Are Politics Shackling the Private Sector in Africa’s Development?

by Tessema Christos

The challenge to find an enabling environment for investments thus, economic development remains illusive in most African countries. In the last century, the attempt to find the right balance failed to bring about the desired result. Record expenditure in development assistance through governments and non-government organizations didn’t make much of a dent. The private sector remains a spectator; marginalized on the sideline throughout the last century.

Mo Ibrahim

Mo Ibrahim, Sudanese-born British mobile communications entrepreneur, billionaire and founder of the Mo Ibrahim Foundation (Photo credit: Wikipedia)

Poor governance, corruption, undemocratic regimes, misguided foreign aid…are some of the main obstructions sited for the failure. The Mo Ibrahim Index on Africa Governance  mapped out the state of Africa like no organization has ever done before. Yet, none of the problems it documented were addressed appropriately and transparently as they should have been.

Most change agents remain fixated on the symptoms rather than the cause of underdevelopment.  Africa governments are largely stuck in maintaining political power at all cost. International development agencies are obsessed with mitigating the problem of poverty and underdevelopment than tackling the cause. Multilateral organizations are caught up in stabilizing mismanaged economies and the associated crises that comes with it. Foreign governments are preoccupied with the unstable governments of their choice, mostly on security matters.

Lost in the web of activities from different entities doing their own things, is the political will to confront the lack of transparent governance and institutional reform for the private sector to play its vital role. Thus, politics remain the single obstacle that shackle the private sector from allocating resources in African development. Worst yet, the lost opportunities to develop the infrastructure of the respective local and regional markets remain.

The recent positive outlook towards the private sector is encouraging but not sufficient.

The private sector still remains subordinated to political decision instead of playing its economic role independently.  As it is evident, private investments the last decade were limited to a handful of sectors subordinated to the political decisions of regimes and international development agencies.

The implications for sustainable and diversified investments and trades in the future are twofold. First, the role of the private sector is distorted in favor of the political class; defeating the meaning of the private sector. Thus, the energy of the free market is limited to politics.

Second, the necessary institutional reforms are reduced to the interest of the political class. Thus, private institutions, if they ever existed at all or their formations are in a collision course with political interest; opening the door for conflicts, corruption and cronyism.

In that regard, no organization has highlighted the importance of institutional reform to improve the environment for the private sector like The Center for International Private Enterprise (CIPE). For the last 25 years, CIPE strived to put the private sector on the front burner. It is clear the efforts are unappreciated by governments as well as international development agencies.  Only a few African countries barley took advantage of the organization’s effort to help reform institutions and develop the private sector, indicating that the private sector hasn’t yet been taken seriously to help transform economies.

It is abundantly clear by now, economic development, without institutional reform and the private sector playing its role, isn’t going to happen. It is also obvious the private sector can’t be subordinate to political power in order to make a difference to the free and competitive market.

There is no wonder that governments and international development agencies don’t master the political will to take advantage of Mo Ibrahim Foundation’s and CIPE’s resources, that would make substantial differences in a relatively short time, than all they did in the last century combined.