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Mobutu Sese Seko, ruler of Zaire (now Congo) from 1965-97, was the archetype. Bluntly declaring that “democracy is not for Africa”, he ruled by decree, jailed his opponents, grabbed foreign businesses and shared them out among the elite. From the fattest minister to the humblest clerk, anyone with power tried to turn it to cash. The regime even forged its own currency; the contractors printing bank notes for the government were caught producing more than one note for each serial number, and pocketing the duplicates. Not surprisingly, inflation hit 9,800% in 1994. (The Economist, January 17 2004)
A further circumstance hindering foreign investment is Africa’s lack of privatization. Foreigners distrust African governments and blame these regimes for the economic despair of this continent. The Economist stipulates that to encourage investment, Africa must privatize faster. However, so far, African governments have only sold low impact assets such as motels. Western countries are requesting the privatization of larger industries such as utilities and telephone. Many privatization requirements are part of IMF and World Bank relief funds.
The emphasis western countries and international economic institutions place upon increasing the level of investment in Africa is hardly met with rapport by the continent’s intelligentsias. Kofi Buenor Hadjor, an Oxford graduate and the author of “Africa in an Era of Crisis”, considers the west’s preoccupation with bringing capitalism and democracy to Africa as an obsession. His chapter, “Bogus Capitalism” examines the negative consequences incurred by Africa because of foreign investment and implementing IMF/World Bank reforms. The total long-term debt of African was 125 billion in 1985. Much of this sum has been deemed unpayable as African countries suffered through a decade of low commodity prices that seriously impaired their ability to return the loans. Hadjor argues that if western countries are truly seeking relief for Africa, these loans should be forgiven. Another consequence of foreign investment delineated by Hadjor considers Africa’s dependence upon western nations. Many Africans see this wave of foreign investment as the re-colonization. However, this re-colonization is headed by corporations and banks rather than by military forces. This concept of re-colonization is the legacy of distrust that has developed as a result of past injustices:
African politicians have a tendency to blame all its ills on colonialism or its legacy, even in countries that have been free for decades. Many people believe in conspiracy theories; that western scientists created AIDS to kill Africans; that America was behind the war in Congo; that the IMF and the World Bank are, in the words of Namibia’s president, Sam Nujoma, “the imperialists’ well-organised machinery to get African cheap labour and raw materials for their economic development”. (The Economist, January 17 2004)
Despite its abundance in natural wealth, Sub-Saharan African (hereafter Africa) is the poorest region of the globe. Absent of adequate government implements to foster a healthy, capitalist economy, Africa has lagged further behind in terms of economic development. The liberal western nations blame Africa’s governments. They urge these Third World Nations to adopt International Monetary Fund and World Bank reforms. The central aim of these reforms is to increase investment; reasoning increases in investment equates increases in capital. Capital increases augments productivity and thereby gross domestic product. African intelligentsia, however, do not embrace foreign investment and IMF policies. In reaching an economic solution for Africa, we must examine the social structures that deter economic development, the reasons for foreigners’ reluctance to invest, and the flaws that are especially obvious to Africans concerning IMF or World Bank policies.
A central issue deterring development in Africa is property rights or the lack thereof. The lack of property rights is an obstacle to economic development because landowners are not able to mortgage homes to raise start-up capital. Mortgaging homes is the most common way to raise money for entrepreneurship in the United States, in Africa, often times this is not an option because less than 10% of the continent’s land is formerly owned.
For example, in Mtandire, a Malawian slum, a sturdy brick bungalow costs about $300. That is a large sum by Malawian standards; nearly twice the average annual income. But home-owners in Mtandire have enormous trouble making their assets work for them. One explained that she wanted to borrow $200 to expand her goat slaughtering business to meet a ravening demand for goat stew, but no bank would accept her house as collateral. Like the other houses in Mtandire, it was built on “customary” land. She had bought it from peasants who had farmed it for generations. The only proof that they had owned it was the say-so of the village chief. Banks need more surety than that, so the homeowner’s butchering business seems likely to stay small for the foreseeable future. (The Economist, January 17 2004)
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