with Greg Mills & Marie-Noelle Nwokolo
In the late 1990s, South Africa’s then-Trade and Industry Minister Alec Erwin likened the country’s trade strategy to a “butterfly,” according to which the thorax ran north-south to Europe and North America, while the “wings” oriented west-east were to link Africa with Latin America and Asia.
Erwin’s concept promised much then, as now, for a diversification effort, but so far has delivered less. Still, there is much to gain from closer regional ties, in at least two respects.
The first of these is underscored by the growth and nature of economic relations. While trade relations between Africa and Asia have burgeoned, they remain lopsided; Africa is primarily a source of raw commodities, Asia an exporter of finished products.
Key aspects of Asia’s relative economic success—including high spending on education, bureaucratic responsiveness, attractive policy for business investment, low wages, high productivity, investment in infrastructure, raised agriculture outputs as an initial spur to growth, and an overwhelming focus on competitiveness—are routinely overlooked by advocates for autocracies.
Overall, the most notable differentiating factor between the regions of Africa and East Asia is in the relationship between government and the private sector. Japan’s industrialization was, for example, based on three key elements: 1) a strong private sector supported by an education system providing apposite skills; 2) a supportive state; and 3) a willingness to attract and absorb outside ideas, technology, skills, and capital.
One priority for Japan’s development spending in Africa is on kaizen—the “continuous improvement” of the workforce. To this end, a Kaizen Institute was established in Ethiopia in 2013, while the Japan International Co-operation Agency (JICA) continues to fund seminars, experts, training, and other skills improvement initiatives in Africa as part of its $1 billion in annual African aid. This engagement has accelerated and deepened as Japan has felt marginalized by China’s African ambitions, and Tokyo has learned lessons from the effectiveness (or not) of its aid.
Such a focus on skills and education is not going to be enough to replicate, or even adapt, the Japanese model. At its core, it will require understanding the nature of business and its needs to seeing the customer—whether a business or an individual—as being at the centre of government’s actions.
Learning to trust the private sector
Africa’s development answers lie in providing the space for the private sector to flourish and to establish the regulatory conditions in which it can grow to formalize. There are an increasing number of stories of sustained entrepreneurial success across Africa. Too often these stories are, however, in spite of often-predatory government interference rather than because of adroit policy.
African business is supremely practiced at circumventing government obstacles, rather than relying on government to catalyse and nurture good ideas and must routinely find workarounds to inefficient infrastructure. The continent gets ahead now largely because of the power of entrepreneurship and not the efficiency of governments.
And, yet, other African countries, such as Botswana and Morocco, show how it is possible to run state-owned entities along efficient, commercial lines and, in so doing—coupled with streamlined regulatory and tax processes reducing the cost and wear of everyday frictions—provide the requisite foundation for external investors.
The power of the private sector, formal and informal, can be seen in a multitude of ways, from tourism to retail. As Asia has shown, state ownership is not the problem; it’s how these entities are run. Whether they operate along commercial principles or as agents for the redistribution of political largesse is the difference between success and failure. (