A frank statement on the African economy

–          Prof. Brando Okolo

This edition of the African Heritage magazine is dedicated to the African economy. The African economy is the most unfairly treated economy in the world. International economic laws are generally weighted against and not in favour of the African economy. Unfair trade practices by the developed countries ensures that weak economies residing in several parts of Africa remain isolated and starved of the capital needed to stimulate growth on any economic scale. The economic attractions of Africa namely oil, wild life – tourism, human resources and a variety of solid minerals are considered by foreign investors to be commodities for plunder and not for creating sustainable productivity at the local and national levels. It has been said that emerging economies such as those in China and India have eyes trained onto Africa for in Africa resides the resources required to drive their economies to the realm of steady growth. African economies need to be eager to and encouraged to partner with China, India and all the new developed economies. Africa is still willing to partner with the old developed economies even with the long history of plunder, betrayal and unfair associations. It has been argued that geo-political tensions in several parts of Africa have kept foreign investments away from the continent.  Investors are wise to keep their businesses distant from unsafe places although this may not always be the right approach to business. Investing in any business proposition is a risky affair. The measure of risk a business is exposed to in a politically-tense environment is quite similar to that in an insecurity-tense environment. The decision to take a business risk lies in the degree of assurance a business manager receives from contacts and allies. These contacts and allies are created through a variety of time and resource dependent associations. Africa has kept its markets and corridors to its wealth open for access and development for several years. Developed economies particularly in the “west” have taken time to exploit these opportunities. In return, investment capital, technical knowledge and industrial growth had been promised but barely realized. Africa has had very bad business friends. Friends that connive to keep competitive African products away from their local marketplaces. Friends that deny Africa of a sitting place at the global roundtables. Friends that keep their borders closed to African guests. Friends that have rules changed when it is time for Africa to move forward. Friends that Africa has been good at forgiving for years of abuse. It is such a shame that global attitude towards socio-economic progress in Africa is still one of “let’s tackle this later” when it is convenient. The amount of international deals, seminars, joint ventures and economic programs put forward over the past 35 years to help African economies grow is immense. The truth though is that the enthusiasm which accompanies most of these economic ideas and deals are not genuine. When foreign firms, governments and international financial institutions approach African nations or are approached by African nations for assistance to stimulate economic growth or bail-out from an economic crisis, exploitation is often lurking behind the scene. Results have shown over and over again that there is an imminency to failure associated with most of the economic stimulus packages set before African nations. Corruption by officials of the aid-receiving nations has often been blamed for failures. This is true and it is also true that while corrupt practices by officials of aid-receiving nations are systematically encouraged by officials of aid-donating financial bodies, there is corruption of an even more complex nature occurring in the boardrooms of the aid-donating bodies. The dynamics of economic aid-programs is very complex. The complexity stems from the fact that legal steps included in the contract-of-understanding must protect the donor from a possible lack of returns on the investment being made. The complexity also proceeds from the premise that difficult-to-understand contracts drafted by the donor body ensure that aid-recipients are trapped in a financial marshland. It is hard to believe that financial institutions that pledge to provide aid to desperate African economies on a humanitarian basis or fair lending rates scheme to exploit humanitarian crisis in a predatory manner.

Does Africa need foreign help in order to stimulate economic growth? Yes, it does, as a matter of fact quite urgently. Governments of developed and emerging economies may argue that their national companies are involved in various business activities in Africa. The question then is in which African countries and what kind of activities are their national companies engaged in? It is not sufficient to import raw materials from African countries; Africa also needs foreign firms to export their investment capital to Africa. The downstream activities of foreign investors need to play-out on African soil. Excavation and exportation of raw materials from Africa and having them processed outside Africa is a very unfair business arrangement. As long as the processing and marketing activities of raw materials occur outside Africa local economies in Africa will never experience the direct economic benefits of toiling on their land.

Africa however needs to open-up further its borders for investments. Excess investment capital are currently in the hands of new comers to global economic power such as China, Russia and India. It is important that lasting realistic alliances are developed with such nations. Africa also needs to prepare herself for the future. The future where only nations that have gone “green” and are respectful of environmental concerns will be progressive.

Political problems in Africa appear catastrophic because the popular media in the developed economies have shaped it so. Africa needs to use all media tools at its disposal to market the salient aspects of the continent. African leaders also need to get together for a frank talk on politics and the socio-economic instabilities that often originate from bad politicking. Whilst interfering in domestic issues of other nations is discouraged amongst African leaders, it is critical that colleagues whom clearly do not respect the wishes of their citizens are reprimanded. African leaders also need to form meaningful economic alliances amongst their nations. Nations that prove to be bad financial citizens need to be penalized. Africa also needs to formulate contractual policies that make it attractive for foreign investors to bring production capital to a business-safe continent. Contractual policies that penalize both local and foreign companies that err on the rules.

Recent economic indices indicate that there is a marked investment growth in Africa. This however is not entirely true as much of the investment is in labor costs on expatriates at African operational locations. Child mortality, hunger and poverty are still deep seated in African societies. Until clear reductions on the incidence of such socio-economic indicators are recorded it will be premature to tick Africa off as being on the positive side of the economic growth curve. The diagram inserted shows that Africa still lags behind on foreign investment flow.

Africa badly needs an educated population. Innovative business concepts are derived from an informed mind. When only a small fraction of African citizens have access to information, the effort put into executing a successful business idea can be huge.

There is no single solution to the problems which burden the African economy. A basic concept we Africans need to grasp is that good governance, legal institutions for a market economy and the will to succeed, are critical for economic growth in Africa.

Professor Brando Okolo, African Heritage Man of the year 2011 is a full Professor of Materials Science and Engineering at the German University in Cairo – Egypt: Article first published in African Heritage print Magazine 2008 edition



Comments are closed.