Africa turns to barter as dollars dry up

Press, 17 February 1983, Page 21

Africa turns to barter as dollars dry up

From

ALASTAIR MATHESON

in Nairobi

Several African States, their development plans thwarted by an acute shortage of foreign exchange, are seeking a return to old-style barter. Under it they can exchange surplus products for urgently needed manufactured goods and services from industrialised nations. Two big powers, the United States and China, have already shown some interest in the idea. The twentieth-.century style of barter was first proposed by Tanzania’s President Julius Nyerere during discussions early last month with Chinese Premier

Zhao Ziyang and a team of economic advisers as 'one possible way out of Tanzania’s desperate economic plight. With virtually no hard currency left for Tanzania to repay its substantial overseas loans as a result of a drastic fall in exports, Nyerere sees no way his country can buy muchneeded materials for even a limited number of- development projects. This suggestion appeared to have had a sympathetic reception from the Chinese, whose • accumulated trade surplus for the whole of

Africa in the first half of 1982 was $5OO million. Only six days later, Kenyan President Daniel arap Moi met a delegation of American congressmen in Nairobi to discuss Kenya’s trade relations with the United States. According to United . States Embassy sources in Nairobi, the delegation put forward barter as a means by which Kenya could perhaps exchange some of its coffee and tea for American food grains. Both sides agreed to look further into the possibility of negotiating a swap in order to conserve Kenya’s dwind-

ling stock of dollars, although the country is not in such a serious plight as its Tanzanian neighbour. No barter arrangement seems to have been finalised so far between any African State and an overseas country but Tanzania did conclude one with neighbouring Zambia last December. Zambia owes Tanzania a sizeable sum for its use of Dar es Salaam port facilities, and Tanzania is to be repaid, at

least in part, with manufactured goods from Zambia, which has a modest industrial base. At a banquet he gave for the Chinese Premier. Nyerere referred to this and the possibility of a similar arrangement with Mozambique. The he added: “Why should Tanzania and China cease to trade to their mutual advantage just because neither has United States dollars or sterling

pounds? “Bilaterally, and perhaps even regionally, we must be prepared to enter into the mutual exchange of goods without using internationally acceptable currency.” Although Zhao Ziyang visited Kenya immediately after his Tanzanian talks, barter does not seem to have been raised. China did pledge, however, to buy more Kenyan coffee, tea. and soda ash. In West Africa, now that it is in trouble from falling oil prices, Nigeria is also apparently considering barter. The country's plans for a fourth

oil refinery may have to be scrapped for want of capital. But rumours are circulating that one Asian country (unidentified) is offering to build the refinery in exchange for a guaranteed supply of “free” crude. All these deals have the common objective of eliminating the use of scarce dollars, sterling, or D-Marks, yet enabling trade to continue and the wheels of industry to keep turning with a steady supply of spare parts. The present shortage of these is threatening to cripple the industrial output of manyAfrican countries.

The Soviet Union has in past years used a slightly different form of barter with its African clients. This entailed such deals as giving a “loan” to Kenya at independence in 1963 consisting largely of Cuban sugar the Soviet Union did not need, which Kenya could then sell locally to realise Kenyan shillings. Of late, however, Soviet trade and arms deals with client States such as Ethiopia have included direct swaps of coffee and other African commodities for Russian oil and guns.—Copyright. London Observer Service