectations that rich country politicians were finally enlisting themselves in a "war on AIDS" of the scale needed to stop the disease in its tracks. Two years on, the Global Fund is up and running. It is the best vehicle we have to mobilise a concerted global campaign against AIDS. And yet, while world leaders vie for the title of "Africa's best friend", the Global Fund has everything it needs—except the funds.

  11.3  The Global Fund has already delivered positive changes. It has mobilised significant new financial resources and funded high-quality proposals from developing countries. It has allocated over $1.5 billion over two years for innovative, life-saving projects. The Fund's success has transformed expectations. AIDS activists, doctors and community workers in rich and poor countries have started to talk confidently about humanity's capacity to tackle the pandemic.

  11.4  Nonetheless, rich countries, and the UK in particular, are now putting the Fund's achievements in jeopardy. The Global Fund is in financial crisis. President Benjamin Mkapa of Tanzania argues, "the real problem is lack of political will among the rich countries and corporations. If they can spend over $300 billion to subsidise agriculture . . . they can surely spare $10 billion for the Global Fund."

  11.5  The Global Fund needs to raise at least $2.5 billion in 2003, $3.8 billion in 2004, over $8 billion in 2005, and almost $9 billion every year from then on. In order to raise these huge totals, each rich country will need to contribute a proportion consistent with their share of global wealth, as measured by its gross domestic product.[52] On this basis, the UK should provide 4.5% of these annual targets. Most rich countries are nowhere near providing their fair share. HIV/AIDS operates as a vicious circle—the more people are infected, the harder it becomes to provide treatment and to prevent future infections. As a result, the longer we leave tackling the disease, the more it will cost to do so in the future. We need action now.

  11.6  The fact that the Fund receives and responds to applications from recipient countries makes it hard to project how much money it will need. However, on the basis of the two rounds of applications processed so far, we can assume that the Global Fund will need to raise at least $2.5 billion in 2003, $3.8 billion in 2004, and over $8 billion a year from then on.[53]

  11.7  The current funding crisis presents a major moral challenge to all donors. If they do not secure the long-term future of the Global Fund, people who have moved onto life-saving anti-retroviral treatments will have to come off them again. This raises the spectre of drug-resistant strains of the virus emerging in aid-dependent countries that establish treatment regimes on the basis of aid flows, only to see the same programmes dry up.

  11.8  The injustice of the current situation is causing outrage around the world. Stephen Lewis, UN envoy for HIV/AIDS in Africa, found on a recent trip to Southern Africa that, "it is impossible to overstate how strongly people feel—from Cabinet Ministers to People Living With HIV/AIDS—that the Global Fund is the best vehicle we have to finance the struggle against the pandemic. Every country yielded the same questions: When will the money come? Does the Global Fund have enough money? Why don't governments contribute to it? What happens if it goes bankrupt?. . . It's legitimate to ask: what's wrong with this world? What's wrong with the rich countries? Why are they willing to jeopardise the integrity of the most hopeful financial instrument we have to combat the cruellest disease the world has ever seen?"[54]

  11.9  In January 2003, President Bush announced a new AIDS initiative, providing $15 billion over five years, and signing a bill with the potential to increase the US contribution to the Global Fund to $1 billion a year. This funding is conditional upon the US providing no more than one third of the Global Fund's total funds. In other words, the US has laid down a powerful challenge to the rest of the world, which must contribute at least $2 billion a year in order to release America's full contribution.

  11.10  In response, at the June 2003 G8 Summit, French President Jacques Chirac, British Prime Minister Tony Blair and European Commission President Romano Prodi have all said that they would like to see Europe contributing $1billion to the Global Fund—to match the US funding. However, there is considerable disagreement as to where that money should come from. One potential source is unspent European Commission aid money. However, the EU's administrative procedures are complex, and there are a number of other claims being made on the money—for projects on water, education and debt relief. This is also not "new" money, having already been earmarked for African, Caribbean and Pacific countries.

  11.11  France has therefore suggested that the bulk of the money should come from the European member states, and has provided an example for the rest to follow, tripling its contribution to the Global Fund to $177 million a year. This is more than four times the UK commitment, though the two countries have very similar sized economies. Italy and Germany have also made recent announcements of new funds.

  11.12  In May, Britain's new Minister for International Development, Baroness Valerie Amos, announced that the UK was to contribute a further $80 million to the Global Fund. This money, if delivered this year, could have made a massive difference. However, this "new money" (which will come out of existing aid budgets) will only be handed over to the Global Fund in two instalments of $40 million in 2006 and 2007, and even then will represent a cut in the UK's annual donations. In fact, by 2006, the UK should be aiming to providing ten times this amount.[55] This dismal record brings into question the sincerity of Tony Blair's leadership role in increasing European donations. The UK seems to be relying on the European Commission to provide the bulk of new European money. However, if this does not happen, there is currently no indication that the UK is willing to increase its own contribution. In other words, the UK wants Europe to match America's $1 billion, as long as it doesn't have to pay for it.

  11.13  Africa's poor health infrastructure should not be used as an excuse to do less. The international community can easily afford to declare a comprehensive war on AIDS that includes investment in prevention, care and treatment.

—  The UK should aim to ensure that the Fund receives at least $2,521 million in 2003.

—  The UK should give at least an extra $72 million this year, at least a further $124 million in 2004, and $315 million in 2005.

—  From 2006 the Global Fund needs to be raising almost $9 billion a year. The UK should encourage the Global Fund's donors to commit to annual, dues-based contributions.

  11.14  Beyond increased funding, global trade rules also place major constraints on the ability of poor countries to respond to the AIDS crisis. Most African countries have no home-grown drug industry, so they need companies in other countries to supply them with cheaper versions of expensive western drugs. Almost two years ago developing countries won a great victory against the pharmaceutical lobby when trade ministers at the WTO signed the "Doha Declaration" agreeing that health needs should override the "intellectual property" rights of pharmaceutical multinationals.

  11.15  But from that moment on, the US blocked a solution and backtracked on the promises made at Doha. The European Parliament proposed a neat 52 word agreement. However, when on 30 August 2003, the US finally agreed to new rules, the deal negotiated with the European Commission created a complex 3,200 word text. Developing countries successfully stopped the US from excluding many diseases from the deal. However, the new compromise places enormous obstacles in the way of affordable medicines actually being made available where they are most needed. Poor countries without their own drugs industry will now have to ask another country to license a local company to produce and export cheap generic copies of patented drugs. But any country offering to assist still risks retaliation from rich countries. The agreement provides so much scope for interpretation that the only likely winners are the army of lawyers the EU and US will employ to tie up any attempt be developing countries to make use of the agreement.

  11.16  The new deal missed a massive opportunity to establish clear and simple rules that would deliver cheap drugs and bring the bullying tactics of the EU and the US to an end once and for all.

  11.17  Despite these limitations, Canada has recently announced that it plans to introduce legislation to allow generic drug manufacturers to make generic versions of anti-retrovirals for export to developing countries. The move could substantially increase the volume of generic production and help African countries to source the stable, high quality supply of generic anti-retrovirals to meet its massive needs.

  11.18  This contribution should also encourage governments around the world to use the compulsory licensing route to develop production, and shows that it is possible for governments to stand up to pressure from the pharmaceutical industry and the US government. The move is important, because as producing countries (such as India and Brazil) implement their TRIPS obligations and provide full patent protection for pharmaceutical products, the supply of generics will inevitably dwindle. To ensure a sustainable supply of generics, more countries must be able and willing to produce for export. The greater the number of producing countries, the more likely generics will be available for import.

  11.19  The UK should follow Canada's lead and do it all to provide practical support for the production of significant volumes of generic drugs for export.

12.  CONCLUSION

  12.1  ACTSA strongly welcomes the Foreign Affairs Select Committee's decision to hold an enquiry into UK policy towards South Africa. The imminent tenth anniversary of freedom provides an excellent opportunity to meditate on how far South Africa has come since the end of apartheid, and how far the country still has to travel. It also offers countries that would hope to count themselves among South Africa's friends to consider the nature and health of their relationship.

  12.2  ACTSA argues in this submission that the UK needs to focus its assistance to South Africa more closely on humanitarian considerations, and needs to exercise extreme caution when considering an "influencing" agenda towards policy issues that ought to be decided according to internal democratic processes.

  12.3  We also urge that the UK's most energetic engagement should be with the wider continental campaign for a new partnership between Africa and the rich world.

  12.4  Both the UK and the G8 have paid unprecedented lip-service in recent years to tackling Africa's crisis. Our Prime Minister, and other global leaders have promised; development focused trade-rules, an end to the debt crisis, more aid with fewer strings and a real engagement with the global AIDS crisis. But when the media circus surrounding set-piece international conferences has died down, Africa has been quietly forgotten. Promises made on extra aid to Africa (G8 2002) and extra money for the Global Fund to Fight AIDS, TB and Malaria (G8 2003) have been conspicuous only for the manner in which they have been broken. African complaints that the G8's Africa Action Plan fails to engage with key structural issues of trade, debt relief and aid conditionality have simply been ignored.

  12.5  Despite this reality, Baroness Amos repeated in March 2003, "the Prime Minister's determination to help Africa to help itself is as strong now as it has ever been. Our commitment to NEPAD, in which South Africa is such a key driver, is a major plank of the foreign policy of Tony Blair's Government."[56] If a commitment to Africa is truly a major plank of British foreign policy, the Foreign Affairs Committee will find it difficult to deliver anything but a damning verdict on the FCO's attempts to pursue that policy.

  12.6  The G8 have so far effectively ignored NEPAD as proposed by African leaders, developing their own plan, centred on their own priorities. NEPAD is first and foremost an appeal to the rich world to alter the unequal basis of North-South relations. It notes, "The New Partnership for Africa's Development calls for the reversal of this abnormal situation by changing the relationship that underpins it. Africans are appealing neither for the further entrenchment of dependency through aid, nor for marginal concessions."

  12.7  The Africa Action Plan ducks this challenge entirely, as the G8 argue that NEPAD is, "first and foremost, a pledge by African Leaders to the people of Africa to consolidate democracy and sound economic management, and to promote peace, security and people-centred development." (Para 4, Africa Action Plan) The G8 have thus chosen to use NEPAD as another opportunity to lecture African nations on their failings. They refuse to recognise that the current trade and debt arrangements are unjust, and require change per se. Rather they are using miserly debt relief, trade concessions and aid promises as bargaining chips for which they will demand a high price—the opening up of African markets to Western multinationals, privatisation of essential services and further cuts in state spending.

  12.8  Furthermore, the insistence of the G8 countries that as a group they cannot adopt a co-ordinated platform, but will each act alone effectively begs the question, what is the point of the G8? The G8 commit to "mobilise and energise global action, marshal resources and expertise, and provide impetus in support of the NEPAD's objectives." (Para 6) They also state that, "We will pursue this Action Plan in our individual and collective capacities, and through the international institutions to which we belong." (Para 10)

  12.9  The UK has so far done little to challenge the limitations of the G8 Africa Action Plan, urging campaigners to recognise the realities of global power politics, and to focus on winning "deliverables". The concept of deliverables recognises in effect that the biggest blockage to effective change is a lack of political will within the G8 to take the major structural challenges presented by NEPAD seriously, and a determination to pursue business on the usual agenda, through the usual channels and institutions.

  12.10  The UK's response has been to focus attention on what the UK can and has achieved bilaterally. Some of this is welcome. However, if the G8 has a useful function in relation to Africa, it is that it provides an opportunity for leadership. The UK needs not only to lead by example, but to punch above its weight for Africa, committing negotiating capital in international forums in which the UK has influence, to make trade fair, end the CAP, cancel third world debt and transform the international role of the IFIs.

  12.11  The leaders of the rich world effectively abrogate responsibility for their own political power, announcing themselves constrained by frameworks and agreements made by political and technical institutions like the WTO, the World Bank and the EU. They do so in denial of the fact that the G8 are the effective masters of each of these institutions. If the G8 itself has any useful function it is in recognising global challenges and in developing new agendas for these institutions which G8 members commit to pursuing energetically.

October 2003

---

---

15   Baroness Amos, "Co-operation, not Colonialism", South Africa, March 2003. Back

16   Statistics South Africa, "Earnings and spending in South Africa: Selected findings and comparisons from the income and expenditure surveys of October 1995 and October 2000", November 2002. Back

17   Mbeki, T, Bold steps to end the "two nations" divide, ANC Today, 22 August 2003. Back

18   African National Congress, The Reconstruction and Development Programme, Johannesburg, Umanyano Publications, Section 6.5.16, 1994. Back

19   Bond, P, "Against Global Apartheid", UCT Press, South Africa, 2003, pp vii. Particularly significant was the abolition, in March 1995 of the "financial rand" exchange mechanism, which acted as a tax on financial outflows. Back

20   Mbeki, T. (2000), "Keynote Address to the ANC National General Council", Port Elizabeth, 12 July, quoted in Bond, P, "Against Global Apartheid", UCT Press, South Africa, 2003, pp vii. Back

21   See paper by Paul Goodison, ERO, to ACTSA conference, "The Cotonou Trade Negotiations: Building European Solidarity for Southern Africa", October 2002, ACP House, Brussels. www.actsa.org/shop Back

22   ACTSA, Zimbabwe: Evidence for the Foreign Affairs Select Committee, 2002.www.parliament.uk/parliamentary-committees/foreign-affairs-committee.cfm Back

23   Jack Straw, South Africa is making a difference for good in the world, May 2003. Back

24   Mbeki, T, "Letter from the President: A hundred flowers under the African sun", ANC Today, Volume 3, No. 30. 1-7 August 2003. Back

25   Baroness Amos, "Co-operation, not Colonialism", South Africa, March 2003. Back

26   Baroness Amos, Speech the Royal Commonwealth Society, London, 30 January 2002. Back

27   From "contracts" section of DfID website (www.dfid.gov.uk), accessed 25 Sept 2003. Back

28   Baroness Amos, "Co-operation, not Colonialism", South Africa, March 2003. Back

29   NEPAD, October 2001 www.nepad.org Back

30   UNCTAD, Economic Development in Africa: Performance, Prospects and Policy Issues, New York, 2001, pp 7 www.unctad.org Back

31   World Bank, World Development Indicators, 2002. Back

32   UNAIDS, AIDS Epidemic Update, 2001. Back

33   Quoted in Patrick Bond, "What is Pretoria Planning for Africa?", Sangonet Newsletter 45, December 2001. Back

34   FAO, Agriculture, Trade and Food Security, Volumes I and II, Rome, 2001. Back

35   OECD, Agricultural Policies in OECD countries: Monitoring and Evaluation, OECD, 2001. Back

36   Shaffaeddin SM, The Impact of Trade Liberalisation on Export and GDP Growth in Least Developed Countries, UNCTAD Discussion Paper 85, Geneva, 1994; and Buffie E, Trade Policy in Developing Countries, Cambridge University Press. Back

37   WTO agreement on Trade Related Investment Measures (TRIMS). Back

38   WTO agreement on Trade Related Intellectual Property Rights (TRIPS). Back

39   Such as under the General Agreement on Trade in Services (GATS). Back

40   See for example, ACTSA, Freedom to Grow: bringing down the barriers to Southern Africa's trade with Europe, Action for Southern Africa, London, Jan 2002, www.actsa.org/shop.htm Back

41   UNCTAD, Trade and Development Report 2002, Geneva. Back

42   Action for Southern Africa , The debt of apartheid, ACTSA, London, May 1998. Back

43   Quoted in Patrick Bond, "What is Pretoria Planning for Africa?", Sangonet Newsletter 45, December 2001. Back

44   HIPC Review 2002, World Bank. Back

45   Jubilee Research and the Jubilee Debt Coalition "The Unbreakable Link-Debt Relief and the Millennium Development Goals" London, February 2002. Back

46   UNCTAD, Economic Development in Africa: Performance, Prospects and Policy Issues, New York, 2001, pp 5. Back

47   World Development Movement, States of Unrest-Resistance to IMF Policies in Poor Countries, WDM London, 2000 www.wdm.org/Cambriefs/Debt/unrest.pdf Back

48   World Development Movement, Policies to Rollback the State and Privatise, WDM, London, April 2001, www.wdm.org.uk/cambriefs/DEBT/PRSPcrit.htm Back

49   Manuel, T, Minister of Finance, Republic of South Africa, Globalisation, Income Distribution and the Role of the State, Comments delivered, 24 March 2003 in Geneva, to the ILO Commission on the Social Aspects of Globalisation. Back

50   UNAIDS, AIDS Epidemic Update, 2001. Back

51   "Estimated Worldwide HIV/Aids Infections: 47 002 057", Mail & Guardian (Johannesburg), May 31, 2002. Back

52   A table showing recommended pledges from the G8 to the Global Fund based on an equitable contributions framework is available from the aidspan website. www.aidspan.org Back

53   These figures have been generated largely from the Fund's own spending projections. See "How Much Money Does the Global Fund Need? How Much Does it Have?" by Bernard Rivers, 24 March 2003 www.aidspan.org Back

54   Dollar equivalent figures are from the Global Fund website, as updated 30 June 2003. www.globalfundatm.org Back

55   ACTSA, Funding the War on AIDS, May 2003, www.actsa.org Back

56   Baroness Amos, "Co-operation, not Colonialism", South Africa, March 2003. Back

---

Prepared 18 May 2004