Africapitalism: Towards Africa’s future economic development

While Africa is home to the earliest civilisations in Nubia, Egypt and Ethiopia, the continent is often thought of as a place lacking in civilisation, order, and stability. Capitalism, the economic system which has dominated the world for the past five centuries, has done much to create this misconception. Through slavery, colonialism, neo-colonialism, apartheid, racism […]

While Africa is home to the earliest civilisations in Nubia, Egypt and Ethiopia, the continent is often thought of as a place lacking in civilisation, order, and stability. Capitalism, the economic system which has dominated the world for the past five centuries, has done much to create this misconception. Through slavery, colonialism, neo-colonialism, apartheid, racism and predatory rent seeking, capitalism has disappointed Africa and made it an appendage of the advanced industrial world. On all indices of economic development Africa lags at the bottom of the nations which once enslaved, colonised or exploited it.
Yet, shorn of its historical baggage, capitalism, as a system of efficient organisation of resources to satisfy human needs, can be used to overcome Africa’s disadvantages and guarantee its future. We need to re-examine the nature of capitalism to see what it can offer by way of a solution to Africa’s problems.
Historically, African ‘capitalists’ were limited to rent seeking, to sharing the ‘wealth’ that already existed from payments for mineral exports, bribes for contracts, or payments as middlemen or facilitators. This system resulted in stagnation, retrogression or degradation in the quality of life of the African citizen. History has proven that a capitalism which impoverishes the majority of its people is self-defeating, because poor people lack the means to purchase the goods and services which traditional capitalists produce.
But Africapitalism rejects the capitalism of the robber barons of Europe and America, as well as the rent seeking of middlemen. Africapitalism is a holistic system of social and economic organisation, which seeks to satisfy social needs as well as provide profit on long term investments; to create a self-sustaining, self-propelling system for improving the quality of life of citizens of Africa. Africapitalism seeks to create wealth which the whole society will share, to provide employment for increasing numbers of the population, and to produce goods and services which the people need for their survival.
Opportunities abound for the Africapitalist
If the African capitalist wants to get returns on investments in the long term, he/she must invest in areas of the greatest needs, where people are willing or able to pay over a sustained period. For example, investments in mobile phone networks are among the most profitable in Africa because people need to communicate consistently, and for a variety of reasons. The businessman must communicate with customers, employees and suppliers; the student needs to speak to her professors, parents, and friends.
For years the Nigerian government maintained a monopoly of telecommunications through NITEL, which proved incapable of satisfying these economic and social needs. A telephone became a luxury because of scarcity and the difficulty and expense of obtaining and maintaining one. Billions were spent on the company, with no improvement in its services. Finally government tried to sell the company but could find no buyers and NITEL had to be liquidated.
Contrast this with the experience of the mobile networks—MTN, Airtel and Globacom—which now cater to tens of millions of Nigerian subscribers, and make billions in profits for investors. When MTN first invested $285 million in Nigeria, investors doubted that it could make a profit. Today, MTN has forty million subscribers in the country, profits per set are higher than in South Africa, and Nigeria provides 28% of its $10 billion dollar annual revenue. The companies which operate the mobile phone networks in Africa are not government owned or charities but capitalist organisations, in which every citizen can buy shares. In this sense they are democratic organisations, in which every shareholder has a vote.
Banking is another critical sector of the economy in which the tenets of Africapitalism have played a crucial role.  In 1997, when only ten per cent of Nigeria’s population had a bank account, Tony Elumelu, now Chairman of Heirs Holdings and founder of The Tony Elumelu Foundation, led a group of entrepreneurs to acquire the distressed Crystal Bank, which had shuttered its few branches.
He has said, “We introduced best practice in business methodology, democratised the organisation, and dedicated ourselves to satisfying the needs of our customers. Within seven years we became one of Nigeria’s top five banks with a hundred branches. A year later we merged with UBA, the third largest Nigerian bank, and by 2007 we grew from four hundred to seven hundred branches, with three thousand ATMS, from forty in 2005. We also spread to nineteen African countries, as well as the USA, France and the UK. The bank now has seven million customers. Again this was no charity but a successful business organisation.”
In Kenya the Information and Communications Permanent Secretary, Dr Bitange Ndemo, sparked the digital revolution by championing the expansion of Kenya’s fibre optic network, marine cable network, and incentives for the IT sector. As a result Kenya’s ‘Silicon Savannah’ is in a position to challenge India’s dominance in IT outsourcing and software development. In Benue State Nigeria the Transnational Corporation of Nigeria (Transcorp) commissioned a juice concentrate plant to reduce the massive amount of wasted fruit produced in the state, and provide goods for increasingly affluent and sophisticated consumers.
In Ethiopia an agreement with India’s Footwear Design and Development Institute to upgrade technology, manufacturing capacity and quality, and improve worker skills has the potential to increase footwear export to $500 million in 2015 from $100 million in 2008. Ethiopia is also a large African country which imported huge quantities of footware, and can now manufacture what it needs, as well as export to other African countries.
These are examples of Africapitalism since they involve long term investments, provide efficiently for crucial needs on a mass scale, add value, and create employment for millions, as well as wealth for the entire society to reinvest in self-sustaining growth.
Africapitalism: A partnership with government
The experience of African development for the past two decades show that nations which progress are those which allow the version of capitalism we have outlined to produce goods and services for the African people, and provide adequate returns for investors. Government has a crucial role to play in catalysing economic development, as long as it recognises the areas in which it can do more good than harm.
Government needs to provide a framework where entrepreneurs can work productively. Entrepreneurs need stability, predictability, the rule of law – especially in contracts, transparency, incentives, an educated work force, and independent media.
Where local private investors are not yet capable of handling large scale infrastructure projects, government may need to provide investment, or create the conditions for international private investors to put their capital in. Government must also reduce corruption and ensure the autonomy of the judiciary and media. And government must ensure political stability as terrorism, riots and kidnappings are not good for business.
Countries such as Ghana and Rwanda which have introduced the best structural reforms in banking, visas, permits and contract law have been the most successful in developing entrepreneurial activity. In Nigeria, governors of the Central Bank have introduced reforms which eliminated the most serious defects of the sector, improving the conditions for public as well as business customers. The privatising agency has also done a good job in moving key areas from government to private hands, where they can enjoy the best practice of the entrepreneurial order; what we call Africapitalism.
A Pan-African Solution
Africapitalism, which provides a template for developing national economies, can achieve its best results when its principles are applied on a continental scale. Research has shown that inter-African trade is far more beneficial for individual countries than trade with countries outside the continent, stimulating manufacture, skills mobility and economic development. If Nigeria imports IT skills from Kenya, it provides that country with the means to import Nigeria’s oil or manufactured goods. If best practice in economic activity is transferred across African economies, it catalyses the whole African economy.
Africa is the final frontier for capitalism in the world today. In Africa, the capacity for growth is practically unlimited. Africa’s entrepreneurs have an almost blank slate to write on, an empty vessel to fill. As shown in our discussion of mobile communications, banking, agriculture and manufacturing, Africans are capable of meeting the challenge.
Africapitalism requires the constant vision of the common good, even while investors keep one eye on the bottom line. Long term investments, social improvement, and reasonable returns are essential to sustainable development. Africapitalism is a democratic system which involves provision for the needs of the majority, control by the majority through shareholding and a free media and judiciary, as well as reasonable returns on investments.
The current demographic profile of the continent makes the implementation of this new system of thought urgent. Africa now has the lowest average age of all the continents. As young people age and approach the peak of their productivity, African entrepreneurs will have a unique opportunity to do what Europe and Asia have done, to take advantage of a mass of producers and consumers. In a very short time, Africa will have larger sources of labour than China or India. If Africa does not take advantage of this unique opportunity, it can look forward to more unemployment, violent crime and terrorism.
Given our recent history of entrepreneurial activity we can vote for the optimistic option. Africapitalism is the future because it creates wealth and other values for all the people.

*Professor Wilmot taught Sociology at Ahmadu Bello University, Zaria, for 18 years from 1970 to 1988 and is now a writer. His last novel, “Seeing Double”, was published by Jonathan Cape in 2005. His next, “Glass”, is due in Spring 2014.