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How Institutions Shaped Trajectories of African Economies

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“I hope that by the end of this year we will have an elected government and that universal freedoms are applied and that we put an end to the corruption that has taken over this country”. – Mossab El Shami (A twenty year old pharmacy student during a demonstration at Tahrir square – Egypt.)

“Tunisia: repression + absence of social justice + denial of channels for peaceful change = a ticking bomb” – Mohammed Elbaradei (former Director of International  Atomic Agency.)

My most revered mentors in economic development and world respected economists (Daron Acemoglu and James Robinson), in their book WHY NATIONS FAIL, critically evaluated, providing great depths of insights on the origins of power, prosperity and poverty.

It is quite an irony, that nations well endowed with natural and human resources in the 21st century are regarded as “poor and underdeveloped”, while nations less endowed with natural resources but with human capital are regarded as prosperous and developed.

From Hosni Mubarak, who ruled Egypt with tight grip for about thirty years, Siaka Stevens of Senegal, Charles Taylor of Liberia, President Zine El Abidine Ben Ali of Tunisia, to Robert Mugabe’s unending administration in Zimbabwe, lingering colonial impact which clearly differentiate how today’s developing nations differ from developed nations in their earlier stages, suggest clearly the reason for the existence and inherent nature of extractive institutions in African economies, with Botswana as an exemption.

Extractive institutions via its vicious circles has eaten deep into virtually all African countries, leading to various degrees of state failures, who once had and still have the potentials to becoming economically prosperous.

In the case of Zimbabwe, where she was colonized in 1870 by Cecil Rhode’s British South Africa company, who sent a military expedition into Ndebele, and by 1901, the colony of Southern Rhodesia which is today Zimbabwe was established. Rhodes made money by prospecting and mining for precious minerals and tapping into the rich farmlands, which attracted white migration. By 1960, the white  elite had reached about 5% of the population and by 1965 the white elites declared independence from Britain. This led to an economic and political sanction from United Nations, which spurred international pressure and rebellion by Robert Mugabe and Joshua Nkomo, which resulted to negotiated end to white rule.

These actions led to the creation of Zimbabwe in 1980. Upon independence Mugabe took complete control and took over (more intensely), the set of extractive and political institutions created by the white elites. This is evident in a host of regulations on prices and international trade, state-run industries, and the obligatory agricultural marketing boards. Also employment increased but with jobs only given to Mugabe’s supporters. Zimbabwe under the Mugabe’s regime, carefully illustrates the social and economic consequences of lingering colonial impact. As at 2008, the Zimbabwe’s per capita income was about half of its per capita income at independence. As much as this sounds, it does not adequately capture the level of deterioration in living standards of its people. Zimbabwe failed and more or less, has stopped providing public service. The insecurity of property rights brought by Mugabe and his party elites led to a collapse of agricultural output and productivity. In 2008 to 2009, the deterioration of the health systems led to an outbreak of cholera. As at January, 2010 there have been 98741 reported cases, and 4,293 deaths, making it the deadliest cholera out-break in Africa over the previous fifteen years. The United Nations office for coordination of humanitarian affairs claimed that the unemployment had hit an incredible 94% at early 2009.

Sierra Leone had gained independence from the British in 1961, and power was handed to Sir, Milton Margai, who made his brother prime minister in 1964, but later lost the 1967 elections to her opposition party led by Siaka Stevens. Steven administration came into power and firstly pulled up the railway line, the British had built at Mende, whose role was economic, transporting most of the countries exports: coffee, cocoa and diamonds. The rail was Mende window to the world, but Mendeland had voted hugely for his opposition party in the 1967 election. Steven was more intended in holding on to power than promoting Mendelands export. The drastic action greatly damaged some of the most vibrant sectors of Sierra Leone economy. This and many more were done by the extractive nature of political institutions, who drafted policies and made economic decisions that were extractive in nature (extractive economic institutions) that destroyed her ability to harness her rich resource potential; which could have brought growth and development that would be benefiting to all.

The story of Zimbabwe and Sierra Leone has been the story of most African countries like Nigeria, Egypt and a host of others, where post independence leaders have crippled the economy with their selfish motivated economic decisions and actions, when the choice was between consolidating power and encouraging growth, innovation and a pluralistic society.

There is no point adding salt to existing injuries; like drafting various development plans, soliciting for foreign aids and global partnership in the name of revamping sectors and developing the economy when the root causes of problems (the vicious nature of extractive institutions), has not been dealt with.

So, I pose a question to us this week.

Are foreign aids, global partnerships, increased budgetary allocations to sectors, just enough to boost growth and development that would be benefiting to all?

Join me next week, as we explore solutions to extractive institutions and the way forward for ailing economies. Cheers!!!

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CRO – Project Change Initiative A 21st Century Leadership, Organizational and Economic Development Strategist For comments, please visit Obele Jesuite on facebook, on twitter, gospel_obele@yahoo.com. For email: or contact 08130070991.

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  1. Pingback: Building Inclusive Institutions in Africa; Economic Lessons From Botswana | The Spectacles

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