Africa has the potential to succeed

Western countries did not grab colonies because they liked the climate. They knew they could make money
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The Independent Online

Could a Commission for Africa, promoted by a British Prime Minister, really make a significant difference to the continent's economic performance? That surely is the first issue: can outsiders really help? It is such an obvious question that the Number 10 team has been swift to stress that this is a practical project, developed in Africa by Africans.

Could a Commission for Africa, promoted by a British Prime Minister, really make a significant difference to the continent's economic performance? That surely is the first issue: can outsiders really help? It is such an obvious question that the Number 10 team has been swift to stress that this is a practical project, developed in Africa by Africans.

"The key thing," according to the Number 10 spokesman, "is that Africa should be leading the way in helping solve its own problems with the rest of the world supporting them."

No one could quarrel with that. No one could quarrel either with the aims of the commission. But the fact remains that this is a project led by a developed country, with the results to be presented to other developed countries at the G8 economic summit next summer.

The pitch is beautifully crafted: "The Prime Minister wants a report which reflects the reality of what works and what does not work in Africa; which advocates the importance to the rest of the world on how to turn Africa around." But it is impossible not feel a certain wariness: wonderful words, but three years down the line, won't they seem just a little empty?

Yet the idea is half right: what matters is what works, and we do know a lot about the process of successful economic development in the rest of the world. After all, the two most populous countries in the world, China and India, have become beacons of successful development over the past quarter century. Their progress has not been straight-line at all. China has seen serious political dissent, including the catastrophe of Tianamen Square; while India has experienced economic disasters, including 1991/2, when the country came within a few days of bankruptcy.

The idea is also half wrong. Anyone looking at what works should surely start with these two giants, rather than looking at the much more limited progress made in Africa to date. Of course they are single jurisdictions, rather than the patchwork quilt of the countries of Africa. But the scale is similar. China and India had a vastly more difficult task than Singapore, Malaysia, Thailand and Taiwan, where problems were on a more manageable scale. So what might we learn from them?

The first and common lesson was the desire to do better. The 1978/79 decision in China to switch from a planned economy to a market one was quite sudden. In India there was a more gradual easing of economic controls, starting about 1981. For a generation China had experienced very little economic growth; in India, much of the growth had been absorbed in population increase. Yet Hong Kong was booming and Indians abroad were hugely successful.

I suspect that an African take-off, which is completely possible, will only occur when there is a similar collective decision that the present performance is not acceptable. It has to find political expression in a big country. If, say, Nigeria, were suddenly to achieve rapid sustained economic growth, then it would become a beacon.

The second lesson is that two cherished characteristics of western developed countries, democracy and freedom from corruption, don't matter much. Sorry about that, but they don't. China does not do democracy; and both China and India manage despite a high level of corruption. What China and to a lesser extent India do is to make sure that the corruption does not impede key areas of business, in particular exports.

This is not to advocate the culture of the back-hander. Far from it, for it does do some damage. I recently had a conversation with someone very senior in a giant US multinational who had just had a plant in India shut down because they would not pay the bribes. China, he said, by contrast, was wonderful. But corruption has to be predictable and at a manageable level.

The third necessity is order. There does not have to be a Singaporean level of order, but there has to be, at a minimum, physical safety and there has to be some respect for legal contracts.

That leads to foreign direct investment which in both the Chinese and to a lesser extent the Indian booms has played a big role. Such investment brings both know-how and access to markets. Some 60 per cent of Chinese exports now are carried out by foreign or joint-venture companies.

With that comes certain basic conditions in which business can flourish: contract law, the ability to get profits out, favourable taxation - lesson five.

The next lessons is there has to be an adequately helpful bureaucracy. I spent a morning in a Shanghai institution dedicated to encouraging inward investment. It was fascinating seeing clever, thoughtful people with the single of objective of making life easier for foreign companies. I'm sure there are examples of official obfuscation in China, but at least part of the bureaucracy is specifically there to help.

Infrastructure matters, but only up to a point. Here the great contrast is between China and India. One has over-invested, the other, up to now at least, under-invested. The Shanghai port I gather is excellent. Mumbai has greatly improved its performance, getting turnaround times down from about a week to little more than a day. But it is still way behind the best of Asia. India's roads are notorious, but it now has the largest road-building programme in the world.

Intriguingly, Bangalore's success has come despite being land-locked and having only an OK air service. It exports virtual goods - for example software - that don't need to be physically transported. So Africa should not despair about its communications. They don't need to be wonderful, just good enough.

There can never be enough effort on education. But the key commodity that both China and India offer the world is brains at a discount. It is not cheap labour as such. It is cheap educated labour. The higher the level of education the greater the variety of jobs that people can do. The greater the skills of the workforce the greater their productivity. The greater the productivity, the more foreign investment flows in and the faster the sustainable level of economic growth.

Finally, African countries should beware being too prescriptive about the areas where growth will be sustained. China's export sector is completely demand-led, however odd the demand might seem. Does China have a competitive advantage making fluffy toys? Er, not really. But if that is what American companies want to buy, so be it. Does India have a competitive advantage in call centres? Maybe it does now but five years ago no one planned that. You do what Western markets want, not what their "experts" who come and write reports say they want.

We should wish the commission good fortune. Unlike so many "initiatives", this one can at least do little harm. The frustrating thing is the potential of Africa. Western countries did not grab colonies because they liked the climate, or at least in most cases they didn't. They did so because they could make money there. That potential still exists. The problems, though huge, are not of a different order of magnitude than those faced 30 years ago by China and India. Look what has happened, is happening, there. It is thrilling. So good fortune, Africa.

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