EU-Africa Trade Relations:1975-2000
By Peter Bill Kisitu (http://peterkisitu.blogspot.com/)
In 1958 the six founding members of the European Union, Belgium, France, Italy, Luxemburg, The Netherlands and West Germany decided to grant aid to countries which were under their jurisdiction, mostly in Francophone Africa. Shortly after, the colonies began getting independence and entered into a dialogue with the European Economic Community (EEC, as it was known then), culminating into the signing in 1963 of the Yaoundé I convention.
In 1973, the EEC grew from six to nine members, admitting the United Kingdom (UK), Ireland and Denmark. As part of its EEC membership negotiation, the UK demanded to have its former colonies enjoy similar privileges from the EEC as those given to former French colonies. This gave way to the signing in 1975 of the Lomé I Convention between the enlarged EEC and Africa, Caribbean and the Pacific group of states (ACP). The apartheid South and the Arab North of Africa were not part of this arrangement. Lomé I had as its major objective to help ACP countries to ‘take off’ and to facilitate their integration into the world economy. In all four Lomé conventions were signed with the last one ending in the year 2000.
However, Lomé produced the opposite of its objectives because the percentage of Africa’s exports to the EU fell from 6% in 1976 to 1% in 1999. Lomé’s failure could be attributed to the following:
According to Brigide Laffan, a European researcher, Lomé introduced the stabex fund to compensate ACP states when Agricultural prices fell on the world market. However, due to European bureaucracy it took up to three years from the time an application was made and when the funds were released. For example the eighth European Development Fund (EDF VIII) was supposed to spend the equivalent of six billion Euros by the end of 1997 but by December 1998, 4.5 billion from EDF VI and VII was still unspent.
The Common Agricultural Policy protected European farmers while farmers from ACP States were left to bear the consequences of market vagaries.
For most of the 20th century the British and the French led the way in formulating policies towards Africa. With ACP relations on one side, they continued to deal with their former colonies on a bilateral level. France used the Communaute Financiere Africaine (CFA) whereby 14 African countries (Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo Republic, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea-Bissau, Mali, Niger, Senegal and Togo) use the franc, it used military agreements and the Communauté Francophone en Afrique to influence African politics.
Britain on it's part continues to influence the politics of it's former African colonies through the common wealth.
The EU blames Lomé’s failure on Africa’s bad governance. However, during the same period, Indonesia under a dictatorship but without the meddling from its former colonial master increased its percentage of total exports to the EU from 7.5% in 1976 to 13% in 2000 scoring a trade surplus of €6.9 billion against the EU the same year.
On a cultural level, African art-crafts held in Europe which Africa wanted back. Moreover, some of these items were believed to be of religious value that helped Africans to communicate to their gods and to dead ancestors. Other items were used for propaganda that helped to build social cohesion and cultural identity, and from a material point of view, Africa lost tourist income as a result. On an individual level, the artists and their offspring were deprived of the social status and mating advantages that art bestows on its maker, just as it did to Picasso and Modigliani
High Money Transfer Costs pushing Africa out of International Trade.
Money Transfer and International Trade
By Peter Bill Kisitu (http://peterkisitu.blogspot.com/)
In the year 2007, 318 billion dollars were sent back home by 150 Million international migrants. The top remittance earners were India at 27 billion, China at 25.7 billion, Mexico 25bn, the Philippines at 17billion and Sub-Sahara Africa received 19 billion. According to the World Bank, the remittance fees range from 6% of amount sent for inter-bank transfers to 20% for money transmittance companies like western Union. On top of the remittance fee is a hidden exchange rate charge.
Insofar as the current money transfer companies and banks do a great deal in helping deliver the much needed help to families, the high transfer fees they charge make them unsuitable as a system of payment in international business. These charges wipe out African Sme profits Furthermore; the high cost of borrowing money in Africa further increases the cost of doing business. With the current financial crisis pushing many migrant workers out of work, the remittance problem has never been worse.
The emerging consensus is that more competition in the money transfer industry will bring the remittance fees down. International Bank transfers are often reported as a highly efficient alternative to money transfer companies because they streamline the complicated process of handling cross border and inter-country disbursements and collections since each country has a different clearing system with its own rules and regulations thereby saving customers up to 90% in fees.
However, maintaining multiple Bank accounts and complying with country specific payment format is expensive and time consuming and payment delivery and time is uncertain. Furthermore, more than 80% percent of the population in Sub Saharan Africa do not keep a bank account. This calls for the use of technology that is accessible to people without bank accounts but is affordable.
The EU-Africa Trade and Investment conference (http://eatc2010.blogspot.com/)will seek as one of its objectives to find the most competitive rates for money transfer. To this end, three companies with some of the most competitive rates have been identified, these are; Atena, a Dutch company that charges a standard rate of 3% regardless of amount. The other is Xoom which charges from 0.3%-8% per transaction depending on the amount being sent. The third alternative is Money transfer software (MTS).
MTS is an easy to use interface that can be used by anyone with or without computer experience and supports multi-currencies. It keeps track of the recipient’s previous transactions in the history. The transaction is available immediately and is available for the payee agencies worldwide.
Therefore, the shift from western Union which charges 20% per money transfer transaction to Atena which charges 3% percent per transaction would translate into savings of 3.23 billion dollars for Africa per year and 54 billion for global remittances. These savings will help the small companies to increase their investments and consequently increase their share of international trade.
EU-Africa Trade Relations:1975-2000
By Peter Bill Kisitu (http://peterkisitu.blogspot.com/)
In 1958 the six founding members of the European Union, Belgium, France, Italy, Luxemburg, The Netherlands and West Germany decided to grant aid to countries which were under their jurisdiction, mostly in Francophone Africa. Shortly after, the colonies began getting independence and entered into a dialogue with the European Economic Community (EEC, as it was known then), culminating into the signing in 1963 of the Yaoundé I convention.
In 1973, the EEC grew from six to nine members, admitting the United Kingdom (UK), Ireland and Denmark. As part of its EEC membership negotiation, the UK demanded to have its former colonies enjoy similar privileges from the EEC as those given to former French colonies. This gave way to the signing in 1975 of the Lomé I Convention between the enlarged EEC and Africa, Caribbean and the Pacific group of states (ACP). The apartheid South and the Arab North of Africa were not part of this arrangement. Lomé I had as its major objective to help ACP countries to ‘take off’ and to facilitate their integration into the world economy. In all four Lomé conventions were signed with the last one ending in the year 2000.
However, Lomé produced the opposite of its objectives because the percentage of Africa’s exports to the EU fell from 6% in 1976 to 1% in 1999. Lomé’s failure could be attributed to the following:
According to Brigide Laffan, a European researcher, Lomé introduced the stabex fund to compensate ACP states when Agricultural prices fell on the world market. However, due to European bureaucracy it took up to three years from the time an application was made and when the funds were released. For example the eighth European Development Fund (EDF VIII) was supposed to spend the equivalent of six billion Euros by the end of 1997 but by December 1998, 4.5 billion from EDF VI and VII was still unspent.
The Common Agricultural Policy protected European farmers while farmers from ACP States were left to bear the consequences of market vagaries.
For most of the 20th century the British and the French led the way in formulating policies towards Africa. With ACP relations on one side, they continued to deal with their former colonies on a bilateral level. France used the Communaute Financiere Africaine (CFA) whereby 14 African countries (Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo Republic, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea-Bissau, Mali, Niger, Senegal and Togo) use the franc, it used military agreements and the Communauté Francophone en Afrique to influence African politics.
Britain on it's part continues to influence the politics of it's former African colonies through the common wealth.
The EU blames Lomé’s failure on Africa’s bad governance. However, during the same period, Indonesia under a dictatorship but without the meddling from its former colonial master increased its percentage of total exports to the EU from 7.5% in 1976 to 13% in 2000 scoring a trade surplus of €6.9 billion against the EU the same year.
On a cultural level, African art-crafts held in Europe which Africa wanted back. Moreover, some of these items were believed to be of religious value that helped Africans to communicate to their gods and to dead ancestors. Other items were used for propaganda that helped to build social cohesion and cultural identity, and from a material point of view, Africa lost tourist income as a result. On an individual level, the artists and their offspring were deprived of the social status and mating advantages that art bestows on its maker, just as it did to Picasso and Modigliani
High Money Transfer Costs pushing Africa out of International Trade.
Money Transfer and International Trade
By Peter Bill Kisitu (http://peterkisitu.blogspot.com/)
In the year 2007, 318 billion dollars were sent back home by 150 Million international migrants. The top remittance earners were India at 27 billion, China at 25.7 billion, Mexico 25bn, the Philippines at 17billion and Sub-Sahara Africa received 19 billion. According to the World Bank, the remittance fees range from 6% of amount sent for inter-bank transfers to 20% for money transmittance companies like western Union. On top of the remittance fee is a hidden exchange rate charge.
Insofar as the current money transfer companies and banks do a great deal in helping deliver the much needed help to families, the high transfer fees they charge make them unsuitable as a system of payment in international business. These charges wipe out African Sme profits Furthermore; the high cost of borrowing money in Africa further increases the cost of doing business. With the current financial crisis pushing many migrant workers out of work, the remittance problem has never been worse.
The emerging consensus is that more competition in the money transfer industry will bring the remittance fees down. International Bank transfers are often reported as a highly efficient alternative to money transfer companies because they streamline the complicated process of handling cross border and inter-country disbursements and collections since each country has a different clearing system with its own rules and regulations thereby saving customers up to 90% in fees.
However, maintaining multiple Bank accounts and complying with country specific payment format is expensive and time consuming and payment delivery and time is uncertain. Furthermore, more than 80% percent of the population in Sub Saharan Africa do not keep a bank account. This calls for the use of technology that is accessible to people without bank accounts but is affordable.
The EU-Africa Trade and Investment conference (http://eatc2010.blogspot.com/)will seek as one of its objectives to find the most competitive rates for money transfer. To this end, three companies with some of the most competitive rates have been identified, these are; Atena, a Dutch company that charges a standard rate of 3% regardless of amount. The other is Xoom which charges from 0.3%-8% per transaction depending on the amount being sent. The third alternative is Money transfer software (MTS).
MTS is an easy to use interface that can be used by anyone with or without computer experience and supports multi-currencies. It keeps track of the recipient’s previous transactions in the history. The transaction is available immediately and is available for the payee agencies worldwide.
Therefore, the shift from western Union which charges 20% per money transfer transaction to Atena which charges 3% percent per transaction would translate into savings of 3.23 billion dollars for Africa per year and 54 billion for global remittances. These savings will help the small companies to increase their investments and consequently increase their share of international trade.
