view to transforming their economies;
(c) undertake studies on efficient macro-economic management, effective mobilization and efficient allocation of domestic resources,
including human resources development;
(d) identify technical co-operation projects for submission to donors for funding;
(e) organizing the meetings of the Conference of African least developed countries, for consultation on common problems and identification of appropriate actions.
CAMI.lO/6/Vol. I ICE/1991/6/Vol. I Page 71
OF AFRICAN LDCs
291. The majority of African LDCs have prepared their national programmes for
the second IDDA. The projections of the LDCs have been included in the
earlier analysis in Part C.
292. One significant factor appears in the national programmes of African
LDCs. Virtually, all of them have adopted World Bank sponsored Structural Adjustment Programmes. This has involved re-orientation of policies towards economic liberalization, reduction of the state sector in industry,
encouragement of private entrepreneurship and a high priority for capability
building and infrastructural development. These approaches are in tune with
the strategic approach of the second IDDA.293. One other factor equally clearly emerges. Most of the LDCs are extremely
small (population wise). The setting up of large-scale industrial plants on
an optimal basis is not practical. Hence these countries will need toconcentrate, as indeed they are doing, on promoting the small and medium sectors and to go in for export-oriented industries, in view of their limited
domestic markets. So far as large scale industry is concerned, the most
pragmatic course would be for African LDCs to participate in regional and
sub-regional ventures.CAM.lO/6/Vol. I ICE/1991/6/Vol. I Page 72
PART E. FINANCING THE SECOND IDDA I. ESTIMATING THE COSTS II. MOBILIZING THE RESOURCES
III. FUNDING ESTIMATES IN THE NATIONAL PROGRAMMES
■ v, m>k;;i:;e >'*.. ■ \ui IV. FOREIGN AID
CAMI.lO/6/Vol. I ICE/1991/6/Vol. I Page 73
FINANCING THtt SECOND IDDA
294. Visions and dreams of development, strategies of industrialization, projects and programmes acquire a sense of reality if they can be backed by
financial resources, specifically mobilized and deployed for the purpose. One
of the handicaps faced during the first IDDA and one of the reasons, amongst others, why the first IDDA did not come up to expectations, was that the required investment finance was not forthcoming.295. The financial scenario at the commencement of the second IDDA is rather grim. The debt burden of the continent has reached staggering proportions
estimated to be over US$250 billion. The debt service ratio of the majority
of member states is well over fifty per cent. Most governments are running large budgetary deficits. Public enterprises are not giving adequate returns on invested capital and many of them have to be supported by the publicexchequer. Domestic savings are very low. The capability of governments to raise tax resources has reached saturation point. The flow of foreign capital has dried up. The continent is today heavily dependent on loans and grants
from bilateral donors, World Bank loans, IMF assistance and costly foreign commercial borrowings.
296. This picture is being painted in frank terms not with any intention of
dampening the ciiUiusiasm for the second IDDA but only to si^*, . "<-"« k:o«i:j
need to prevent wastages and unauthorised leakages, to ensure that adequate returns are obtained from existing investments, to determine with great prudence and competence the scale and direction of new investments and to promote the concept of financial discipline. Indeed, financial consciousness is one of the essential ingredients of the industrial culture which Africa is now seeking and must seek to acquire.297. The financial requirements for the Implementation of the second IDDA fall under the following broad categories:
1. Funds for developing the physical infrastructure;
2. Funds for improving the institutional Infrastructure including human resource development;
3. Funds for rehabilitation and reconstruction of existing industries;
4. Investment funds for new ventures;
5. Financial resources for technical aid and consultancy.
298. The money required for the first two categories will mainly have to come from the public exchequer. The financing of categories three and four will rest with the Governments so far the public sector industries are concerned, and It should be noted that in many African countries, the public sector share of industry Is dominant. The funds for private investments, and its share is expected to increase, will have to be mobilized from domestic savings and foreign capital. The financing of category five will largely come from bilateral and multilateral sources.
CAMI.10/6/Vol. I ICE/1991/6/Vol. I Page 74
I. ESTIMATING I'" ' * '■r^
299. The exercise of estimating the funding requirements of the second IDDA is, by no means, an easy task. The following elements inherent in the situation have to be kept in mind.
1. We are dealing with a time frame of ten years, whereas the plan periods of most African countries cover four or five years. Cost estimations even for these shorter time frames have gone awry. As a result in many countries, the plans have, de facto, become
co-terminus with annual budgetary periods. The experience has been that even over a period of one year, the accuracy of cost
forecasting cannot be guaranteed. In this context, the enormity of the problem of attempting to make cost estimations over a period of ten years will be appreciated.
2. During a decade, a number of uncertainties exist and assumptions have to be made. Amongst these are:
the degree of cost escalation;
the extent of inflation;
the movement of world commodity prices;
changes in costs ot inspurLed t^cixo't.-■■£,?, j.-j^ulnt;;-;, ^wyK-iient* >
spare parts and raw materials.
3. At this early stage of the second IDDA, African countries have still
to finalize their priorities, to allocate resources, to review their
national plans and strategies and to decide on the Investment portfolio. This is of course, an on-going process. The pipeline includes projects at various stages:
preliminary project ideas;
feasibility studies and reports currently under preparation;
completed feasibility studies under analysis and consideration for investment;
- approved projects awaiting financing;
projects under construction;
projects under commissioning;
operating units.