Help or trade?

A brother 's advice

Moeletsi MbekiMoeletsi Mbeki On Independence, African and Asian colonies faced two challenges, namely creating domestic political stability and transforming their economies from the production of raw materials to industrial production. Most of Asia achieved this but Africa did not. In sub- Saharan Africa average per capita income is now lower than it was at the end of the 1960s. Competition for economic resources exacerbated ethnic and religious tensions, which had been partly created by the arbitrary drawing of boundaries by the European colonial powers. As a result, most African wars in the past 50 years have been internal ones. Economic growth depends on a strong private sector but African entrepreneurs are prevented from creating wealth by the political élites that control the state. These élites use state controlled marketing boards and taxation to divert agricultural savings, as well as the vast amounts borrowed and given by developed countries, into their own bank accounts and to strengthen their repressive states.

Peasants need property rights and direct access to world markets. Private individuals seek wealth and this enables them to produce more and to exchange what they produce with others. To do this they must generate savings and re-invest. Most Africans live and work on small farms. In Ethiopia for example, by law all land is owned by the state. Farmers have no incentive to improve productivity. They cannot use land as collateral to raise credit and SenegalSenegalare taxed so heavily that they rarely have a surplus to invest. Between 1967-1980 there was substantial growth in ten African countries. Much of this was sustained by domestic savings which grew to over 20% by 1980.

When African states became independent, foreign companies lost their colonial protectors. Some companies were nationalised and given compensation, some were confiscated. Others, mainly in manufacturing and mining, survived by bribery and ingratiating themselves with the élites . For example the US Senate unearthed vast sums paid by oil companies to the private bank accounts of Equatorial Guinea's Obiang Nguema. Perhaps the UN needs to attempt to do something about the banking system which permits this. Only joking, as if ! (Though we in the West have the problem of the sub-prime market to sort out before offering advice to others.) The companies have to pay all sorts of official and unofficial taxes and bribes. Oil revenues make it possible for the political élites to literally become detached from the local population and economy and to live in an oasis. There is no need to invest in health, education and infrastructure.

It is estimated that the European Union's Common Agricultural Policy(CAP) causes the developing countries a welfare loss of $20 billion annually. People have tried to quantify the loss which developing countries suffer due to protectionism by western economies and the figures are in hundreds of billions of dollars. There are also other losses, 20,000 Thabo Mbeki in
 the driver's seatThabo Mbeki in the driver's seatAfrican professionals emigrate each year.

An exception is South Africa, which does not have a large peasantry. The private sector is mainly owned by South African citizens ( an unintended consequence of sanctions and disinvestment of the 1970's and 1980's). Hence the political élite is constrained. The strength of urban Trade Unions is also a factor. This is not to say that the government isn't trying to increase state control. Black Economic Empowerment (BEE) is a government policy which ostensibly aims to increase black participation in the South African economy but is, in reality, an attempt to siphon off savings from the private sector.

The solution is land ownership. This will also prevent deforestation and desertification. So freehold must be introduced and the communal land tenure that is state ownership of land abolished. Secondly, peasants must pig factorypig factorygain direct access to world markets rather than state -controlled marketing boards. Thirdly, sub-Saharan Africa needs financial institutions independent of the political élites such as: co-operatives, credit unions, savings banks etc. These could also provide technical services such as crop research, storage, distribution, transportation and so on. Foreign donors could help here by providing expertise and management and shielding them from predation by the élite. The New Partnership for Africa's Development (NEPAD) headed by Thabo Mbeki must help redesign Africa's political economy and so protect the rights of private sector actors instead of rent-seeking political élite . Namely it must address fundamental issues rather than giving inflated accounts of African democratisation ( perhaps a little criticism of Mr. Mugabe would help?)

Donors can put pressure on African governments to hold elections - then get the elections held - and the elections get rigged. This is putting the cart before the horse. There need to be institutions of democracy such as church and youth groups, trade unions, mass media, opposition parties - all of which were suppressed after Independence. It is ironic that the huge France 1960s immigrant
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France 1960s immigrant bidonville amounts of aid make governments less accountable to the people. As an independent nation, Britain could help in a small way by only directing aid in this way and opening our markets rather than subsidising French farmers to force-feed geese and producing tobacco for the third world via the Common Agricultural Policy CAP. There is too little laissez- faire and too much state interference in Africa. Yet this is precisely how the African élites want it. Also the black economies in Europe favour big business and increasingly impose central control, using cheap, illegal workers, some from Africa, to fund their growth. How typical that the one system should find in the other an ally.

This article comprises, in the main, a précis of some of the writings of Moeletsi Mbeki. The sensible brother of The South African President and AIDS denier Thabo Mbeki. How is it that the sensible people rarely end up in power?