The last decade has not been a happy one for the African economic scene. Development efforts have stagnated, political difficulties have been widespread and population has continued to grow rapidly. In many countries, the gross national product has been low or negative. In many, the gross national product per capita has actually declined. No one can be happy about this situation. This conference is directed at attempting to seek new solutions out of this sad situation. What I’d like to share with you is not a specific answer; I have no answer. I would like to share with you first a vision, a vantage point for looking at the problem and, then examine areas where solutions may be found. My honest believe is that the problems of growth and development in Africa are solvable. That is the very message of this conference and of my speech to you today.

Societies grow economically- not because of their political leaders, but because of the efforts of the citizens. In fact, actions by political leaders often inhibit economic growth through venality, bad policies, inaction, lack of understanding and more. The challenge before Africa today is how to stimulate and sustain economic growth, often in spite of political leaders. I say this to you today because, after all, this is a conference not primarily with political dimensions but rather with economic ones.

We all share the view that it is our goal to encourage a better life for all citizens. By a better life, I mean health, peace and wealth and all that those three things in combination may bring with them. The premise of my presentation this morning is that the key stone to this better life is economic growth. And the keystone to economic growth is to free up the spirit and effort of people so that they can contribute to their own economic growth.

For a variety of reasons, that I won’t go into here because they will be discussed more fully in later sessions, during the last two decades, much of Africa has been caught up in a variety of ideologies: anti-colonial, pro-socialist, anti-socialist and several others. They have often been reactive rather than prescriptive. The economic implications have usually been secondary to political necessities. Much of Africa has agreed too easily to Kwame Nkrumah’s plea first to gain the “political kingdom.” We all know now that, in contrast to his political predicting, “all else” has not followed in the wake of that political power. Power has been exercised, but often not in ways that have been effective for economic growth.

The ideologies of other continents and societies cannot be transferred in whole to Africa. Socialism, communism or capitalism- none of these provide an African framework. Such a framework will evolve from both the experiences elsewhere and those in Africa. But there needs to be agreement on the fundamentals. First, it is necessary to accept the fact that there exists a state and that the state does not have a role that relates to all matters within its borders, especially the economic environment. But, at the same time, it is necessary to realize that the state cannot be an efficient producer of wealth. The state is no the mechanism best suited to make efficient decisions and the state is not able to force its citizens to work, to innovate, to save, and to invest. Such behavior- participation and drive of citizens (if you wish, call them “the masses”)- is key for economic growth.

I have made these comments in order to provide and introduction to sketching out two levels that I believe should be the framework for the deliberations of this conference. The first level is a plea for understanding- understanding that the goal must be greater involvement and more productive activities of more people, not of their institutions and not of their leaders, and not of their governments, but rather of the people themselves. The second level is the search for mechanisms to bring about this participation. I d like to now discuss a little bit my views on each one of these matters.

First the need to involve the people. Some people believe that economic planning is absolutely necessary. Some believe that it is useless. I believe that the truth is somewhere in between. Plans are good and necessary for any institution. Rigidity, however, is bad. Government must seek ways to free up the spirit of its people, to allow for spontaneity of action and energies, to encourage the kind of serendipity that brings about geometric economic growth. What governments need to consider, what many of you in this conference need to consider, is something that may be new to you. There is need to learn how to unleash the people and their creativity, how to channel actions into productive activities, and how to encourage greater participation, greater accumulation of wealth and greater investment of wealth.

Now, part of the problem is that, in the eyes of some, the accumulation of wealth is bad rather than good. In the eyes of those who have accumulated it, the investment of wealth may be dangerous rather than secure. And in the eyes of many, those who have accumulated have done so corruptly and those who have invested have done so foolishly. As long as these views are held, the economies of Africa will suffer. Many in Africa need to reconsider their views of the private sector and realize that it is a constructive vehicle for growth. The major playing field for these activities is the market place, the locale for economic activity.

The most dramatic recent testimony to the failure of ignoring the dynamic potential of market economics took place last month. The people’s republic of China unveiled bold changes in its economic policies. It discarded tight state controls and broad state planning. Instead, it freed a large portion of the economy, freed prices and gave autonomy for most factories. Finally, it recognized that only when some individuals are allowed and encouraged to get better off first through diligent work will more and more people be prompted to take the road of prosperity. Just as this can happen in China, so, too can it too happen to Africa. Think back to pre-colonial times. There was a private sector, it was dynamic and it was effective. Whether it was the trader or the blacksmith or the transporter, this was where dynamism occurred. I realize the social security system involved in family ties and ethnic ties and I realize the extent to which this is often a vehicle of welfare rather than growth. This is a problem with which Africa must contend. Nevertheless, the spirit of enterprise is not foreign to Africa; it is in fact indigenous to Africa. Go to any market place and you will see it.

In certain parts of the continent, it became fashionable in the 60s to talk about self- reliance. This is a very important concept. But it is important to examine what it has brought about and what it could bring about. A self- reliance  that shuts out the world’s market place, that closes opportunities for a country in the world around it, and that dictates to the people from the capital; what they should be doing and what is best for them, is a collectivism that is a sure recipe for failure. A self-reliance that encourages rather than discourages, that provides opportunity rather than dampens it, is what ought to be the goal. To do so within a growing world trade system is also of great importance.

Self reliance also carries with it an appropriate concern for equity. Equity of what? Opportunity? Equal  salaries? Equal wealth? I’m not sure that this is a useful definition of equity. Some people will work harder than others and should be rewarded for so working. Some will accumulate and others will spend. Some will put their savings into productive uses (let’s call that investment) and others will put their savings underneath the mattress not allowing them to be productive for the society. Some will keep their capital, their savings, in their own country, and others will send it to Switzerland or other safe havens. Those that do the latter do not help their own country. But very few African governments have provided the atmosphere that would encourage savings, investment, and maintaining working capital in one’s own country.

To reverse this is a major challenge to Africa today

Unfortunately, largely in the context of the colonial period, a historical pattern developed in much of Africa. It is a pattern of looking for help from outside. Some political scientists call this “dependency.” Perhaps it was this pattern that Julius Nyerere tried to break in his calls for self reliance. In that context, self reliance does make some sense. The feeling of impotence in the world’s economic scene has led many leaders of developing countries to make unrealistic calls for a new International Economic Order and to call for an international redistribution of wealth. They have failed to realize that their internal policies have been a major factor. The industrialized countries are not prepared to “share” their portions. The effective developing countries, however, will increase their won portions, as has been particularly true in Asia over the last decade.

Dependency has not only been a factor between nations, it has also been found within a nation’s borders. People in rural areas have often looked to the cities for help as well. Meanwhile, actions in the cities have frequently been counterproductive to growth. In fact, many urban-oriented policies are primarily political or welfare related; rarely are they growth oriented. There have been no more devastating policies in Africa than those related to agriculture.

By maintaining producer prices low in order to subsidize urban consumers, African governments have discouraged farming and food production. By controlling prices of food at low levels, African governments have ignored market forces, seen a reduction in agricultural production, and created a need for imported food. The growing dependence on imported food has removed the possibility of utilizing trade, specifically imports, for economic growth and development. Imports have become necessary for the maintenance of the status quo. At the same time these policies have forced government to pay out of its own revenues, subsidies for the maintenance of lower food prices than exists on world markets.

 The continuation of policies of subsidizing food prices has exacerbated the trend of movement of people from rural areas to urban areas. Thus, an additional reason for encouraging realistic producer prices is to help forestall the continuing flood of people into unprepared cities. Part of the problem results from the nature of many African governments today. By their economic behavior, in particular, many African government officials view their role not as public officials but as private actors carrying the public mantle. Their efforts are frequently for their own private benefit or for the benefit of friends or relatives-what outsiders (and many insiders) view as corruption. Thus, an important factor to consider in trying addressing the economic growth needs for Africa is the need to make more public the actions of government officials.

Another important factor to watch is the percent of GNP taken up by the government. In a recent study, the IMF identified Africa as having the highest percent of GNP taken up by government budgets and other government efforts. Such a situation crowds out private efforts in both credit availability and opportunity, reflects harmful tax and tariff polices and generally means slow growth. The facts are striking- in 1978, in the USA, only 4.4% of the capital being formed came from publicly owned enterprises. In Germany, the figure was 10.8% and in Japan, 11.2%. In comparison, in Algeria, it was 67.6% and in Zambia 61.2%. The continent average was 32.4%. Government spending levels must be reduced, at least to where their growth is below the growth of GNP.

Overvalued currencies often discourage exports and encourage imports thus reducing the attractiveness of foreign investment. A realistic exchange rate is a very important factor.

A little earlier I indicated that several mechanisms for freeing the marketplace were on the agenda of this conference and indeed they are. Let me mention eight needs of those that I believe are important :

1. The need to understand the unique contribution of the entrepreneur. Such a person needs to be encouraged and given the skills that would supplement natural inclinations. Such people are different from large corporations and corporate bureaucrats. They are the spark that can ignite the economy. They personally assume risk, manage and produce goods or provide services themselves. Little is known about successful Africa entrepreneurs

2. The need to realize the key role of small and medium sized businesses as vehicles of growth.

3. The need to stimulate financial intermediaries. The goals here should be to broaden and deepen equity participation within the economy

4. The need to resolve problems of capital availability. This means stimulating venture capital, devising mutual fund possibilities, utilizing development banks and finding privately owned lending facilities to encourage private enterprise and other mechanism.

5. The need to devise tax and other incentives for entrepreneurial development.

6. The need to realize that services industries play a major role in the modern economies and to encourage development of the services industries.

7. The need to identify those sectors of the economy where a private sector is most likely to develop and for governments to withdraw from those sectors. Such areas as transport, artisans, and small scale manufacturing are among a few that quickly come to my mind. Many countries have a vibrant informal or underground economy. How can these activities be brought into the mainstream and not lose their dynamism?

8. The need to devise a way to make ethnicity an economic asset and not and economic liability.

A special mention must be made of the issue of private investment, particularly foreign private investment. You all know that I come from a country that prides itself in its faith in private investment. It is also a country whose citizens have a strong streak of nationalism and pride. The citizens of most countries have a similar nationalism and pride. Yet, in our case, we have seen in recent years, not the erection of new barriers to foreign investment but active efforts to attract it.

States vie with each other sending investment missions to foreign countries and legislatures change laws to provide incentives for foreigners. The result has been that, during the 1980s, the Unite States has been the world’s largest recipient of foreign investment. We are happy when foreigners contribute to our growth.

How does this compare with Africa? In most of Africa, foreign investment has been viewed as an affront by nationalists. There has been a fear of losing control of the economy to foreigners. In order to bring technology and retain control, turn-key projects have been popular. Many of these, however have been uneconomic and remain as white elephants, inactive, or a burden to the government’s budget and to the economy.

The market is the best test of investment needs. Private investment assures an efficient and economic use of resources. Attitude is an important factor. Foreign investment is fungible- it will go where it is wanted and where opportunity exists. Look at the money in foreign bank accounts, in foreign real estate or just plain hidden away. An additional factor for several countries is the heavy dependence on foreign workers who, while, performing valuable technical services, still repatriate their savings, thus denying the host countries of a needed source of investment capital.

Earlier this year, the World Bank projected a likely disaster in the flow of capital to Africa. Unless additional capital is found, the net flow will decline from  $11 billion in 1980-82 to $ 5 billion in 1985-87. That problem must be addressed by African leaders, foreign countries, public and private sectors and multilateral institutions.

A good portion of the debt crisis in which many African countries find themselves today results from a lack of confidence in –indeed a suspicion of- foreign investment. Faced with obvious fact that  capital was necessary for growth and expansion, many countries pursued domestic polices that discourage investment by their own citizens and  for many reasons, were unwilling to accept foreign investment. The only available alternative was bank loans. Many of these loans went for non-productive purposes and now have to be paid back without additional growth to produce new revenues. With the control of inflation, especially in the US, the face value of these loans has proven even more onerous than might have been true during the 1970s. A desire to avoid future debt problems and to repay current debt then is an additional argument to encourage investment.

How will these matters be brought to public attention? Unfortunately, few business men and women in Africa have a public policy agenda for consideration by government leaders. The business community is often demoralized, struggling with an inferiority complex that has derived from the public failure to appreciate how necessary to growth the business class is, and from years of intellectual criticism of that class. Youth have stayed out of business because its image is bad. Many foreign advisors to African governments and professors in universities were, indeed still are, either skeptical or critical of the market. They favored control, rather than dynamism. The results have proved them wrong. As has happened in China, this distortion and discrediting need to be replaced by an alternative approach that places faith in the marketplace.

If you want your country to be among the developed countries of the world a century from now, what is needed? Economic growth alone will take it there. But you cannot have growth and the employment associated with it if at the same time, you hate the job creators. Such a contradiction however, has not been uncommon among past observers of development, particularly those partial to the “Limits of Growth” kind of approach.

I could not make this presentation without a few words about the type of organization in which I now work – business organizations. They may be Chambers of Commerce or they may be called something else. In some places, they may not exist at all. What I am referring to is the need for institution that will

• Raise the level of public understanding of economic policy, of their choices and effects of various actions
• Be organized to reflect and encourage local, not national, interests, growth and welfare
• Show government where rules and regulations stifle initiative and opportunity
• Present a positive image of business and combat from within corruption and corrupting monopolistic practices
• Be a source for training for new ideas
• Assist in the needed diversification of economic actors; and
• Reduce the personal nature of business’ presence

Conclusion

Sustained rapid economic growth doesn’t occur by accident. It is the logical result of a coherent set of polices designed to unleash the creative spirit and enterprise of the people. Few, if any, African countries have yet figured out what those policies are. The number one challenge to the public sector is to devise policies that will free up the private sector. Policies and people, not resources, are the major determinant to growth. I am optimistic that this conference will be a major step in helping those who are interested in finding ways to correct that situation. Let me repeat what I said earlier, the problems are solvable.

By Dr. Michael A. Samuels. Founder of the Centre for International Private Enterprise (CIPE); President and Founder of Samuels International Associates. He  served as Deputy United States Trade Representative and Ambassordor to the General Agreement on Tarrifs and Trade (GATT). he previously served as US Ambassordoe to Sierra Leone and was Vice president of the US Chamber of Commerce. He has served as Director for Africa and as Executive Director of the Center for Strategy and International Studies (CSIS).

Dr. Michael A. Samuels Delivered this speech  at  the Club d’Afrique in Lome, Togo on November 5, 1984.

Question: Does Africa need new strategies and new speeches on the same? How much change has occurred in Africa ever since the speech was made?