The case for the private sector in Africa
Some months back, I discussed what I felt were the reasons why African leaders found it particularly difficult to leave office when they should. Borrowing from the thesis of Africa’s foremost political economist, Claude Ake, I argued that it is because power is the established way to wealth in most of Africa and those who win state power can have all the wealth they want even without working and those who lose the struggle for state power cannot have security even in the wealth they have made even by hard work.
The only way this works is when the economy is under state control. And that explains why most African leaders desperately seek to control their economies upon coming to power. They seek to determine who gets what, when and how; who deserves to be helped to flourish and who must be smothered and crushed. That was the motivation for the policies of economic controls or what some scholars refer to as the ‘control regimes’ practised all around Africa. These basically include state control and regulation of trade, state distorting and manipulation of interest and exchange rates and state industrial regulation through creation of monopolies or oligopolies. These policies do not only reduce the rate at which economies could grow and distort key prices in the macro economy, but they are also economically very costly and could lead – and indeed led – to many state collapse in Africa.
But how do these leaders care? Despite succeeding regimes knowing of the disastrous consequences of these ‘control regimes’, most of them still choose to retain them for, as Robert H. Bates, a Harvard renowned political economist argues, the policies generate huge political benefits for African authoritarian regimes, provide elites with sources of income and furnished means for transforming even declining economies into political organisations, enabling politicians to recruit political dependents, willing to fight – if necessary – to keep them in power.
Like I argued on this page many months ago, in Nigeria particularly, this control regime, as against the popular belief that discovery of oil and the oil boom, was responsible for the gradual decline of the agricultural sector and the stoppage of cash crop exports. This can be seen from a careful study of the management and collapse of the commodity marketing boards.
Like I mentioned earlier, the ‘control regimes’ so dear to most African leaders is particularly destructive to African economies. Besides the terrible inefficiencies it engenders, it prevents the inflow of private capital to develop the economies and provide jobs even when it is clear that no African government has the resources to provide all the infrastructure, jobs and social needs of its society.
The sharp economic declines of the 1970s, 80s and 90s and the insistence of multilateral Western financial agencies on privatisation and a private sector led economy has resulted in the gradual weakening of state control in Africa. But some authoritarian and dictatorial regimes in Africa, such as Museveni’s in Uganda and some other smart leaders in East and Central Africa have been able to warm themselves to these multilateral institutions, allowing semblances of reforms but devising ingenious ways of maintaining tight control over their economies. In Southern and Western Africa, where some leaders genuinely implemented the structural adjustment programmes prescribed for them, the reforms unwittingly unleashed forces that led to the toppling of longstanding dictatorial regimes.
Nigeria, on its part, due to the oil boom in the 1970s – at a period when most African economies were a rapid decline – refused to join the trend and even went further to take control of most private enterprises and positioned itself as the sole economic player in the country. That was the period when a former president said Nigeria’s problem was not money but how to spend the money.
Being one of the staunchest proponents of state control of the “commanding heights of the economy”, Obasanjo attempted to continue with that trend on coming back to power in 1999. However, it soon dawned on him that Nigeria did not just have the resources to go on such grand ambitions. He was wise and flexible enough to liberalise the economy and his 8 year rule coincided with the blossoming of the private sector in Nigeria. While oil and gas exports accounted for more than 98 percent of export earnings and about 83% of government revenues in 1999, the oil and gas sector now accounts for just about 14 percent of Nigeria’s GDP. The private sector has clearly taken over and ensuring prosperity for Nigeria.
Enter Buhari in 2015 and he attempted to bring in the era of state control of the economy that is now clearly outdated and impracticable. Mr Buhari has never hidden his dislike for the private sector despite the marvellous job done by his campaign handlers to hide that fact during the campaigns. In August last year, Mr Buhari said matter-of-factly that he was averse to the inclusion of members of the private sector in his administration’s economic management team because such persons frequently steer government policy to suit their own narrow interests. He came to power therefore with a vengeance; to reverse what he may have likely considered as the mortgaging of Nigeria’s patrimony to private and selfish individuals by previous administration.
Fortuitously and very fortunately for the country, his plans are falling flat on his face because of the decline in the prices of oil and decline in federally distributable revenue. With bankrupt states unable to pay workers’ salaries not to talk of embarking on projects to better the lives of their people, with the federal government also borrowing to pay salaries and also admitting that it is unable to effectively implement recent budgets due to declining revenue, it is clear that the state does not have the resources to play the debilitating role Mr Buhari had intended it to play in the Nigerian economy. The government has also reduced subsidy on petrol and is fidgeting with floating the naira.
Although the government’s Economic Recovery and Growth Plan (ERGP) recognizes the role of the private sector, it is yet unclear whether Mr Buhari personally believes in it and 100 percent committed to its implementation.
Inevitably, the government will be forced to turn to the private sector to provide jobs for the millions of jobless Nigeria, to partner the state in building and maintaining the huge infrastructure needed for the economic takeoff of the country. Ultimately but gradually, as the government continues to grapple with declining revenues, the private sector will continue to assume greater importance in the life of the country until such a time when the country – and the continent becomes a fully liberalised economy. Then, public office will no longer hold the kind of attraction it currently holds for Africans. Then, Africans know they can be prosperous and lead quality and meaningful lives even without state power and resources.
CHRISTOPHER AKOR