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Monday, October 26, 2020

Financing development in Africa

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By Francis Aubee (Jeggan)

For growth and development in Africa, it has always been viewed through a top-down paradigm which makes it cumbersome to proffer solutions. One of the first mistakes in solving development issues is the failure to properly diagnose the problems plaguing societies. Colonialism, political instability, poor infrastructure, corruption, dictators, bad governance and many more are often listed as reasons for the lack of development, and rightly so in many regards. However, in contemporary times, viable and local solutions are needed to solve local problems rather than umbrella policies and panaceas that do not always work as desired. Therefore, as an African leader, these are some of the ways in which development and transformation could be financed, bearing in mind geographic, social, economic and political differences. The focus here is simply to propose methods to finance development.

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First, taxation. Taxation is a very important revenue generation tool for any country. In most African countries taxation is not often implemented effectively; few people pay, most evade paying taxes, and tax collectors are not often transparent and accountable. In terms of a taxation system, it is recommendable to adopt a flat tax rate system in which everyone pays the same percentage, therefore, it generates enough revenue for the government to provide social services and undertake projects that will aid development. While a flat tax rate might seem harsh on the poor, it gives the incentive to work and earn more, and if taxpayers money is used effectively, the poor will not be stripped off their human dignity. Big corporations and industries should be taxed an extra 2–4% as part of their contributions to the development of their home/host country. If taxes are not increased, then the existing tax rate(s) must be strictly enforced to prevent tax evasion. It is imperative to have a proper enforcer of taxation in order to account for government revenue.

Second, reduce the size of government and cut costs. Governments have become too expensive to run with very little to show for it. In a bid to bolster national development, duplicated offices, agencies, ghost workers, miscellaneous and unnecessary travel expenses should be cut off. A huge amount of money can be saved and redirected towards economic development and infrastructure by reducing the size of government. The executive and its bureaucratic nature leaves a lot of people deriding government and its efficiency. To propagate growth and development, a sense of urgency must be injected into the bureaucracy. Furthermore, an efficient government produces results and saves costs incredibly. Fiscal austerity measures are necessary to finance development and create transformation.

Third, foreign investment not foreign aid. Creating a suitable environment for investors to come in and invest in different sectors and industries within the economy is good for development. Foreign investment in the form of manufacturing companies, technological hubs, assembly plants helps to create employment, increases tax revenue and improves the general outlook of transformation from agrarian societies to industrial and tech driven ones. Foreign investments are often long-run initiatives that need the right ingredients in order to bolster transformation and change the course of development.

Fourth, privatization and commercialization. A government cannot fully execute its programs if it does not privatize and commercialize some of its services and agencies. While controversial and likely to face strong criticism, this is one way to boost efficiency and transform certain sectors of the economy which are slow and/or reversing backwards. Just like taxation, commercialization helps to generate revenue while providing more efficient services to the public.

Also, to create a transformation agenda that can boost development, African countries need to double up their efforts in joining the digital revolution and also become partakers of a digitalized economy. Digital technology must be a key feature in linking rural areas to urban ones, and the role of the internet cannot be overemphasized. However, the cost of making calls and using the internet in some places is too expensive to the point that it has become a luxury. If adequately used, there are endless benefits that local economies can enjoy from partaking in an internet driven digital world with tools readily available to catapult innovation, and transform societies to meet 21st century needs.

In addition, the African Union, and other regional bodies such as the ECOWAS should be structured to lead financing operations for development and transformation through low-interest loans without conditions similar to the Washington consensus. As contributors to the African Union, member nations should be able to call upon the organization for financial help. In addition, there should be a yardstick to measure progress overtime, thus testing the efficiency and impact of various policies.

Financing transformation and development begins at home, therefore, credible financial institutions and instruments must be present. Central Banks are responsible for selling government securities and debt instruments to raise funds. Bonds, treasury notes, treasury bills and other securities are bought and sold based on the ability to repay as stated, this means that the more credible securities are the more likely investors would invest. This is a very standard financial practice across the world, but in Africa not so much.

Development and transformation will not be possible if the private sector is not involved. As an African leader it is imperative to engage the private sector of the economy to invest, hire and expand their capabilities. Government should never be the biggest employer of labor, therefore, the onus is on the government to provide enabling economic environments for the private sector to thrive. This can only be done right by providing a viable, safe and prosperous business and economic climate for investment to take place. How can it be approached? By providing the framework — constant electricity, access to water, good transportation system, security and protection of lives and properties, intellectual property rights, an independent judiciary and a well informed and enlightened citizenry — for investors to emerge and boost economic activities, this can be a cornerstone. Development does not occur in a vacuum, moreover, small and medium enterprises — the backbone of strong economies and huge provider of jobs — cannot operate in unstable, dilapidated infrastructure and economic conditions.

As a leader of a developing nation, it is imperative to diversify the economy and bring marginalized sectors together. By diversifying, it reduces dependency, creates new jobs and platforms for youths to explore and hone their craft. Diversification of the economy also helps to prevent the Dutch disease. There is so much potential in the African youth, and this is something that cannot be ignored as an African leader. The need to invest in human capital is extremely important if the transformation of society is to happen. This will help reduce brain drain, if the right intellectual structure is in place — one that promotes and protects property rights, and rewards creativity rather than stifle it.

To illustrate, take a look at the Gambia. For starters, the Gambia needs to get the very basic essentials — electricity, transportation, water, food security, and the rule of law — to function and function properly. Unless one is being naïve, it is apparent that there are numerous development ideas and frameworks to use, with endless fountain of knowledge from its’ citizens — home and abroad. Thus, it cannot be for the lack of knowledge or the lack of trying. But it takes more than just technocrats and intellectuals to achieve development agendas. The lack of will to implement development frameworks and policies is often where the problem lies. Ignore the elephant/legacy projects, do the basics right and the Gambia will be headed in a positive direction.

The Gambia will benefit from grassroots development that is inclusive of everyone. Many would ask, “why not industrialize like Rwanda and other countries?”
Industrialization will not happen if there is no framework for it. Moreover, it would be ignoring the specific challenges facing the Gambia, while assuming that the Rwanda model is the right fit. Models are models. No two countries can have the exact same development trajectory.

To this end, as an African leader, these are some of the mechanisms that should be adopted to finance development and foster transformation in domestic economies. The implementation of these policies should be over the short, medium and long term. Devoid of any cankerworm (corruption, neo-patrimonialism, etc.), acquiring the desired end results is not rocket science. It is time for Africa and its leaders to make the decisions that matter and act on them. Enough with the clarion calls. You would not let a quack doctor treat you, so why let “experts” who know nothing about your real issues provide solutions?

Francis Aubee is a Gambian, currently pursuing an MSc degree in Emerging Economies and Inclusive Development at Kings College London. Francis graduated in December 2018 with a BA in Economics and a Minor in Political Science from McDaniel College, USA. Francis was inducted into the Omicron Delta Epsilon (Economics Honor Society) and Pi Gamma Mu (Social Sciences Honor Society) in 2018. Francis is a budding freelance writer and an avid football fan.

 

Source: medium.com

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