|
|
|
|
|
Stolen Money Keeps Equatorial Guinea Underdeveloped
A key reason why African countries are poor. Leaders abusing their authority and helping themselves to their people's resources.
|
|
Another exciting feature, has been added to Unleash Africa . In the “Change Makers” section of each edition of Unleash Africa , Eron Henry will share views about the Unleashed Team’s agenda for change, insights into our campaign for change, his worldview, the worldview of important people in the African narrative and in the African diaspora, or the importance of African nations to people of African heritage in the diaspora. In Eron Henry, Unleashed Team’s agenda for change has found a tremendous advocate. Likewise, he envisions an African continent of nations who battle their way out from economic and political wilderness to assume a place among nations of the world and as equal partners in the global family of nations.
Hope for the Future
In many respects, Unleashed gives reasons for great optimism. Despite the many problems faced by Africa and Africans, there is reason to believe that a bright future lies ahead, if the right decisions and steps are made.
The data the book provides speaks for itself. With many examples to draw on, particularly those from East Asian economies, with its many natural resources, and with opportunities lurking globally, Africa can begin to rise. There are certainly enough resources available to feed, shelter and educate everyone in the world, including Africa, not just in the present, but for future generations as well.
Africans, like much of humanity, have made much progress over the past several hundred years despite wars, epidemics, natural disasters and the many vicissitudes of human life. People are, on the whole, living longer; there is less poverty than there were in the past; and greater educational opportunities abound.
The trend is set to continue because of the way technology is opening up opportunities to people everywhere. Technology can, and has, led to exponential growth, which means that change is taking place at an explosive pace. These changes are durable rather than fleeting and will help to lift the four billion who still live in poverty out of their parlous state, including the millions in Africa.
These technological changes will help to enhance freedom and wellbeing as people will have more power and resources in their own hands to challenge autocratic rule and despotic systems.
Resources that are now in the hands of the rich and well to do will eventually be available to virtually everyone everywhere in the same way computers and cell phones, which were once available only to the privileged few, are now widespread around the world, even among the poor. Therefore, while everyone will not be wealthy, most people will have the means to live longer, healthier and more comfortable lives.
Unleashed helps to show the way forward. If corruption is tackled and brought to heel, if proper governance is put in place, and if many of the prescriptions in Unleashed are implemented, then Africa will have a bright future.
|
|
Dependency Redux: Why Africa is Not Rising
(Part Three)
by Ian Taylor
For the last two months we have featured a segment of Dr. Ian Taylor's "Dependency Redux" article, originally published in the Review of African Political Economy. You can read Part One in our December 2015 issue and Part Two in our January 2016 issue.
The Growth Hymn
Current growth and governance models being pursued in SSA are based on facilitating market-based actors’ profit-making and capital accumulation. Environments that may develop production are largely ignored and the existing growth model is instead constructed on a simple-minded raising of national GDPs (Hamilton 2003). Governments ‘focus their attention heavily on the main tables, especially the gross domestic product (GDP), and the international agencies reinforce this bias’ (Kpedekpo and Arya 1981, 208). GDP growth is routinely used as the major benchmark against which ‘success’ is measured, despite Arthur Lewis’ warning back in 1955 that ‘[i]t is possible that output may be growing, and yet that the mass of the people may be becoming poorer’ (1955, 9).
This obsession on economic growth stems from developments within the dismal science. ‘From the 1960s on, GDP conquered the political scene and affirmed itself as the supreme indicator of modernity and progress. Everything else (e.g. environmental sustainability, social justice, poverty eradication) were sacrificed on the altar of economic growth’ (Fioramonti 2013, 51). This measurement of one indicator of the economy as being the yardstick to measure progress and enable pundits to pronounce on the spectacular trajectories of, for example, emerging markets or Africa, was bolstered by events in the early 1990s:
In 1992, the GNP [gross national product] was superseded by GDP … . Traditional GNP referred to all goods and services produced by the resident of a given country, regardless of whether the ‘income’ was generated within or outside its borders. This meant that, for instance, the earnings of multinational corporations were attributed to the country where the firm was owned and where the profits would eventually return. With the introduction of the gross ‘domestic’ product, this calculation changed completely. GDP is indeed territorially defined, which means that the income generated by foreign companies is ‘formally’ attributed to the country where it is generated, even though the profits may very well not remain there. This conceptual evolution … was by and large responsible for the economic boom of many developing nations. Yet, it is obvious that the gains it revealed were more than apparent than real. (Ibid., 41)
Given the capital-intensive nature of much investment in Africa by foreign corporations involved in extraction, the distortionary effect when reporting Africa's growth based on GDP rather than GNP is obvious. Yet it is exactly the GDP figures that are deployed to construct the ‘Africa Rising’ discourse.
Additionally, no thought is given to the long-term repercussions of how such growth rates have been realised. Extraction is, by definition, non-renewable and non-sustainable. In the current situation of dependent relations, Africa's wealth is being dug out of the ground at an alarming rate. This is celebrated as Africa's gain, even whilst ‘the continent is actually losing a net 6% of the gross national income each year, thanks to the Resource Curse writ large’ (Bond 2014, 237). ‘GDP calculates such exports as a solely positive process (a credit) without a corresponding debit on the books of a country's natural capital’ (Bond2011, 39), despite the fact that there is an actual ‘decline in “natural capital” that occurs because the minerals and petroleum are non-renewable and lost forever’ (Bond 2014, 237, emphasis in original).
The World Bank itself recommends that deducting the value of non-renewable resources through extraction gives a superior indicator of actual gains made through trade. The Bank first published cross-country estimates of what is called ‘genuine savings’ (GS) in 1997 and began including them in the World Development Indicators in 1999 (World Bank 1997). Mysteriously, the ‘Africa Rising’ proponents neglect to factor in such measurements.
The idea of GS traces its roots back to the work of economists such as Solow (1974) and Hartwick (1974), whose work sought to model a development path where social welfare did not deteriorate in economies based on the exploitation of non-renewable resources. GS are thus equal to Gross Savings (GDP minus consumption) minus the depreciation of produced capital, minus the net resource rental rate times the variation of the stock of exhaustible resources, minus the marginal cost of social pollution times plus investment in human capital (Hanley, Dupuy, and McLaughlin 2014, 20. The indicator measures the true rate of savings in an economy and is a measure of net investment in produced, natural and human capital, producing ‘a much broader indicator of sustainability by valuing changes in natural resources, environmental quality, and human capital, in addition to the traditional measure of changes in produced assets' (Bolt, Matete, and Clemens 2002, 35).
This has huge implications for the ‘Africa Rising’ story, because the majority of this ‘rising’ has been built on non-renewable extraction – and resource-rich countries are historically the poorest genuine savers (Atkinson and Hamilton 2003). In fact, setting aside Algeria and Guinea, for whom GS was just above zero for the period 1970–2001, every country with an average share of fuel and mineral exports in total exports of over 60% had a negative GS rate (Dietz, Neumayer, and de Soysa 2007, 35).
Obviously, GDP is not calculated making deductions for the depreciation of fabricated assets or for the depletion and degradation of natural resources. Thus a country can have very high GDP growth rates whilst pursuing an unsustainable exploitation of its finite natural resources. Persistently low or negative GS are indicators that a country's trajectory is untenable, whilst negative adjusted net saving rates in themselves demonstrate that the total wealth of a country is in decline (World Bank 2006, 66). Below is an illustration of both GDP growth rates and the GS rates, including particulate emission damage, for SSA. The year 2000 is the start date, for comparison with the latest available data (2012). Of interest is the contrast between the two different indicators, which shows the unsustainability of many African countries’ current growth models (Table 3):
The above scenario is all missed in standard GDP measurements and is certainly overlooked in the ‘Africa Rising’ account.
Conclusion
The current model of growth so far has been ineffective in engendering sustainable developmental outcomes and has made things worse vis-à-vis equality, the environment and Africa's dependent status within the global political economy. As Morten Jerven notes: ‘The most recent period of economic growth did not entail the large improvements in human development that were the case from 1950–1975 … Furthermore, the latest period of economic growth has not been associated with much industrial growth’ (Jerven 2010, 146). The Africa Progress Panel, which is habitually upbeat in its appraisals of Africa, concedes that:
After a decade of buoyant growth, almost half of Africans still live on less than $1.25 a day. Wealth disparities are increasingly visible. The current pattern of trickle-down growth is leaving too many people in poverty, too many children hungry and too many young people without jobs. Governments are failing to convert the rising tide of wealth into opportunities for their most marginalised citizens. Unequal access to health, education, water and sanitation is reinforcing wider inequalities. Smallholder agriculture has not been part of the growth surge, leaving rural populations trapped in poverty and vulnerability. (Africa Progress Panel 2012, 8)
Such a milieu stands in contrast to the wild claims about Africa's middle class, with assertions that it now amounts to over a third of Africa's population being trundled out to back up the ‘Africa Rising’ meme. It emerges that this figure was arrived at by calculating the number of people estimated (using dubious statistics) to have a per capita consumption between $2 and $20 (African Development Bank 2011). This criteria itself sets the bar at an incredibly low level, but of course then allows the African Development Bank to add its voice to the narrative that the dawn has arrived and that the corner has been turned etc. In fact, currently only 4% of Africans have an income in excess of $10 a day (Africa Progress Panel 2013, 17).
This perhaps explains why amongst normal African people there does not seem much optimism within Africa about its putative ‘rise’.2 A recent Afrobarometer survey revealed that, despite a decade of strong GDP growth and the Africa Rising narrative, there is ‘a wide gap in perceptions between ordinary Africans and the global economic community’, where ‘a majority (53%) rate the current condition of their national economy as “fairly” or “very bad”’ and only ‘one in three Africans (31%) think the condition of their national economies has improved in the past year, compared to 38% who say things have gotten worse.’ Notably, when it came to their own elites, Africans give their governments failing marks for economic management (56% say they are doing ‘fairly’ or ‘very badly’), improving the living standards of the poor (69% fairly/very badly), creating jobs (71% fairly/very badly), and narrowing income gaps (76% fairly/very badly). (Afrobarometer 2013, 2)
Consequently, ‘popular opinion is thus increasingly out of sync with the “Africa Rising” narrative that has been gaining traction among government officials and international investors’ (Hofmeyr 2013, 1).
It is clear that the idea of ‘Africa Rising’ has gone hand in hand with no serious structural change in the continent's economies; indeed, they are linked, with de-industrialisation, alongside the entrenchment of dependency on primary products (Table 4):
With the exception of a few individual countries, manufacturing is mostly in decline across SSA whilst the share of mining and utilities has hugely increased over the last few decades. Even within the manufacturing sector, resource-based manufacturing accounts for about 49% of total MVA in Africa (UNCTAD 2011, 15). Table 5 indicates the parlous state of manufacturing value added as a percentage of GDP in those SSA countries where data is known. As demonstrated, the majority of countries have fallen during the ostensible ‘Africa Rising’ period (Table 5):
This fact of manufacturing underdevelopment in Africa is particularly problematic as it is in low-technology manufacturing where labour-intensive job-creating opportunities are found. A look at the figures where data is available reveals that this sector of manufacturing is relatively small (to very small), as the key contributor to the MVA in Africa (Ibid., 27–28). In fact, ‘fewer than 10% of African workers are currently in manufacturing of any kind and only about 1% in modern companies with advanced technology’ (Africa Confidential 2014, 1).
In short, the much-vaunted recent economic growth in Africa, which is what the ‘Africa Rising’ narrative is fundamentally predicated upon, is based on trade in resources, not production. As Robert Bates notes, it ‘is [the] demand for the stuff underneath it – Africa's mineral and oil wealth – that is driving the economic growth behind all these “Africa Rising” narratives’ (Bates 2012). This is a crisis for Africa, as ‘production is the key to accumulation since the profits of all capital, even merchant capital that operates exclusively in the sphere of circulation, originate in the sphere of production’ (Kay 1975, 71). Yet it should be noted that the surpluses that could lead to industrial investments are not forthcoming. ‘The economic landscape then is weak industrial development, chronic balance of payment problems all under the management of a neocolonial comprador class’ (Amaizo 2012, 127).
It hardly needs restating that a development project which has not broken with the very clear and continuous pattern in terms of commodity structures, consistent with Africa's Ricardian advantage, is short-sighted in the extreme. This is becoming ever clearer with all commodities predicted by the World Bank to fall in value in the next 10 years. It is now predicted that the fall in oil prices alone will translate into a decline in annual exports equivalent to 1.3% of GDP for Nigeria, 3.5% of GDP for Gabon, 4.2% of GDP for Angola and 7% of GDP for Congo-Brazzaville (Standard Chartered Bank 2014). Whither ‘Africa Rising’ in this scenario? (Table 6).
When GDP growth was good, the economic advantages accrued to the accumulation centres outside of Africa.3 The result was that the role of Africa as a source of cheap raw materials, exported to feed external economies and/or processed up the value chain into finished products, was reified. This has been a habitual problem for Africa and the ‘classical dependency-periphery theory that still holds today for a balkanised and economically exploited Africa must be confronted head-on’ (Amin 2014a, 36). Indeed, the insights that radical political economy presents are remarkably prescient in discussing the entire ‘Africa Rising’ narrative. This is an unfashionable but vital point to make.
Economic development typically denotes sustainable economic growth along with important structural changes in production patterns and wide-ranging improvements in living standards (Whitfield 2012, 241).
Emergence is not measured by a rising rate of GDP growth (or exports) … nor the fact that the society in question has obtained a higher level of GDP per capita, as defined by the World Bank, aid institutions controlled by Western powers, and conventional economists. (Amin 2014b, 139)
Indeed, Tamás Szentes’ (1971, 163) objection to such quantitative indices is apposite here. Underdevelopment is a much too multifaceted phenomenon, irreducible to showy statistics about GDP growth or mobile phone usage. Instead: there are two aspects, two sides of underdevelopment: the basically external, international aspect, which, from the historical point of view of the emergence of the present state, is the primary aspect; and the internal aspect, which from the point of view of future development, is increasingly important.
The African Union and the UN Economic Commission for Africa itself recommend industrialisation as the central strategy for Africa to address poverty, inequality and unemployment (Economic Commission for Africa 2013). Yet, as Julius Nyerere commented over 30 years ago:
We [Africa] are all, in relation to the developed world, dependent – not interdependent – nations. Each of our economies has developed as a bi-product and a subsidiary of development in the industrialised North, and is externally oriented. We are not the prime movers of our own destiny. (Nyerere 1979, 58)
A redefinition of growth to include structural transformation is needed à la Simon Kuznets’ (1973) definition of a country's economic growth being a long-term rise in capacity to supply increasingly diverse economic goods to its population, this growing capacity based on advancing technology and the institutional and ideological adjustments that it demands. Such a definition puts to shame the crass celebration of Africa's recent growth rates as symbolising some sort of watershed event for the continent. Indeed, the ‘headline figures circulated by the IFIs [International Financial Institutions] and apologists for global capitalism obscure failures around structural transformation of African economies’ (Bush 2013, 63). It still remains that ‘[t]he root dilemma of Africa's economic development has been the asymmetry between the role of the continent in the world and the degree to which that world … has penetrated Africa’ (Austen 1987, 271).
Of course, external conditions are not propitious to true development – the North makes sure of that, pushing multiple agreements criminalising industrial policy instruments used previously by the core to nurture domestic capacities (Cooper2014).4 This is but a modern version of Friedrich List's ‘kicking away the ladder’ (List 1885). In such circumstances, a ‘rise’ based on an intensification of resource extraction whilst dependency deepens, inequality increases and de-industrialisation continues apace, demolishes the ‘Africa Rising’ narrative. In this context, the story of ‘Africa Rising’ is just that, a story, where growth-for-growth's sake replaces development and the agenda of industrialisation and moving Africa up the global production chain has been discarded. Instead, Africa's current ‘comparative advantage’ as a primary commodity exporter is reinforced, even whilst such dynamics reproduce underdevelopment. This is celebrated as ‘progress’.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. The eight countries are: Ghana, Uganda, Senegal, Niger, Malawi, Benin, Mozambique, and São Tomé and Príncipe.
2. Despite a flurry of reports talking about Africa being ‘the new Mecca for luxury brands’ (African Business, September 19, 2013) and how the number of millionaires is set to rise on the continent, one in three people living in SSA are undernourished, 589 million people live without electricity, more than 50% of Africans have a water-related illness such as cholera, 62% of people living in urban areas live in slum conditions and women in SSA are over 230 times more likely to die during childbirth or pregnancy than women in North America (see United Nations 2014). Meanwhile, the percentage of people living on less than $2 a day in SSA is around 70% (in 1981 it was 72.2% – in other words, in over 30 years, poverty reduction in SSA has been negligible). The absolute number of people on $2 a day or less has doubled (see World Bank 2013c, 542). So much for ‘Africa Rising'.
3. This is apart from the $52.9 billion – roughly 5.5% of GDP – that SSA loses in illicit financial outflows each year (Global Financial Integrity 2014). See also Boyce and Ndikumana (2012).
4. The classic example being the World Trade Organization, but there are plenty more.
|
|
|
|
Ian Taylor is Professor in International Relations and African Political Economy at St Andrews and also Chair Professor in the School of International Studies, Renmin University of China - the highest rank a non-Chinese academic can hold at a Chinese university. He is also Professor Extraordinary in Political Science at the University of Stellenbosch, South Africa, an Honorary Professor at the Institute of African Studies, China, a Visiting Scholar at Mbarara University of Science and Technology, Uganda and a Professor in the Brazilian Centre of African Studies, Federal University of Rio Grande do Sul, Porto Alegre, Brazil.
Focusing largely on sub-Saharan Africa (SSA) he has authored 8 academic books, edited another 11 and has published over 70 peer-reviewed scholarly articles, over 70 chapters in books and numerous working papers, reports, op-eds, review articles, encyclopedia entries, book reviews etc. He has been invited to present his research in 46 countries on 6 continents. He has been described as "one of the most authoritative academics on SSA IR" (Cambridge Review of International Affairs, vol. 25, no 1, 2012, p. 171).
|
|
|
African Countries Do Not Have the Resources to be Consumer Economies
by John I. Akhile Sr.
The reason African countries are struggling to prosper is that they have anchored their fortunes to a very poor strategic ship. In virtually every African country industrialization is focused on the domestic market which is poor and for many countries, relatively small. The concept is founded on a foreign-imposed mandate that African countries are destined to be raw materials exporters. It was the linchpin of post-colonial strategy of former colonial masters of carrying on “empire by other means.”
Most people would agree that it is not rational for people in the poorest countries to adopt and maintain an economic policy that puts their societies in the unenviable position of supporting industrial jobs in richer countries. But that is exactly what African countries have done since independence. South Africa is the outlier in this case because of the history of western partnership with South Africa’s economy and businesses, a lot of which were started by Europeans. African economies have been built as consumer economies. Some countries depend on imports for more than 80% of the consumer and industrial goods they consume. The way in which they pay for the consumption is to export raw materials. The list is long. Africans export agricultural products, energy, precious metals, and base metals virtually all in raw material form to be converted to finished goods in richer countries.
African countries, in turn, import most of the resultant products from the raw materials they exported back for consumption in their countries. Creating an economic model that is import-dependent and has remained the major characteristic of both economic activity and development strategy of the countries post-independence. The process was created during the colonial era and for the colonizers, the rationale for it was very sound. The foundation of the rationale was established by chartered companies and flourished in an era of the slave and triangular trade. During which “trinkets” (a euphemism for non-essential goods) went to African countries, slaves went to the new world’s plantations and raw materials from the plantations went to European factories. After the abolition of the slave trade and the loss to the United Kingdom of the United States the source of raw materials to feed European factories went, if you will, global. In retrospect, the arrangement has been cast as exploitative but in contemporaneous times, was quite reasonable.
Fig 1. The Triangular Trade of Chartered Companies. Source. Christopher friede, Haiku Deck
A Wrong Turn for Africans and a Correct Turn for Former Colonizers
After independence, former colonial governments recognized the gravity of the potential loss of sources of raw materials at very cheap prices but also the underlying benefits of losing the colonies but maintaining control over the affairs of resultant independent countries. Simultaneously as the countries were gaining independence the concept of Import-Substitution Industrialization (ISI) was being offered as the optimum model of development for poor countries. However, it was also well known that the strategy lacked any evidence of prior success. In other words no country in the history of the world had traversed the ISI path to development and prosperity up to that point or since. For former colonizers, Import-Substitution Industrialization evolved into and codified the underlying strategy of maintaining control over their former colonies through the concept of empire by other means. In the real-politic of bread and butter issues and its impact on the political calculus of people who are responsible for delivering said bread and butter benefits to their (frequently dictatorial) electorate, the fundamental rationale for aspiring to maintain empire by other means is also understandable.
Import-Substitution started to fail and become indefensible in South America where it was first put in action in the 1970s and virtually everywhere in the 1980s. “Import Substituting Industrialization (ISI) is seen as having used tariff barriers and controls to generate an extremely inefficient industry, suffering under a weight of state bureaucracy, with inappropriate direct state participation. Its excessive import needs, for all its import-substituting origin, are directly related to the generation of the debt crisis”[1] ISI was supposed to save hard currency reserves of countries by curtailing import of finished goods. Instead what countries found was that the lack of intermediate industries meant companies created under the import-substitution program had to import pre-assembled products as the raw materials for their production process. It did not relieve the pressure on hard currency resources. It merely changed the type of imports and did not in fact help to conserve the hemorrhaging of hard currency reserves to pay for imports. As for the countries, they had additional challenges on top of supplying hard currency for the companies to import pre-assembled and semi-processed raw materials.
Repatriation of Profits and Inter-Company Transfers
Most of the ISI companies have foreign ownership and are compelled by their business covenants (agreements), not by choice, to repatriate profits as well as pay for inter-company transfers in hard currency. It creates demand for hard currency which, in turn, exerts additional pressure on the nation’s hard currency resources. It is as natural as day follows night and vice versa. Unfortunately, many African governments have acted like the concept of repatriation of profits and payment for inter-company transfers, which they put in place by their own policies, is Pig Latin. It is a conundrum illustrated by a quote from a Portuguese manager of a company operating in Angola. “Foreign exchange injections are now limited to $113m per week. According to government strictures, foreign currencies are to be used exclusively to facilitate priority transactions, mostly in the petroleum industry and to secure imports of some basic consumption goods. Foreign investors outside these priority sectors are finding it increasingly cumbersome to repatriate earnings. ‘It often takes months for us to receive a transfer, and that is [only] when the transfer request goes through,’ says Luís Patrício, CFO of Portuguese construction and engineering group Somague.”[2]
“Something must be done.” Paul Kagame[3]
African countries can and should get about the business of making changes to engender economic emancipation of their societies for the present and the future generations of their cultures. The main challenge to overcome is how to turn the focus of development from an inward oriented process that depends on the local market to an outward oriented process that thrives on a world market that has more affluent consumers. Founding Head of State of modern South Korea said that the rationale for export oriented strategy of South Korea came about because their local market (about 27.6 million at the time[4]) was too small and too poor to depend on for the prosperity of the country. “The basic strategy of seeking industrialization based on exports was not only daring but also relevant. The country’s cycle of poverty and want, for example, could not possibly be broken by an industrialization policy aimed at poor domestic markets. For a country like Korea, unendowed by nature and saddled with miniscule markets, only an external-oriented development strategy, making full use of the abundant human resources but aimed at exports, appeared relevant” [5] To varying degrees Park Chung Hee’s statement is a truism that applies to all African countries. It is worth noting that an industrialization strategy that is focused on poor domestic markets does not have a precedent of creating prosperity for any nation in the history of the world.
From Poverty to Prosperity
Transformation of every African country is feasible and executable. It requires prudent policies, responsible governance and committed leadership. Of all three the most crucial is committed (unselfish) leadership. Everything that is required to achieve prosperity in every African country depends on committed leaders. With committed leadership everything that is required is acquirable and achievable.
Committed Leadership/Competent Governance: Committed leaders will concentrate on improving the affairs of their people instead of self-enrichment or perpetuating their stay in power. Committed leaders will seek out and find every opportunity to improve their people and leave no rock unturned in the search. Committed leaders will seek out the best counsel no matter the source, including potential rivals, in other to make the best decisions for the welfare of country and people. Committed leaders will constantly seek to grow and improve by learning from examples of other good leaders and from the best-practices and historical precedents relevant to their nation and people.
Education: Committed leaders recognize that their greatest assets are their people. The way to recognize this is to begin a commitment to educating and inspiring their people. Using community centers governments can teach their people about the virtues of unity, citizenship and opportunity. They can teach them about how entrepreneurship, how to start businesses, banking, responsibilities of citizenship, monitoring corruption in their communities, etc.
Reverse bad strategies: In the beginning of the discussion, it was postulated that the decisions made by Chartered Companies to exploit the Triangular Trade for the benefit of its shareholders was reasonable and understandable. That the decisions made by trading companies to export raw materials from African countries and import finished goods for distribution in African countries was reasonable, maybe even expected. That the decisions made by former colonial governments to support a strategy of empire by other means is reasonable and expected due to the fiduciary responsibility to their shareholders—the citizens who are the voters and by extrapolation the shareholders of the country. The totality of evidentiary manifestation of unreasonableness is traceable only to African leaders persisting in the preservation of economic models embodying the vestiges of colonialism and irrelevant to the goal of prosperity for their nations.
Fig 2. Manufactured and Processed Goods Exports is the Major driver of Economic growth in Asia as it was for Western Nations. Source. IMF
Earn more through exports: African countries need to earn more hard currency. The only expandable revenue accordion is through export of manufactured and or processed goods. It can be achieved through converting the raw materials they are exporting into finished or semi-finished goods for export; using cheap labor to attract companies to manufacture and or process for export; and through export-oriented industrialization using a the Asian stair-climber model starting with labor-intensive goods.
Fig 3. Export-oriented industrial Strategy increased its hard currency income. Source Pearson Education 2003.
Corruption: African countries must kill corruption or risk corruption killing their society instead.
Use every tool: Every tool needed to engineer trade and development is available and has been tried somewhere. In most cases, ideas can be implemented wholesale or modified to suit the environment. African leaders should not shy away from trying an idea because it “cannot work in their country.” If a great idea has worked in other places, then the challenge is not the idea but rather removing the impediments to its success in the local environment.
Conclusion
Paul Kagame is proof positive that African countries can excel. All the ingredients are in place and the money is available for turning African countries into the primary engine for global growth in the 21st century. The issue is not what is available or whether there is potential. The issue is when will committed African leaders emerge? In the context of prosperity for African countries, committed leaders is the egg in the debate of which preceded the other in the chicken and egg debate.
[1] Rosemary Thorpe, Journal of Latin America Studies, Volume 24, Supplement, S1, March 1992, Pg. 181-195, Cambridge University Press, 1992.
[2] http://www.thisisafricaonline.com/News/Angola-s-dollar-shortage-deepens
[3] https://www.youtube.com/watch?v=bZd13b9sKjI
[4] Source 1956-1989: "Korea annual", vol. 32 (1996); and for the years 1990-2001: "Korea statistical yearbook".
[5] Park Chung Hee, Korea Reborn, A Model for Development, Prentiss Hall, 1979.
|
|
|
John I. Akhile Sr. is the author of two books: Compensatory Trade Strategy: How to Fund Import-Export Trade and Industrial Projects When Hard Currency is in Short Supply and now Unleashed: A New Paradigm of African Trade with the World. He is also the President of African Trade Group LLC., a U.S. based trading company.
|
|
|
Developing Entrepreneurship and Export Prowess
Developing a prosperous society is a function of vision. Leaders without vision lead people astray. Lee Kuan Yew, the late maestro of Singapore’s transcendent ascendancy to first world nation status was a consummate visionary. He saw what he wanted his country to be and worked night and day to achieve it and did. Singapore had a per-capita income of $450.00 in 1963. It is $78,000 now and they boast the third highest number of millionaires per capita in the world and are number nine in the world in the number of millionaires with 142,000. One out of every thirty-six people in Singapore is a millionaire.[1] Very few examples of miraculous national economic transformation in world history can compare, except perhaps, that of another great visionary, the late president Park Chung Hee and his transformation of South Korea.
Fig 1. List of Countries with the highest number of dollar Millionaires, Source Statista.com
Park Chung Hee inherited a country with a per capita income of $87.00 per year in 1961. Per capita income in South Korea is nearly $40,000 today, in a country of almost 50 million people. They did it by executing a proven method and process enunciated under an unprecedented conceptual economic philosophy that he described as “guided capitalism.” At the core it was a public-private partnership not unlike the new-fangled craze in infrastructure and other high ticket development projects in this era. It was developed by Western countries in the medieval era and perfected by Asian nations in the modern era. Western monarchs used their power and the resources that came with it to invest in business ventures and inspired their subjects to take life-altering and threatening risks to travel to unknown places in search of lucre. It created the the age of adventure, discovery and chartered companies. The Asians did it by inspiring their citizens to create enterprises that manufacture and process goods for export to richer countries. Like European monarchs, they created a platform of support through low interest and subsidized loans, favorable share of economic resources, export-friendly exchange rate policies and diplomatic initiatives.
The Power of Entrepreneurship
Entrepreneurs are a force of nature. As the illustration about the top global business brands, all of which were created by entrepreneurs demonstrate. [2] [3] Entrepreneurs are the engines that create the enterprises that create the jobs. British entrepreneurs created the chartered companies that created the trade and manufacturing industries that gave us the first industrial revolution that gave us the age of industries and the modern world. John D. Rockefeller created Standard oil Trust in an effort to regularize the refining of crude oil into kerosene before the advent of automobiles and gasoline. His company, the world’s first integrated oil company, grew so big that Trust-busting President of the United States, Theodore Roosevelt, decided to break it up. From the break up came several companies that have dominated the exploration, production, refining and distribution of oil for nearly 100 years and still exist, albeit, some within newer organizations today. The most prominent of which is ExxonMobil (a merger of two off-springs of the Standard Oil Trust), one of the world’s largest companies but also included two other companies, Mobil (before the merger with Exxon) and Chevron, among the seven largest integrated oil companies in the world, formerly referred to as the seven sisters of oil.
The size of Standard oil is reflected in the net revenues and dividends to shareholders and shows that at the turn of the 20th century, Standard was a multi-billion dollar company. “From 1882 to 1906, Standard paid out $548,436,000 in dividends at 65.4 percent payout ratio. The total net earnings from 1882 to 1906 amounted to $838,783,800, exceeding the dividends by $290,347,800, which was used for plant expansions.”[4] John D. Rockefeller epitomized the self-made entrepreneur. He was raised under very curious circumstances, characterized by an absent father, a mostly single mother and very little means. He lacked pure formal education. Although he attended a professional school, he did not finish high school and did not attended university. Because of his impoverished family background he also had no wealthy contacts. Despite these handicaps, he built one of the world’s greatest business enterprises. It continues to create jobs, 145 years after its founding and 78 years after his death.
Fig 2. Top Global Brands created by entrepreneurs.Source. CNNiReport
Developing Entrepreneurship in African countries
Every African country is able to embark on a journey of; discovery, development and to disconnect from hopeless poverty. It is a journey that will enlighten, acculturate, inspire and empower the citizens of the country to do and be more. It starts with educating the populace on the virtues of entrepreneurship but also the tangential elements of citizenry. The process should teach relatively mundane but crucial skills in how to start and manage a business; how to raise capital; how to developing a banking culture and most important, how to evaluate supply-chain opportunities in every arena. The format should be a mixture of small seminars, large conferences and specialized instruction in one-one settings. Recommended venue is a mix-use cultural center facility.
To support the process, it would be necessary for countries to do a top down review of their civil service delivery system in order to ensure that starting a business is one of the simplest activities for citizens. It should be a one-stop environment close to all population centers that requires minimal the travel distance for citizens. The banking system has to be an integral part of an initiative that nurtures entrepreneurship. Banks should be incentivized and compelled to support the effort by lending to the areas of priority to the country. Traditional business models of most banks were developed around support of import trade. It is a major stumbling block that was inherited from the colonial era and has to change. In South Korea, Park Chung Hee’s government nationalized the banks. It was a temporary but necessary step at the time. Today, Korean Development Bank Financial Group has only three banking companies, Industrial Bank of Korea, Export-Import (Exim) Bank of Korea and Korea Development Bank. South Korea is a private banking nation notwithstanding the nationalization of banks in the 1960s. It may be a necessary, albeit unpalatable step for many, though not all African countries. In other to transform African countries from consumers to producers, the financial sector must dance in lockstep with the public sector.
Promoting Export Industrialization
African countries can increase their income by selling more goods to the world. It is not a novel idea. Only to the false-prophets that insist that African people are not capable of exporting. Exporting is usually taught to people because very few people possess the innate awareness and skill necessary to sell to people of another country and culture. With proper instruction, African business will become adept at exporting and the world will begin to see many made in Zimbabwe, made in Kenya, made in Cote D’ Ivoire, made in Nigeria, made in Ethiopia etc., brands in markets throughout the world.
Leaders should recruit companies to carry the torch for export industrialization and build a culture of exporting as a path to business success and prosperity. It has worked for many organizations in Asia, including the Shogo Shoshas of Japan, Chaebol of South Korea and Guanxi Qiye of Taiwan. The conglomerate companies represented in these groups are not the only success stories of the companies in their countries. The multiplier effect of their success has lifted the economic boat of their countries and enabled many enterprises to also follow in their footsteps or grow as offshoot of the multiple supply chains that sustain the companies. However, their biggest contribution is the number of direct and indirect jobs linked to their activity. Samsung is an example of how one successful export oriented company can have a great effect on a nation’s economy.[5] Samsung was started by Lee Byung-Chull, one of the private instigators of South Korea’s transition to export, flourished under Park Chung Hee’s export oriented industrialization strategy. Today, the company’s 80 plus divisions generate more than $300 billion in sales and accounts for about ¼ of South Korea’s GDP. Samsung Electronics, the electronics division of Samsung Group, employed more than 275,000 people.[6] Samsung Group and affiliates employ about half a million people. Not bad for a company that got its start as a rice importer.
South Korea’s road to prosperity started with the decision to switch economic strategy from import substitution (i.e. a consumer-based model) to export industrialization (a production-based model). The beginning was a humble affair. The quote from the South Korean man whose plan created it and was directly responsible for managing it is instructive. “With limited finance, banking. Foreign exchange and foreign investments, I believed South Korea had to efficiently select and promote industries appropriate to Korea’s conditions and could yield results promptly, as a quick and sure way to achieve export-led industrialization. Once this was accomplished it would lead to the promotion of other industries. By July, 1965, 13 items were selected for export promotion that were considered to be superior, in terms of the effect on international division of labor, the balance of payments, and unemployment, as well as, having spillover effects on other industries. The 13 items were silk, cotton, china, rubber goods, woolen goods, plywood, clothing, leatherwear, handicraft, miscellaneous goods, radio and electronic devices, fish and shellfish, and canned button mushrooms. For each of these industries a deputy director was tasked with providing financial and technical assistance.” [7] In 1964, South Korea’s exports amounted to $120 million USD. In 2014, South Korea exported $512 billion dollars in goods and services, making it the 7th most successful exporting nation in the world. [8] Samsung Group’s affiliate companies accounts about a fifth of South Korea’s exports.
Conclusion
African countries have much to gain by developing indigenous entrepreneurs because the current status-quo of renting a private sector is unfeasible for economic emancipation. Export of industrial goods will amplify the revenues of African countries and create jobs. It is a no-brainer for African leaders.
[1] http://www.insidermonkey.com/blog/11-cities-with-the-most-millionaires-per-capita-359670/
[2] http://ireport.cnn.com/docs/DOC-1279487
[3] http://ireport.cnn.com/docs/DOC-1279488
[4] https://en.wikipedia.org/wiki/Standard_Oil
[5] http://www.samsung.com/us/aboutsamsung/samsung_group/affiliated_companies/
[6] http://www.cnet.com/news/the-chaebols-samsung-and-lgs-50-year-star-wars/
[7] Kim Chongy-um, From Despair to Hope, Economic Policy Making in Korea 1945 to 1979
[8] https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html
|
|
Figo Leather Designs
 Figo Leather Designs is an independent South African leather goods manufacturer based in Plettenberg Bay, supplying hand crafted leather goods. All women have a handbag. Its existence is vital, seen by many as the mobile extension of the female body, a familiar house of our needs and wants, portable living spaces and our trusted friends.
 Figo started in 2000 out of a love for the craft and passion for creativity. Since then it has continued to grow and added a wide range to the collection over the past 10 years.We specialize in the manufacturing of beautifully fashioned handbags, wallets, purses, belts and accessories all individually crafted by hand, using the very best South African leather such as ostrich, crocodile, fish skin and bovine.
The collection features classic and flamboyant designs in the warm colors of the African Continent.
Figo products are truly hand crafted and our designers sketch the ideas, cut the patterns, source the leather from tanneries with good environmental practice and construct the products in our own studio. All our handbags are fitted with suede leather lining.
Within each product you can feel the attention required to create it – a transformation from design to creation.
 Leather is alluring, durable and most attractive. At Figo our collection can be measured against all that leather is known for, sturdiness, strength, fashionable, worthy, valuable and long lasting.
This information is from the Figo Leather Designs homepage. You can visit their site here to learn more and to look through their product line.
|
|
|
|
|
Next month we will have be featuring Bethlehem Tilahun Alemu, founder and CEO of SoleRebels Footwear. Alemu has previously been named by Forbes as one of the world's most powerful women, and CNN listed her as one of the top twelve women entrepreneurs of the century.
|
|
|
Our Mandate
To deliver Africa to the world and the world to Africa.
Our main focus is on African trade. We specialize in helping clients in African countries to develop industrial projects. We will broker commodities and manufactured goods to and from the global market to African countries. In the area of industrial exports, we will help our clients to develop export oriented industries and market the goods produced in hard currency markets.
Our Vision
Our goal is to be a key component of the transition of African countries from raw materials exports to industrial goods export. In addition to contributing to the rise of export industries in every African country, AFRICAN TRADE GROUP aspires to become the premier company in the trading of commodities and manufactured goods of African origin.
|
|
|
|
|
|
|
