Once a lost continent, Africa has been receiving some good press of late. True enough, incomes are up and so are standards of living. But, can the continent continue on a path to prosperity? Much will depend on the evolution of African institutions. Long-term growth requires well-functioning rule of law that protects, speedily and reliably, the security of people and their property.
Unfortunately, Africa still has a rule of law problem.
The new millennium has been good to Africa. Fuelled by domestic economic liberalisation and high global demand for natural resources, the African economy has been growing about 5% a year. Between 2000 and 2013, African per capita incomes adjusted for inflation increased from $1,469 to $2,002 — growth of 36%. Along with higher incomes came improvements in other important indicators of human wellbeing. Africa’s score on the United Nations Human Development index rose from 0.43 in 2000 to 0.49 in 2012.
One of Africa’s key problems remains the weakness of African institutions, which are, in turn, a necessary prerequisite for robust long-term growth.
Yet, it is far too early to speak of an African dawn, let alone an African century. One of Africa’s key problems remains the weakness of African institutions, which are, in turn, a necessary prerequisite for robust long-term growth — and a sustained rise in the standard of living.
Academic research shows that countries with weak institutions, such as the rule of law, are capable of rapid growth. The problem is that they cannot sustain that growth. In other words, the occasional spurt of high growth is usually followed by economic stagnation or, worse, contraction. Countries with robust institutions, on the other hand, are much more likely to maintain high growth rates over much longer periods. That, with a relatively free economy, is the key to the success of Botswana, where, between 1960 and 2013, per-capita income increased 1,751%. In Africa, it rose a mere 150%.
The trouble is that the rule of law in Africa has been deteriorating in recent years. Even some of the supposed African success stories have seen erosion in the robustness of the rule of law, accompanied by the worsening of corruption.
Take SA, which boasts Africa’s most sophisticated and second-largest economy. President Jacob Zuma had faced 783 counts of corruption related to an arms deal. His financial adviser and intermediary went to prison. Zuma, however, was cleared of all corruption charges just three days before he assumed the presidency.
Since then, new allegations of corruption have mushroomed, perhaps the most egregious of which is the spending of a great amount of taxpayers’ money on his private residence. Will Zuma ever have to answer for his deeds? Probably not; one of his first acts in office was to abolish the Scorpions, SA’s anticorruption agency.
Or take Zambia, which the Economist called one of Africa’s “best performers” over the last decade. In 2012, Rajan Mahtani, a politically connected businessman, allegedly used forged shareholding certificates to gain control of the $160m Zambezi Portland Cement company from Italian investors, who were then suspiciously deported from Zambia for “posing a threat to national security”.
Company owners Antonio and Manuela Ventriglia eventually succeeded in returning to Zambia after a high court ruling and regained control of the plant. Antonio Ventriglia told me: “For years we have suffered losses of more than $100m due to corruption, but now thankfully it appears that rule of law is returning. I despair for small businessmen who have to face intimidation and theft without recourse to speedy justice.”
The interplay between corrupt businessmen and politicians on the one hand, and the weak rule of law on the other hand, poses serious challenges to Africa’s future. It is difficult to see how productive businesses can expand and the African economy can grow in size and sophistication in the absence of clear, predictable and enforceable rules.