The Way Forward
“Prosperity is not determined by what is beneath your feet but by what is between your ears,” Thomas Sowell. This statement by Thomas Sowell pertains to the socio-economic dynamics of Africans in Africa and African Americans in the United States. It remains highly relevant to the continent and nations of Africa. Here are a few indisputable truths. Since independence, the degree and level of corruption have increased from decade to decade. Meanwhile, economic challenges have also increased due to population growth and declining revenues. A significant debt forgiveness initiative occurred in the 1990s. HIPC, an acronym for Heavily Indebted Poor Countries, significantly reduced or wiped out the debts of most heavily indebted countries, and African countries benefited from the program. It was followed in 2005 by the MDRI, the Multilateral Debt Relief Initiative. However, the debt situation of African countries has reached similar crisis levels to those that prompted debt forgiveness. There is a chorus of voices calling for another round of debt forgiveness for African countries. Meanwhile, African countries have been minting millionaire politicians. These are individuals who are robbing their countries of the seed capital and brainpower needed to effect economic change and transformation in their realms. The challenge of endemic corruption is that it not only robs the country of fiscal resources but also of the mental acuity necessary for contemplating solutions to the problems facing their countries. It is a double whammy!
Constructing Solutions to the Economic Challenges of African Countries.
Achieving economic independence does not happen in a vacuum. It happens through deliberate activities supported by robust economic policy initiatives. The governments of African countries must establish a comprehensive, overarching strategy that is informed by relevant tactics. For instance, it is incontrovertible that in the world history of nations, following the mercantile era, poorer nations have comprised the manufacturers and processors for the consumption of more prosperous countries. This formula is the foundational predicate for the economic development of nations. The only anomaly is the context of the African continent during colonial rule and since independence. African countries, manifestly the poorest countries in the world, have been relegated to the consuming nations of the world. Thereby making African countries the promoters and supporters of economic development in the richer countries. It is an obscene narrative unsupported by any figment of rational thought or acumen.
There are readily apparent solutions to the economic challenges facing African countries. The primary challenge facing African countries is that they are not generating sufficient income to manage their affairs effectively. That is the direct manifestation of poor economic strategy, corruption, and a poorly functioning governance apparatus. African leaders continue to rely on the “begging bowl” as a means of alleviating financial pressures. In the same vein, they complain vociferously about the lack of respect from Western externalities. The question they have not asked themselves is how long the begging bowl economic development policy will continue to be effective. Furthermore, how many debt forgiveness initiatives will it take to stop proponents of debt initiatives from continuing the charade? The goal of economic development is supposed to be economic emancipation, not deepening economic dependence. African leaders have relied on raw materials as the means of funding the entire lifestyle of their countries, including the importation of consumer goods. This is math that has been apparent since a few years after independence would not add up to economic development. Yet leaders have persisted in the process. Trying to fit a round peg strategy of raw materials export into a square hole of economic independence. It is not what is under the ground or grows on trees in Africa that is important. Instead, it is what is between the ears of leaders who have been tasked with guiding their people’s affairs in the socio-political and economic realms. The status quo of chasing revenues from raw materials has persisted because the gatekeepers are benefiting from the process. Foreign concerns are paying a kickback to the gatekeepers for the privilege of deeply discounted contract pricing to exploit the raw materials. To eliminate the role of gatekeepers, African countries should assume responsibility for the exploitation of their raw materials.
It is time for African Countries to exploit their raw materials.
African countries should take charge of finding, exploiting, and marketing their raw materials. The managerial talent and skills needed to exploit any raw material in the African continent are available on the open market. The companies that are awarded contracts typically must follow the same procedure. They must acquire managerial skills and financing to develop any raw material exploitation scheme that they undertake. It is an excellent opportunity to develop indigenous entrepreneurs and businesses who will partner with the government on an equitable basis to exploit proven raw materials. The other option is for African countries to demand a higher percentage of the business arrangement, which would make them full equity partners in the deal, including assuming the associated risks. The scenario of asking companies to pay a tax for the privilege of exploiting raw materials in Africa should be consigned to the dustbin of history. The principal risk associated with exploiting raw materials is determining whether there are commercially viable quantities of the raw materials being sought. The expertise required for the task can be sourced in the open market in numerous countries worldwide. If African leaders had been minding the store with integrity and fidelity, they would have trained indigenous people with the requisite skill set for executing such responsibilities already, so that it would not be necessary to hire in the open market and pay in hard currency. As it stands, the exploitation of raw materials has joined the long list of industries and commercial activities that fall under the category of state capture.
Conversion of raw materials to semi-finished or finished goods for export.
The next most important aspect of raw material exploitation involves local processing into semi-finished or finished goods for export to the world market. This is the low-hanging fruit for African countries. By adding value to the raw materials that they export, African countries will achieve two distinct goals: 1. The value addition will increase the income derived from the raw materials; 2. The process of adding value will create jobs in the local environment. This is not “rocket science;” it is the low-hanging fruit on the road to economic development for serious policymakers and countries. If African leaders had been minding the store with integrity and vigor, this process should have been well underway more than fifty years after independence for many of the countries. It is also worth noting that the continent has not been fully explored, especially since independence, as African leaders have often delegated the responsibility of exploring for minerals to external entities rather than undertaking it themselves. It is the lazy way to manage a country’s resources and the best way to set up state capture, extracting inducements from companies that want to conduct exploration.African countries can process any raw material they choose into finished goods. Aliko Dangote of the Dangote Group has commenced crude oil refining in one of the world’s most extensive refinery operations, with a capacity to process 650,000 barrels of crude oil per day. African countries can refine Iron Ore to Steel and everything in between. One specific area of cooperation that remains unexplored is the collaboration of several countries to undertake a significant venture, such as a steel plant, a Copper plant, or an aluminum plant. African governments and leaders must start viewing the entire continent as a supply chain link that is adaptable for evolving ventures that require the pooling of resources to achieve the best outcomes for the countries. Manufacturing processes in Metallurgy are complex and expensive, but African countries control a significant portion of the inputs in this arena. In steel production, for example, the largest suppliers of Iron Ore, a primary raw material, a supplier of natural gas, and a supplier of electricity to the plant can collaborate to create a steel production industry, sharing the resultant products and exporting the excess quantity. Market-based funding can be created for such ventures within and outside Africa. The result would be to reduce the exportation of Iron Ore as raw material and instead develop plants that convert Iron Ore to steel in African countries by pooling resources from several partner countries…to be continued in next month’s issue of Unleash Africa Newsletter.
References:
1. https://rb.gy/dg8mhx
2. https://www.aljazeera.com/news/2018/2/20/mapping-africas-natural-resources
3. Dangote plans to list Africa’s largest oil refinery in 2026 to quell monopoly fears | Business Insider Africa
