The future is to follow China
Published 14 March 2005
Africa special: trade - Foreign-owned
companies operating in Africa and the rural poor are victims of the continent's
political elite. It's time to set the producers free, argues Moeletsi Mbeki.
When African and Asian colonies gained
independence in the 20th century, their new leaders faced two main challenges:
to consolidate quickly their political power while ensuring stability and, in
the longer term, to transform their countries' economies away from colonial-era
norms.
The new political elites aspired to develop
industrial economies like those of the departing colonial powers: economies
that could produce both raw materials and manufactured goods, using a local
labour force that was healthier, better educated and better clothed than
before.
At first, many expected Asia to remain mired
in conflict while Africa would quickly surpass it. But the opposite has
happened. Although much of Asia at first succumbed to bloody conflict,
stability soon followed in the south and east of that region, and countries
moved fast to address the economic challenge. In Africa, however, old conflicts
still rage and new ones have erupted. With few exceptions, Africa's political
elites have undermined their countries' economies.
Comparing Ghana and South Korea, for
instance, the World Bank notes that the two were at similar levels of
development in the 1960s. Yet by 1995, Korea's exports had increased 400-fold,
while Ghana's had increased fourfold. In the latter country, average real
earnings per head declined.
Thinkers on the left and right of the
political spectrum agree that the private sector drives modern economic
development. And Africa has one of the largest private sectors in the world. If
classical economic theory were right, Africa should be a hive of economic
activity and growth, with private individuals and households all trying to
maximize their security and comfort. But today the vast majority experiences
less of both and, in many instances, faces homelessness, violence and
starvation every day.
The problem is that the theory assumes
private individuals and firms are free to pursue their security and comfort
while owning and controlling the means to do this. It assumes that they are
free to exchange what they produce without hindrance and that where they can
save, they are free to keep those savings and plough them back into improved
techniques or other investments.
This is not the case for the private sector
in sub-Saharan Africa. It consists predominantly of subsidiaries of
foreign-owned companies and the rural poor. Neither of these groups is free to
operate in the market place because each is dominated politically by
non-producers who control the state. This is the weakness of the African
private sector, and it explains its inability to become an engine of economic
development. Africa's private sector lacks political power and is therefore not
free to maximize its objectives. Above all, it is not free to decide what
happens to its savings.
In short, the political elite uses its
control of the state to extract savings from the rural poor who, if they could,
would have invested those savings either in improving their skills or in other
productive economic activities. The elite diverts these savings towards its own
consumption, and to strengthen the state's repressive instruments. Much of what
Africa's elite consumes is imported. So state consumption does not create a
significant market for African producers. Instead, it is a major drain on
national savings that might have gone into productive investment.
This explains Africa's growing
impoverishment. The more the political elite consolidates its power, the
stronger its hold over the state, and therefore the more rural societies sink
into poverty and the more African economies regress.
Zimbabwe is a textbook case for the
correlation between falling living standards and the growing power of the
elite. In their struggle against the white minority regime, Zimbabwe's African
nationalists enlisted in particular the support of agricultural workers and the
rural poor, who make up most of the population. Although the government made
strenuous efforts to support the rural poor in the 1980s, the ensuing power
struggles, with all their bloodletting, caused the emerging political elite to
discard its wartime constituency and enrich itself - to the great detriment of
the national economy and the population at large.
Foreign companies have also tended to be at
the mercy of the political elite. European joint-stock companies have operated
in Africa since the dawn of the capitalist era. They started by financing and
operating the ships that transported slaves to the New World. With the
emergence of colonialism proper, these companies followed close on the heels of
the colonialists' conquering armies and established agricultural plantations,
mines, railways, harbors and new cities. Later they diversified into making
consumer goods for the burgeoning African market and processing raw materials.
But when the colonialists retreated from the
1950s onwards, these subsidiaries lost their key protector. They soon fell prey
to the whims of the new African political elites. The lucky ones were
nationalized and their owners compensated. The not-so-lucky ones were
"privatized".
Even the mighty western oil companies have
not escaped. Every now and then, they are compelled to make huge payments into
foreign private bank accounts held by the heads of state - and the leaders' families
and friends - of oil-producing countries. The US Senate recently uncovered
evidence that vast sums might have been paid by oil companies into the private
bank accounts in Washington, DC of the president of Equatorial Guinea.
The result of the onslaught against Africa's
private sector is predictable. In a recent report, the UN Industrial
Development Organization says that sub-Saharan Africa has de-industrialized
over the past three decades, thanks to a widening productivity gap between
agriculture and manufacturing and between manufacturing and the economy as a
whole. Africa also loses more than 20,000 graduates annually, who emigrate out
of the continent, according to the World Bank.
The New Partnership for Africa's Development
was set up to combat sub-Saharan Africa's decline. While it may address some of
the worst excesses of the political elite, it fails to tackle the fundamental
malaise - the enormous imbalance of power between that elite and the key
private sector producers. Until producers can control their own livelihoods and
savings, there will be no development.
Sub-Saharan Africa needs a new type of
democracy - one that will empower the region's private producers. First, the
rural poor must become the real owners of their primary asset, which is land.
This is the only way towards environmental improvement, as opposed to the
current trend of rampant deforestation and desertification. To do this,
freehold must be introduced and the so-called communal land-tenure system,
which in reality is state land ownership, must be abolished.
Second, peasant producers must gain direct
access to world markets without the political elite acting as the go-between
through state-owned corporations. Internationally traded cash crops - such as
coffee, tea, cotton, sugar and rubber - must be auctioned by the producers
themselves rather than being sold first to state-controlled marketing boards.
New financial institutions are needed that
are independent of the ruling elite, and which will address the financial needs
of the rural societies as well as those of small- and medium-scale producers.
These could be co-operatives, credit unions or savings banks. Besides providing
financial services, they would undertake all the different areas of technical
support that are not being provided by the political elite - the crop research,
extension services, livestock improvement, storage, transportation and
distribution that would help to make agriculture in sub-Saharan Africa more
productive.
This is where foreign donors could play a
more constructive role than at present, given their present efforts to sustain
the political elites and African states with budgetary support and the like.
Donors could support these independent institutions by providing the expertise
to manage them and could to some extent help shield them from predators.
What socio-economic system would these
changes bring about? Certainly not socialism. These changes would herald a
capitalist market economy that answers the needs of African producers rather
than the needs of colonialists and, more recently, those of the ruling elites,
who try to maintain the colonialist vision of Africa as a primary producer for
the industrialized world.
Sub-Saharan Africa should draw from the
agricultural reforms in China over the past 25 years or so. After all, changes
in the agricultural sector made it possible for China to embark on its current
unprecedented industrialization.
Moeletsi
Mbeki is chairman of Endemol South Africa, a TV production house, and director
of Comazar, which rehabilitates and grants concessions to railway networks in
Africa. He is also deputy chairman of the South African Institute of
International Affairs. A version of this article first appeared in Global Agenda 2005,
and was based on proceedings of the World Economic Forum in Davos