Fifty years of post-independence failure in Africa has been a tough but effective school for educating governments on policy reform. That is why experts believe that the mistakes made in the last commodities boom – when much of the revenue was either plundered or squandered – will not be repeated in the current upturn. But good governance is critical and it is essential to get all the key points of a governance agenda in place, because missing any one of them will destroy the entire programme.
“I believe that Africa is putting in place structures that will ensure the generation of wealth and income distribution and that will address the issues of poverty and disease,” says Nigerian president Umaru Musa Yar’Adua. Mr Yar’Adua was the key speaker on a panel dealing with Africa’s governance dividend at the World Economic Forum’s annual meeting in Davos, Switzerland, in late January.
Towards stability
One reason for optimism, says the Nigerian president, is that in the past 50 years, since most African nations gained independence, there has never been peace and stability. Africa’s governments and institutions are now working hard to ensure there is sustained peace and stability in the continent, he says.
“Without political stability and without peace you cannot have an environment conducive to growth,” says Mr Yar’Adua. “That is one thing that all institutions have realised, and we are working hard to ensure wars become a thing of the past.” As the first civilian leader to take over from another, following last April’s election, Mr Yar’Adua is able to talk about governance with some authority. As governor for Katsina State, he was among only a handful of Nigerian governors who publicly declared their assets before being sworn in. But managing a country of 130 million during an oil boom will still leave him with huge challenges. Nigeria has in the past been used as a case study by academics to show how oil wealth can be misused and actually set the development process back.
Various theories for the current improvements in African governance were examined in Davos. Suggestions that it is due to the spread of democracy or the impact of policy conditionality linked to aid programmes were rejected. The most plausible explanation is that governments have learned by their mistakes and are avoiding actions that would lead to bad outcomes such as hyperinflation (with the notable exception of Zimbabwe). “The best school in the world is failure,” said one speaker. “So on the whole we are not seeing brilliant policies, but we are seeing the avoidance of really bad policies.” Yet it was also agreed that African governments had completed the easy part of creating basic macroeconomic stability. African countries could not grow properly without substantial investment in infrastructure, an area that is a magnet for corruption.
“In Nigeria we have taken measures to ensure macroeconomic stability,” says Mr Yar’Adua. “We had a commodities boom in the 1970s and we know how we behaved and what the consequences were. We are behaving differently with the current commodities boom by putting in place instruments to channel this boom into economic growth.”
Beating poverty
Nigeria’s economy is growing at about 6% to 7% a year, but Mr Yar’Adua believes a rate of 13% is needed to raise incomes to a level that overcomes poverty. One factor mitigating against Nigeria, says the president, is the dearth of infrastructure such as power and transport in key areas of the country. There also needs to be investment in education. “Once this is addressed, together with the appropriate governance structures, it will ensure rapid growth,” says Mr Yar’Adua. Experts have identified five key decision points that need to be part of a solid governance agenda. With commodities, these are: how the rights are sold; how the revenues are taxed; whether the revenues are reported transparently; whether the money is saved; and whether the savings are invested properly. The problem is that unless all five are in place, the programme fails.
Mr Yar’Adua knows that he has to unlock Nigeria’s oil wealth and use it prudently if the story of the current commodities boom is to be different from the one in the 1970s. He wants to restructure the Nigerian national oil company to make it more transparent and to allow it to raise its own funds on the capital markets rather than relying on government. He is adamant that the private sector, not the government, will be the engine of growth. “There is this impression overseas that Nigeria has oil and is a wealthy nation,” he says. “It’s not true. We have the potential to be wealthy.”
Nigerian president Umaru Musa Yar’Adua
