Africa’s political elites have undermined their countries’ economies, says Moeletsi Mbeki. The region must give power to the private sector producers if it is ever to develop –

When African and Asian colonies gained independence last 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, which 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, for a large part of the region – southern and east Asia – stability soon followed, and the region 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 a similar level of development in the 1960s. Yet by 1995, Korea’s exports had increased 400-fold, compared with only four times for Ghana, where real earnings per capita also declined.

What went wrong in Africa?

Thinkers on the left and right of the political spectrum agree that the private sector is the driver of modern economic development. Yet Africa, with one of the largest private sectors in the world, is one of the least developed.

Classical economic theory suggests that we all seek greater security and comfort, which in turn should make us productive members of society who will accumulate more wealth to shore up that comfort. The logic of capitalism says that since everyone is competing for security and comfort, everyone will produce more, better and more cheaply, for fear of suffering the opposite fate.

However, if capitalism is right, Africa should be a hive of economic activity and growth, driven by the logic that private individuals and households are all trying to maximize that basic need. 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 that 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 predominantly consists of the rural poor and of subsidiaries of foreign-owned companies. Neither of these groups is free to operate in the marketplace because each is dominated politically by non-producers who control the state. This is the weakness of the African private sector that explains its inability to become an engine of economic development. Africa’s private sector lacks political power and is therefore not free to operate to maximize its objectives. Above all, it is not free to decide what happens to its savings.

The vicious circle of corruption

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 also 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 would otherwise 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 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 rural poor who make up the majority of the population. Although the government made strenuous efforts to support the rural poor in the 1980s, the ensuing political power struggles, with all their bloodletting, meant that the emerging political elite quickly discarded its wartime constituency and proceeded to enrich itself to the great detriment of the national economy and the population at large, as the graph shows.

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, harbours 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”.

Force for deindustrialization

Even the mighty western oil companies have not escaped the power of Africa’s political elite. Every now and then they are compelled to make huge payments to foreign private bank accounts of heads of state – and their families and friends – of oil producing countries. The US Senate recently uncovered evidence that vast sums might have been paid by oil companies to the private bank accounts of Equatorial Guinea’s head of state in Washington DC.

The result of the massive onslaught against Africa’s private sector is predictable. In a recent report, the UN Industrial Development Organization says that sub-Saharan Africa has deindustrialized over the past three decades, thanks to a widening productivity gap between agriculture and manufacturing and between manufacturing and economy-wide productivity.

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 (NEPAD) was set up to combat sub-Saharan Africa’s decline. While it may address some of the worse excesses of the political elite, it fails to tackle the fundamental malaise – the enormous power imbalance between the political elite and key private sector producers.

If the reason for the region’s underdevelopment is the powerlessness of producers and their inability to control their own livelihoods and savings, until this problem is solved, there will be no development.

However, if sub-Saharan Africa is to develop, it 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, 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, that 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. This means that 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.

Cooperatives needed

New financial institutions are needed which are independent of the ruling elite, and which will address the financial needs of the rural societies as well as of small and medium-scale producers. These could be cooperatives, credit unions or savings banks. Besides providing financial services they would undertake all the other technical services that are not being provided by the political elite, such as crop research, extension services, livestock improvement, storage, transportation, distribution and other services that would help to make agriculture in sub-Saharan Africa more productive.

This is where foreign donors could play a more constructive role than they do at present, given their current 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 to some extent help shield them from predators.

What socio-economic system would these changes bring about? Certainly not socialism. These changes would herald an African capitalist market economy that answers the needs of African producers rather than that of colonialists and, more recently, 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 process.

Moeletsi Mbeki
Moeletsi Mbeki is chairman of Endemol South Africa, a television production house, and is director of Comazar, a company that rehabilitates and grants concessions to railway networks in sub-Saharan Africa. He is deputy chairman of the South African Institute of International Affairs.