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Perpetuating Poverty in Sub-Saharan Africa: How African Political Elites Undermine Entrepreneurship and Economic Development

Author: M Mbeki
Date: 2005
Size: 13 pages (244 KB)

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Summary

Most countries in sub-Saharan Africa have experienced declining growth and increasing poverty since independence. This can be attributed to Africa’s political elites, who have driven their economies backwards by misusing their countries’ economic surplus. This paper published by International Policy Press examines the consequences of the exploitation of the state by Africa’s political elites. It argues that a vibrant private sector is essential for economic growth, but the development of entrepreneurship is constrained by Africa’s political elites.

With a few exceptions, most African states were created by European imperial powers. Colonial states served as tools of political oppression and economic exploitation. For instance, the state would buy cash crops from farmers at below market prices. African elites that inherited this system in the 1960s saw government as a source of personal enrichment. Therefore, African political elites have exploited their position to attain Western standards of living, undertake loss-making industrialisation projects and transfer large sums of money to private bank accounts, while borrowing from developed countries.

Average per capita income in Africa is now lower than in the 1960s. This is largely because the private sector has been constrained from driving economic development by unproductive political elites. South Africa is unique as the power of South Africa’s elite is limited by the absence of a large passive peasantry. Also, the private sector is owned mainly by South African citizens who have a say in the political process. Elsewhere, political elites affect Africa’s development in several ways:

• Political elites use marketing and taxation to divert agricultural surplus to finance their own consumption and strengthen the state’s repressive instruments.
• Oil revenues allow elites to become detached from the local economy and provide them with funds to repress the local population.
• Foreign-owned companies are subjected to various official and unofficial taxes, ranging from bribes to artificially high tariffs.
• Political elites obstruct industry and divert profits for elite consumption, affecting industrial growth. Sub-Saharan Africa has de-industrialised since 1970.

To reduce underdevelopment in Africa, the power imbalance between political elites and key private sector producers needs to be addressed. Africa’s political economy needs to be redesigned to protect the rights of private sector actors rather than rent-seeking political elites. Other solutions to under-development include:

• A new type of democracy that empowers private-sector producers. Peasants need to become the real owners of land. Freehold must be introduced and the communal land tenure system, which is really state ownership of land, ought to be abolished.
• Direct access to world markets for peasants. Producers must be able to auction their own cash crops, rather than be forced to sell them to state-controlled marketing boards.
• New financial institutions, for example, cooperatives and credit unions that are independent of the political elite and can address the financial needs of peasants and small-to medium scale producers.
• Financial institutions that can also undertake technical services such as crop research and extension services that would make agriculture in sub-Saharan Africa more productive.
• Foreign donors who can provide such financial institutions with expertise and management and shield them from the influence of the political elite.

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Source: Mbeki, M. 2005, ‘Perpetuating Poverty in Sub-Saharan Africa: How African Political Elites Undermine Entrepreneurship and Economic Development’. International Policy Network, London
Author: South African Institute of International Affairs, http://www.saiia.org.za/