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Advocates for Change

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In his innovative and challenging book, Architects of Poverty: Why African Capitalism Needs Changing, author and political commentator Moeletsi Mbeki set out the challenges facing Africa. Now, in …

In his innovative and challenging book, Architects of Poverty: Why African Capitalism Needs Changing, author and political commentator Moeletsi Mbeki set out the challenges facing Africa. Now, in Advocates for Change: How to Overcome Africa’s Challenges, Mbeki, along with leading African thinkers, explores the changes needed to set Africa firmly on the road to effective development. In this session of We Read For You, Prof André Roux presents this thought-provoking book.

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  • 1. City of Cape Town Advocates for Change: How to Overcome Africa’s Challenges Leadership Development Proposal Edited by Moeletsi Mbeki Arnold Smit Presented by: Prof Andre RouxYour partner in world-classbusiness learning Date: 07/03/2012We Read For You:March 2012
  • 2. Architects of PovertyA diagnosis of Africa’s problems…
  • 3. From…Colonial period: Mercantilism Raw materials ColonisingColony country Manufactured goods
  • 4. to…Post-colonial challenge/hope Raw materials Newly Ex-independent colonial nations powers Indigenous manufacturing sector Skilled, healthy labour force
  • 5. But….
  • 6. Asia has forged ahead whileAfrica is marking time/ stagnating
  • 7. Africa’s malaise The fundamental proposition Africa needs a new SA’s elites democracy From EnglishBourgeois revolution commercial elite to the required Black eliteThe failure of regional The de-industrialisation integration of South Africa The post-apartheid Africa is not Europe elite, BEE and globalisation The making of a failed African state Zimbabwe: from rebirth to near death
  • 8. Conclusion • 23 of the world’s critically weak states are in Africa (p153) • Root cause of Africa’s economic suppression and stagnation = role played by Africa’s political elites in keeping their fellow citizens poor; ergo, their stranglehold must be broken • Under colonialism countries did not develop an indigenous bourgeoisie – the character of the post- colonial political elites has militated against the emergence of such a bourgeoisie • In addition: countries lost key indigenous institutions; failed to break away from the economic model created by colonialism; and the subordination of producers to the political elite led to a massive brain-drain
  • 9. New democracy required… • that will empower not only the political elites, but also the region’s private sector producers (most of whom are peasants) • that will be able to restore the Innovations required: growth of an independent and productive middle class, and to world • Peasants to become real owners of land • Peasant producers must gain direct access facilitate the development of the go- markets without the political elites acting as between autonomous civil society institutions • New financial institutions independent of the political elite that will address the financial needs of peasants and also other small- to medium-scale producers
  • 10. Architects of PovertyA diagnosis of Africa’s problems andchallenges Advocates for ChangeA set of policy prescriptions
  • 11. Main title Sub-title Author Negative trends in How should these be1 the South African Seeraj Mohamed overcome? economy What must be done to Africa’s mineral2 make them drivers of Paul Jourdan resources development? Class formation and What does this mean3 rising inequality in for future voting David Everatt South Africa patterns South Africa’s How can it be made4 Jonathan D Jansen education system more productive? How can obstacles be5 Entrepreneurship Mike Herrington overcome? How can the situation Francois Venter &6 Health in Africa be improved? Helen Rees
  • 12. Main title Sub-title Author Why is this island The Mauritius success nation an African7 L Amédée Darga story political and economic success? Fraudulent elections How can the crisis of Gilbert M8 lead to pseudo- democracy in Africa be Khadiagala democracy overcome? How can productivity Mandivamba9 Traditional agriculture be improved? Rukuni Rethinking Africa’s re- What is the best way Thandika10 industrialisation and forward? Mkandawire regional co-operation Regional integration in What are the challenges Sindiso Ndema11 Africa and opportunities? Ngwenya
  • 13. Negative trends in the South Africaneconomy: How should these beovercome?Seeraj Mohamed
  • 14. Fixed capital formation by the private sector and totalcredit extended to privates sector (% of GDP) Fixed capital formation: private sector Total credit extended to private sector 100 90 A huge amount of credit has been 80 extended to the 70 private sector, but 60 not much of that 50 has been used to 40 finance investment. 30 20 What has 10 happened to 0 the rest? SARB time-series
  • 15. 400 200 220 240 260 280 300 320 340 360 380 1980/01 1980/04 1981/03 1982/02 1983/01 1983/04 1984/03 1985/02 1986/01 1986/04 1987/03 1988/02 1989/01 Net wealth (LHS) 1989/04 1990/03 1991/02 1992/01 1992/04 1993/03 1994/02 1995/01 1995/04 1996/03 1997/02 1998/01 1998/04 1999/03 2000/02 2001/01 2001/04 2002/03 2003/02 2004/01 disposable income (%) 2004/04 2005/03 2006/02 2007/01 2007/04 2008/03 2009/02 2010/01 2010/04 2011/03 Household debt (RHS)SARB 30 40 50 60 70 80 90 Ratio of household net wealth and household debt to
  • 16. Net capital flows: % of GDP Net FDI Net portfolio Net other108 SA’s ability to attract6 net FDI inflows has been:42 • Volatile0 • Relatively unsuccessful-2 • Mainly confined to-4 acquisitions in the financial sector-6-8 1997 1990 1991 1992 1993 1994 1995 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 SARB time-series
  • 17. Post-apartheid economic Results?policies have not addressedthe structural weaknesses ofthe economy…. The large • Volatile currencycorporations that dominatedthe economy have (MEC) • Wrong kind of growthbeen permitted tointernationalise their • Lacklustre jobbusiness … thereforeuncontrolled movements in creationand out of the economy … • Continued inequalityhas favoured growth ofservices sectors linked toincreased debt-drivenconsumption and financialand real estate speculation atthe expense of manufacturingand productive services
  • 18. Solutions offered• Focus on supporting industrial development and enployment creation• Make economy less dependent on mining and minerals processing• Shift growth path away from debt-driven consumption… ensure that economic and speculation towards increasing competitiveness and productivity rents, particularly of non- of industry and job creation renewable mining sectors,• Reform financial system to make and in monopoly sectors institutions more be managed by to needs of should responsive the industry. state to support their economic and industrial policy goals
  • 19. Africa’s mineral resources: What mustbe done to make them drivers ofdevelopment?Paul Jourdan
  • 20. Commodity prices World Bank; IMF; McKinsey, 2011
  • 21. Beware the resource curse What sets developmental states apart from mineral-rich countries is primarily the nature of institutions and consequently state capacity (Edijheji) The key determinant as to whether a mineralboom will be a blessing or curse appears to be the level of governance, particularly the existence of sufficiently good institutions
  • 22. Towards a sustainable resource-based African growthand development strategy Deepening of the resources sector through optimising linkages into the local economy Resource rents = • Use resource rents to improve the basic physical and knowledge returns in excess of the infrastructure of the nation expected/average (implement a resource rent tax?) return on capital. • Open up high-rent resource infrastructure to other lower rent Generally, the resource resource potential (eg, agriculture, rents are not shared forestry, tourism) with the resource • Downstream value addition (eg, owner (state/people) greater intra-regional power trade) • Upstream value addition • Technology/product development
  • 23. First step in regional economicintegration:Multi-state co-operation in theestablishment of regional developmentcorridors … seamless infrastructureprovision
  • 24. Class formation and rising inequality inSouth Africa: What does this mean forfuture voting patterns?David Everatt
  • 25. • Gauteng City-Region Observatory (GCRO)/ Quality of life survey• Gauteng city region• 2009 (just before election)
  • 26. Self-selected class descriptor, all races45403530 Race correlated25 with class labelling (46.3% of Africans20 poor; 4.4% whites)1510 Education 5 correlated strongly 0 with self-selected class descriptors GCRO, 2009
  • 27. Which party would you vote for, if theelection were held tomorrow? (African only) 100% 5 6 11 90% 2 7 2 4 80% If income is used 70% 29 as a proxy for 60% class, then the 50% rise of an African 40% 81 79 middle class could 30% 50 spell trouble for a 20% static unchanging 10% ANC … it spells 0% trouble for the DA Up to R1 499 R1 500-R6 R7 000+ too 999 ANC DA COPE Unsure/refused Wont vote GCRO, 2009
  • 28. Which party would you vote for, if the election wereheld tomorrow? (African youth only) 100% 90% 8 15 7 10 80% 12 6 ANC party of 70% 10 10 choice for 12 60% majority of 50% respondents; the 40% younger the 30% 64 62 voters the more 55 “sure” they were 20% of their vote. 10% 0% DA support 18-25 26-30 31-35 among African ANC DA youth lower than among older COPE Unsure/refused African voters Wont vote GCRO, 2009
  • 29. • Post-apartheid class formation - especially the African middle class- remains blurry and poorly understood.• Class-based cleavages starting to become measurable among African voters – young black professionals moving out of the ANC fold (more young black professionals are also starting to vote).• If the ANC remains heavily pegged to a race/age cohort (currently African voters aged above 35) the party will hit a ceiling.• COPE’s implosion gives the ANC more time to change/ respond, but ‘respond it no doubt will. The challenge has not gone; it has merely been postponed.’
  • 30. South Africa’s education system: Howcan it be made more productive?Jonathan D Jansen
  • 31. Matriculants by performance, 2007 Blacks Coloureds Indians Whites Total Black share (%)Matric-aged 830 720 77 500 21 240 65 720 995 180 83cohortDropped 325 181 41 370 6 616 22 286 395 453 82outPass matric 292 344 27 294 13 266 42 225 377 177 78Mathspasses 94 818 7 768 7 764 24 501 135 720 70Endorse-ments 50 984 5 392 7 798 22 214 86 993 59HG mathspassed 9 701 1 226 3 252 10 119 24 549 40HG maths:A, B, C or D 6 237 843 2 666 8 239 18 171 34A-aggregates 1 303 364 1 696 5 604 9 079 14 1 in 640 1 in 11
  • 32. Progress in International ReadingLiteracy study, 2006• 78% of Grade 5 students in SA fell below that level of performance described by the testers as “very low reading achievers”.• And yet at least 13% of them eventually pass matric (Trong, 2009)
  • 33. Explaining low productivity1. A lack of systematic routines and rituals.2. The knowledge problem (especially content knowledge and pedagogical knowledge).3. Bureaucratic and administrative ineptitude.4. Lack of accountability.5. A lack of capacity and expertise.
  • 34. What is to be done?• Restore political authority over schools back where it belongs, i.e. government, not teacher unions.• Establish, through political authority a culture of teaching and learning
  • 35. Entrepreneurship: How can obstaclesbe overcome?Mike Herrington
  • 36. SA’s entrepreneurial rate: International comparison(2009) 35 % of 18-64 population involved in early 30 stage entrepreneurial activity Entrepreneurial 25 rate should be closer to 13% 20 Why does SA’s 15 early-stage entrepreneurial activity lag 10 behind countries at a similar stage 5 ZA of economic development ? 10 20 30 40 50 GDP per capita (PPP $), ‘000
  • 37. Issue Solution Retrain teachers Additional payments for scarce subjects Business skills as a school subjectEducation and training (basic (volunteers from business as teachers)and entrepreneurial) Financial literacy for the unemployed Effective apprenticeship system Effective technology education Small business website (information)Access to finance Mentorship support Reduce costs of doing business (eg relaxGovernment policies and licensing and other statutoryregulations (in 2004 the requirements)compliance costs in small Simplify registration proceduresbusinesses with a turnover of Labour laws!less than R1m represented Reduce telecommunications costs8.3% of turnover) Specialised economic zones Inculcate a societal ethos of self-Cultural and social norms sufficiency rather than state-dependency.
  • 38. Health in Africa: Can the situation beimproved?Francois Venter and Helen Rees
  • 39. What makes Africans sick, or injures them?• Health systems failure (deliver systems)• Health care professionals• Water• Other forms of pollution• Natural and humanitarian disasters• Nutrition• HIV and AIDS• Non-HIV infectious diseases• Access to affordable and safe medicines and laboratories• Pregnancy• Violence (especially gender violence and rape)• Cancers• Traffic accidents• Cigarettes• Alcohol and other substance abuse
  • 40. How can we improve the health of Africans?• While history is an important factor in understanding underdeveloped systems, many countries with limited resources have made rapid strides in addressing social constraints despite huge resource constraints.• Solutions lie largely with the improvement in systems, coupled with mechanisms to address poverty.• Africa DOES have the interventions, diagnostics and affordable drugs and vaccines to immediately tackle vaccine-preventable diseases, maternal ill- health, TB, malaria, river blindness, etc.• Governments should filter out the most pressing and relevant diverse messages from international agencies, the media, public opinion and vested interests.
  • 41. The Mauritius Success Story: Why isthis Island Nation an African Politicaland Economic Success?L Amédée Darga
  • 42. 1970 Today“The overcrowdedBarracoon”Its “problems defysolution”“Plagued bydespair”Per capita income Per capita income $11 400 (highest in Africa; 71st$260 in world) Doing Business 2010: 17th out of 183 Global Competitiveness 2010/11: 55th out of 139 Mo Ibrahim Index of African governance 2009 and 2010: 1st Democracy Index 2008: 26th out of 167 1977-2008 GDP growth 4.6% Gini coefficient Gini coefficient: 45.7 in 1980 38.9 in 2007 Life expectancy: 61 in 1965 69 (men); 76 (women) in 2008
  • 43. 1970• Mono-crop economy – sugar – 1/3 of GDP; 1/3 of employment; 92% of total export earningsToday• 8 economic pillars: cane industry, manufacturing (esp. textiles & clothing), seafood, global business and financial sector, tourism, IT, business process outsourcing, knowledhe service exports
  • 44. What did Mauritius do?1. Pragmatic approach to development – first decide on the desired objectives; then determine the means to achieve the objectives (objectives = employment for all; welfare state; sustainably growth in national wealth; equitable distribution of wealth)2. Nobody owes us a living3. Managing diversity: We cannot sink the other one without sinking ourselves
  • 45. What did Mauritius do?4. Invest in human capital development5. Never kill the goose that lays the golden eggs (at independence the landed bourgeoisie was allowed to continue the process of wealth creation; export levy on all sugar exported)6. Build a petite bourgeoisie and even a middle class from small-scale planters
  • 46. What did Mauritius do?7. Build an entrepreneurial class to drive job creation and national wealth creation8. Industrialising: The brick and mortar economy is crucial9. Strong and participatory institutions
  • 47. Conclusion• Desired outcomes should determine policies.• Do not kill the goose that lays the golden egg.• State as a facilitator (not actor) for wealth creation• Political leaders sought social anchoring through the use of the democratic system, which enabled it to gain adhesion of the majority of the polity and key social actors.
  • 48. Fraudulent elections lead to pseudo-democracy: How can the crisis ofdemocracy in Africa be overcome?Gilbert M Khadiagala
  • 49. Point of departure• Elections in Africa have been fraudulent; therefore, democracies are “cheap”• This has engendered weak participatory systems that have fortified local power imbalances, especially by emboldening regimes with feeble stakes in participation and accountable systems of power.• Nonetheless, citizens remain optimistic about the possibility of building democracies (even though Africa does not reflect the prerequisites often associated with democracy (economic development, sizeable working class, developed market economy). What practical steps do African societies need to embark upon?
  • 50. Practical steps• Escape from the global system of election financing, observation and monitoring (democracy on the cheap underwritten by donors is at the heart of the faltering participation processes)• Recognition of the trade-offs between creating functional political parties for sustainable democracy and the inordinate focus on building NGOs.• Install the preconditions of democracy: property rights; thriving middle class; expansion of the private sector• Analyse the false trade-off between democracy and development (beware the fixation with trying to emulate the Chinese model)
  • 51. Traditional agriculture: How canproductivity be improved?Mandivamba Rukuni
  • 52. What are the issues and challenges foragricultural productivity in Africa? • Diversity of cropping systems • Thin rural infrastructure • Undeveloped markets • Minimal mechanisation • Limited seasonal financing • Competition with food aid • Dominance of weathered and inherently infertile soils • Weak agricultural support systems • Poor agricultural policies
  • 53. What are the solutions? • Favourable policy environment and political will • Realigning of institutions serving farmers and agriculture • Resolving security of land tenure and property rights issues (unregistered land is state land; common land is private land) • Investment in social capital and physical infrastructure • Improvements in technology • Promotion of traditional principles of agriculture • Commercialisation of smallholder agriculture through value-chain development • Make trade open, transparent and fair for smallholder farmers • Integrate climate change into strategies at all levels
  • 54. Rethinking Africa’s re-industrialisationand regional co-operation: What is thebest way forward?Thandika Mkandawire
  • 55. From signs of industrialisation to the era ofde-industrialisation Manufacturing production (average annual growth rate; %) Region/country 1961-79 1980-94 1995-2010 India 6.8 5.5 6.9 Indonesia 8.3 12.6 3.9 L Am & Caribbean 4.6 1.5 2.3 MENA 10.5 5.5 6.5 South Asia 5.4 5.8 6.7 SSA 5.6 1.7 3.1 Markets too small Import substitution Technological strategy dependency; inadequate transfer of technology SAPs
  • 56. Regional integration: Some lessonsProblems with past experiments • Lack of political will • Authoritarianism • Regional technocracies and regionalism • False premise of planned national industrialisation
  • 57. Is regional integration desirable and plausible?• Globalisation vs regionalism• NEPAD• Recent events in Europe• Relations with China and India• Growing inequalities among African countries
  • 58. Regional integration in Africa: Whatare the challenges and opportunities?Sindiso Ndema Ngwenya
  • 59. Solutions for effective and mutually beneficial regional integration• Intensification of political and institutional reforms (participation by ALL societal groupings)• Empowerment of AU and regional economic communities• Development and strengthening of national and regional regulatory authorities to facilitate market- driven operations and prevent market failure (esp. financial sector)• Facilitation of cross-border and FDI in setting up industries that can add value• Capacity-building policies and programmes to promote the speedy integration of formal. Informal and subsistence economies• Production of an educated cadre that has the requisite knowledge and skills for the economy
  • 60. Final message: M Mbeki• There is nothing unavoidable about Africa’s political instability; Africa’s underperformance; Africa’s falling health and educational standards; Africa’s inability to advance regional integration, and to raise the productivity of small-scale agricultural systems.• Arab Spring: people have had enough of the arrogance, corruption, ineptitude and incompetence of Africa’s ruling elites (SA government complacent?)

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