Threats to prosperity creation in Africa
Martin Ike-Muonso, a professor of economics with interest in subnational government IGR growth strategies, is managing director/CEO, ValueFronteira Ltd. He can be reached via email at firstname.lastname@example.org
December 7, 2020468 views0 comments
Africa is developing fast, and it is up to anyone to appreciate it. The pace may be slow; much slower than most people would expect. But that is because of the continent’s past. The growth, however, has not obliterated the reality of our underdevelopment. First, government failure is still well pronounced across the continent. Other factors comprise the market failure, imposed and misleading development models, and the undercurrents of globalization. Colonialism and slavery wrought enormous havoc on the continent and laid the foundations for the languid pace of development experienced today. Yet they are no longer to blame. On average, most African countries have had political independence for over four decades. Yet most of them have failed to make progress substantially beyond where colonialists stopped.
A significant reason for this situation is that those who man the statecraft has consistently shown the lack of vision and strong leadership required to facilitate the continent’s rapid transition to prosperity. In place of those qualities are the attributes of self-rule, which trigger and prop up a range of other anomalies that have kept the continent as the least performing in the committee of nations. Partly because of this, the market witnesses consistent failure. Expected efficiencies in resource allocation fail to achieve optimum levels. The costs of transacting become inexorably high and makes African products less competitive. Less than optimal output capacity and the associated low-income equally become inevitable. But the trap gets more profound by the inability of the leaders to shake-off the many misleading development models inherited through its education by the former colonialists. These imposed models have perpetuated the unfavourable and unequal trade dealings between the continent and many of the industrialized countries. It has also held up Africa from firmly venturing into the production of highly technical goods. Eventually, the continent becomes the dumping ground of manufactures around the world. Worse still, the subterranean undercurrents of globalization strengthen this mental manipulation. Resting on the global economic Trinity of the World Bank, the International Monetary Fund and the World Trade Organization, the continent is in chains through international finance and debts, financial aid and forced economic adjustments programs.
We remain the architects of our destinies. Because if we accept leaders who are the Angels of self-rule and some of these misleading and mind-manipulating economic ideologies of foreign countries, we will remain an underdeveloped continent. Government failure in Africa is evident in the defective and inefficient resource allocation systems and the absence of safe and temperate environment for entrepreneurial progress. In the former, pronounced levels of self-rule among the political leadership severely affects the quality of fiscal programs for achieving efficient resource allocation. That partially affects the latter by ultimately triggering insecurity and the absence of entrepreneurship – supporting structures. There are at least three dynamically reinforcing factors perpetuating the failure of government in Africa. These are the mindsets of poverty and self-rule, the lack of entrepreneurially-minded leadership with the consequential absence of an entrepreneurial state and the resulting governance problems. Most African leaders still suffer from a severe poverty mindset. The constant fear of a possible relapse into poverty triggers unbridled kleptomania for publicly owned resources. These leaders undermine budget implementation and effectiveness to create opportunities for stealing public funds. Many African political officeholders suffer from this disease. It is this poverty mindset that underscores self-rule.
Government failure on the continent also significantly manifests in severe governance challenges. The list of the disorders is endless and comprise severe corruption, insecurity, hunger and poverty and illiteracy. While these are discoverable on other continents, they appear to be the most stringent in Africa because of the self-rule and low accountability of their political leadership. Worse still is the additional problem of the dysfunctional rule of law ceases to function. The continent’s political leadership has over the years consciously undermined the effectiveness of the rule of law for their selfish purposes. In the absence of the effective rule of law, there can be no meaningful development and entrepreneurial prosperity.
Governments make the most progress when they become reasonably entrepreneurial in the conduct of fiscal programs. The substructure for such an entrepreneurial mindset is the capacity to envision a flourishing country. In effect, therefore, the quality of budgetary plans and programs will depend on measurable, derivable net benefits, which should, in most instances, lead to greater output, higher income and employment. For the state to be an entrepreneur, it must possess adequate factor resources coordinating capacity, take risks with high prospects for robust net economic benefits and decisive intervention in market failure situations. An entrepreneurial state strongly reduces the costs of transacting to enable the flourishing of entrepreneurship. African leaders often lack that robust visioning quality and therefore cannot take and finance long-term risks that will orchestrate meaningful prosperity.
Pervasive defective pro-market policies and the inadequate provision of enterprise supporting public goods lead to high transaction costs. The high costs of transacting get worse by governance problems dotting the entire continent. The implication is an elevated level of inefficiency in resource allocation. For example, it is commonplace to find that there are no well cut out logistics infrastructure connecting areas with a surplus supply of several natural commodities to the demand side of the market that desperately needs them. It is also commonplace to find out that some areas that justifiably need some infrastructures lack it while it is in oversupply to those who do not need them. The latter example is a typical case of resource misallocation because of bad governance. Several policies of governments also deliberately work against the efficiencies of the market. Africa is a vast market. Facilitating effective trade and exchange among the countries within Africa with strongly erected barriers against non-African countries exporting those products where several countries within it have reasonable production capacity may be a step in the right direction under certain conditions. One advantage it will confer to the continent is the attraction of direct investment because non-African countries interested in exporting to the continent will have to produce within the continent, thus creating employment and technological opportunities.
Another major threat to Africa’s prosperity is the cocktail of misleading development models and ideologies that our leaders have swallowed hook lines and sinkers. These ideologies are so manipulative that they appear beneficial but are subterraneanly weakening the very foundations of Africa’s development. A few of them include the neo-colonial dependence model, the comparative advantage model, the import substitution model, the current climate change narrative, and the sustainable development goals [SDG]. The neo-colonial dependence model creates a dependency mindset on former colonial masters of some countries in Africa. Most countries in Africa that France colonized appear to be victims of this mind manipulation. The thinking is that the fastest development pathway is to maintain a constant recourse to former colonial masters for advice, trade, and financial dealings. The result is that the countries willingly submit themselves to postcolonial economic rape. Their leaders cease to use their initiatives in formulating plans and programs for their country’s advancements. In the comparative advantage model, the continent swallows the ideological pill that its trade strength lies in the export of primary commodities such as cocoa, unprocessed gold, unrefined crude oil and so on and should therefore not concern itself with the manufacturing and production of cars, aeroplanes, robots and so on. Unfortunately, even the determination of the prices of primary commodities at the international market is outside the control of African exporters. Much the same way developed countries who practically got their status through protectionism and import substitution teach African nations not to do the same.
There is no faster way for Africa to bubble up to an ‘industrially flourishing’ continent if it does not deploy substantial levels of protectionism in those areas where it desires to gain and sustain competitive advantages. The only way to go about it is to stand its ground and reject misleading advice that has hitherto presented itself as limiting constraints. The sustainability narrative also offers some subtle undermining of Africa’s potential for industrialization. Africa does not need to constrain its growth because of the so-called carbon emission. At present, it does not emit any significant level of carbon. Therefore, pressuring African political leaders to weave the policies of governments around pursuing a cleaner environment rather than the imperatives of growth and prosperity is distracting. Africa has a single focus on economic prosperity for its citizens, which consequently banishes poverty in its wake. Sustainability and a cleaner environment are excellent but secondary. That is why the SDGs one and two, which seem to focus on Africa, are misplaced. By considering poverty and hunger as pollution, the global community believes that the best for Africa is to have a substantial percentage of its population live above $1.25. However, even if 90% of Africans live 20% above $1.25, poverty will remain dominant. The SDGs should instead focus on reducing the costs of transacting and the promotion of the rule of law.
Globalization, although particularly good, is used to exploit Africa further. The developed countries of the world ride on the back of the global economic, institutional Trinity namely the World Bank, International Monetary Fund and the World Trade Organization and the ideology of comparative advantage to perpetuate unequal trade conditions of the continent. African countries that seek international finance face the stringent conditionalities of the International Monetary Fund. Those conditionalities essentially revolved around economic restructuring with the primary goal of breaking down trade barriers and hoisting the flag of comparative advantage. They encourage African countries seeking such support to improve on the value of their currencies through the promotion of trade in primary goods where they have a comparative advantage. They also advise them to relax trade barriers such that they eventually become dumping grounds for foreign-made goods. They conduct trade on unequal terms with African countries who helplessly face exploitation. In much the same way, the so-called global aid essentially reduces the leaders of countries receiving them to puppets and marionettes dancing to the tunes of the aid givers. Most aid-receiving countries re-subject themselves to the status of new colonies of the aid-giving countries.
Africa has all it takes to achieve prosperity. Its political leaders only need to pay more attention to those factors, threatening the realization of much-desired well-being. The first is elevating the level of accountability of those in government. Being accountable to a considerable extent, enhances the realization of performance expectations. It is even more efficacious when accountability and elevated levels of the rule of law are mutually in operation. A key benefit is the minimization of market failure and the upliftment of entrepreneurial prosperity. Landmines to avoid in this journey will, therefore, be the imposed and misleading development models forcefully pressured through the forces of globalization. Until the political leaders of African countries muster enough courage to reject some of these clogs to its development, we may remain where we are for many more decades to come.