Kingsley’s view
Africa’s leaders spend time, effort, and resources chasing foreign business investment into their countries, but have not paused to ponder why their efforts have failed to transform the continent’s economies.
Most Africans remain poor, while investors cream profits. That’s because governments on the continent ignore the importance of corporate governance principles of strategy, risk management, transparency, and accountability that most private sector business corporations must play by. Until these standards are deployed to public-sector corporations, ministries, and other entities, most African countries will continue to chase a mirage.
Effective governance in the public sector is the first requirement for prosperity-creating market economies. But most African countries view the government solely as a domain for politics, rather than for actual governance. Leaders focus on utilizing the apparatus of government to win elections and keep supporters happy with appointments and funds from inflated and poorly executed contracts — what economists call rent-seeking. This culture of politics without governance renders many governments on the continent unable to deliver any real benefits to their citizens beyond a “performative democracy” of periodic election rituals. There is no social contract.
While the first casualty is Africa’s citizens, who remain impoverished by incompetent governance, the other important consequence is, perversely, the absence of enabling environments for business and investment. Thus, African leaders in reality seek investments into poorly governed spaces.
In private businesses, driven as they are by profit, there is accountability for non-performance in delivering shareholder value. In Africa’s governments and public-sector corporations, the notion that citizens are at least stakeholders, if not shareholders, and deserve accountability in the stewardship of public resources or institutions, is an alien one.
The upshot of this is that there is no conscious management of risk in African governments and public corporations. State failure, sub-optimal economic management and performance, and state fragility are often the consequences. This further weakens the prospects for inclusive private-sector-led growth. It also creates a vicious cycle. African governments must return to the drawing board.
A focus on strengthening governance effectiveness will yield several advantages. First, it will legitimize African governments with their citizens by discharging better the very purpose of government — providing security, administering taxes, creating a real social contract, and delivering social services. Second, this approach will strengthen public institutions and reduce corruption by increasing accountability. Third, good corporate governance will improve regulatory frameworks that govern African economies and improve business environments for investment. Without effective regulation, a level playing field will not exist. The right balance between regulation and facilitation of business will attract capital, which naturally seeks out such environments for growth and productivity.
African countries must better match their aspirations to specific strategies to achieve goals. External props cannot replace the critical role of effective public sector governance.
Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria, is the president of the African School of Governance in Kigali.