“Having come into contact with a civilization which has over-emphasized the freedom of the individual, we are in fact faced with one of the big problems of Africa in the modern world. Our problem is just this: how to get the benefits of European society, benefits that have been brought about by an organization based upon the individual, and yet retain African’s own structure of society in which the individual is a member of a kind of fellowship.” – Julius Nyerere

 

Markets are extraordinary things. They can drive innovation, wealth creation, poverty eradication and enable people to express themselves in new and creative ways. However, markets can also be incredibly destructive. The relentless drive for profits at its centre markets often lose sight of the welfare of communities, the environment, and most destructively concern for the wellbeing and prosperity of the future beyond the next quarter or dividend payment.

For the last 30 years, Africa has been subjected to the Washington consensus. Which can loosely be defined as a set of policy prescriptions for economic reform centred on market liberalisation. Africa was encouraged (sometimes forced) to adopt free-market principles and mechanisms in their economies, as the medicine for the economic malaise that plagued the continent at the time. Today after a global financial crisis, the unforeseen consequences of the free market success of globalisation, climate change, inequality and this year a global pandemic. It is clear that the inevitable logic of liberal markets cannot and should not hold.

The current crisis of capitalism is an opportunity, to break free from the unbridled capitalism of the Washington consensus and reshape it into an African capitalism. Which considers the unique structures of our economies and societies, as well as our aspirations. To create markets that enable opportunity, reshape our relationships with global markets and that have limits, on how much of our lives and communities should be monetised.

Africa and capitalism: a troubled history and lessons for the future

For the last several centuries Africa has had a troubled history with capitalism. Driven by western capitalisms relentless drive for profit, Africa has been exploited, a source of slaves, ivory, minerals, gold, oil, and other resources that are fed into the economies of more developed nations. This was the logic that drove the slave trade and imperialism, and it is no surprise that to this day Africa has been unable to integrate into or climb to the top of a capitalist system designed with us at the bottom. These structural issues remain to this day,

Beyond the structural issues, as Mwalimu Nyerere pointed out the modern conception of capitalism has its roots in western liberalism, which is highly individualistic. Communitarian values have deep roots in African societies. Where a responsibility to society as a whole, considerations of the welfare of future generations, the importance of the land and resources it holds are all held as guiding principles.

This does not mean to say the Africans are natural communists or socialists. We have a deep appreciation for the positive power of markets, hard work, individual expression, entrepreneurship and success. Thus, the question for policymakers becomes, not whether we should have markets in the first place. Rather what should those markets look like, how do we shape and regulate them to be the kind of markets we want, that will work for Africans? That magnify those things about markets that we value, but that do not cannibalise the community in the process.

Reshaping Markets

The first priority for African capitalism would be to reshape markets within Africa so that they promote and enable opportunity and competition, that enables African enterprise and livelihoods to thrive.

The first element of this is regulatory. Regulations are often a double-edged sword. First, they can be constrictive. A report by the Africa Development Bank looking at the regulatory environment that African businesses face found that “When asked about the major constraints to their operation and growth,   almost two-thirds of African businesses rate at least one regulatory  issue as a serious concern… Collectively, overall regulatory challenges are perceived as more severe than even infrastructure and access to finance.” African businesses especially small businesses face too many hurdles, thus, we need to redesign our regulatory systems. It is not about cutting regulations as ardent neoliberals have been advocating for years. It is about designing our regulations to fit our business context, which means:

• Redesigning our labour laws to fit our informal sectors, and gig economies as well as the changing nature of formal employment.
• SME specific regulatory regimes such as they have in Mauritius and Zimbabwe that make the regulatory regime easier for small businesses.
• Integrating SME’s and the informal sector into larger policy frameworks such as trade, climate change and industrial policy.

The second is tax. Most African states have complex hard to comply with tax laws, meaning most businesses and people avoid it (or bribe officials too) increasing the tax burden on those that do. Simplifying this is key to easing that burden and creating a fair playing field. More importantly, the tax regime for big corporations needs to be reworked, through lobbying and interest groups larger corporations have carved out a multitude of tax breaks and incentives for themselves. Getting rid of these not only brings in more revenue but stops the big boys gaming the system at the expense of the smaller players.

Restructuring our relationship with global capitalism.

If markets are ever to truly work for Africa, we must restructure our relationship to global capitalism. Which has been structured to extract profits from the continent. Doing this requires a series of actions:

1. Remaking the tax regime so that foreign corporations cannot minimise the taxes they pay on profits they extract from the continent so that Africa gets its fair share.
2. Increasing transparency, especially in the extractives sectors, over who owns what. Until we know who actually owns the companies that extract our resources, we will not be able to control them or eventually make sure that Africa has a share of that ownership.
3. Beneficial ownership laws, that give African’s a share in the ownership of corporations on African soil. Because if we do not own the capital you cannot benefit from capitalism.
4. Using our voice in global forums to make sure that the issues that disproportionately affect Africa such as climate change and tax evasion, are not only on the international agenda but at the centre of coalitions of nations willing to take action.

Redrawing the boundaries around markets

Public health, public education, public infrastructure, the legal system, the police, public health, national statistics, a clean environment, street lighting, etc. these are all goods that benefit the public. They help form the social contract between citizens and their governments. And for societies in Africa, they are critical, not just for improving livelihoods and cushioning people from poverty. They are important because, through our various communities ranging from family to neighbourhood groups, to church groups, we support each other. What Africa and the wider world have experienced is a simultaneous failure of both governments and markets. Governments have pulled back from public services mainly due to ideological imperatives such as market efficiency (in Africa often imposed as part of structural adjustment or public private partnerships ). And the markets which were supposed to step in, and be more efficient, do so by leaving people out.

The answer is not to let public services decline further or give in to market failures. Rather it is to draw clearer boundaries around where markets should end and where the public good begins. The Coronavirus pandemic has starkly shown up the holes in public health systems, many of which have been caused by years of underinvestment, and shifting of the burden to private healthcare, where the those who cannot pay are underserved.

We solve this by having a clear policy on the boundaries between markets and the public good. By protecting in our development policies and laws the community obligations that we have as the social contract between African governments and their citizens.

African Capitalism

In the era immediately after independence, newly minted African leaders such as Tom Mboya in Kenya with sessional Paper no. 10 and Julius Nyerere with Arusha declaration were laying out political-economic visions to guide their nations. Many of those visions fell to the wayside or failed, for any of a multitude of reasons. But, as the world is at an inflexion point Africa once again has an opportunity to forge a vision of capitalism that that does not eat us for breakfast and then throw us a few coins of aid money to make everyone else feel better. At the centre of that vision should be a rebalancing between markets and the public good. With global powers facing severe challenges at home, Africa has the space to define what its capitalism should look like. Facing mass youth unemployment, untapped potential, and the societal tension it brings Africa has no choice but to redefine its capitalism and right now is a perfect time.