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Where to from here? Finding the right economic elixir for Africa’s post-Covid recovery - Part 2

Africa continues to balance its books by begging and by borrowing. We perpetuate the extractive, harmful colonial economic models as our way of giving thanks, by paying more to import the finished goods produced using our natural resources than we received for exporting them in the first place. Matsepe Tsiu makes the argument that in order for our continent to start trading on our own terms, we must get out of the debt trap.

Published 12 August 2020

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For Africa to truly rise, the sun must set on the status quo. According to an April 2020 article by Joe Bavier, Cheng Leng and Andrea Shalal, Africa as a continent owes about $143 billion to China alone. According to a 2019 report released by the Organisation for Economic Co-operation and Development [OECD], Africa received $52.8 billion in net overall development aid in 2017. For all our rich potential, and our valuable natural and human resources, we are stuck on a path of pain and poverty. I argue that our governments must serve us better, by becoming lean and efficient, by imparting skills and by creating and capitalising on opportunities.

There is an implicit belief that it is not only suitable but sustainable for a government to continually spend more than it generates in revenue and that it need never worry that the consequences will catch up with the country. This is clearly unsustainable.

We need streamlining, efficiency and effectiveness

Government short-term expenditure must be reduced in favour of productive and effective long-term investment, serving needs that have been rigorously identified, assessed and verified. Clamping down on tax evasion, corruption and other leakages from the fiscus will recover billions of dollars. This money can then be reinvested in our continent to create new industries, boost existing ones, provide skills training and raise the general standard of living.

New industries need new skills. New industries create new jobs. If our governments then step in and provide training to unskilled, unemployed and transitioning workers, they will be able to contribute to their communities, whose dignity will be restored and they will have hope for the future. Once created, the new industries must be sheltered in their infancy, by means of tariffs on imports and subsidies on exports, because exposing infant industries will lead to their demise. We must produce our own essentials, as only then can we begin creating value and exporting. We need the production capacity if we are to become truly independent.

How to boost government revenue

Using taxes to make negative-externality events unfeasible for much of the populace will boost government revenue significantly. For example, Singapore is short on space and so deems cars on the road as sources of negative externalities: congestion, noise and pollution. Singapore imports all its vehicles and requires that various taxes be paid, and licences be purchased by their prospective owners. In an article on Dollars and Sense, Timothy Ho explains that by this mechanism, a Toyota Corolla with an open market value of $19,146 can yield tax revenue of $57,114 . By applying similar logic to negative-externality sources – think of sugar or carbon emissions – we could obtain large revenues with which to bolster continental public health and, by extension, the continental economy.

The importance of political will

Economics follows where politics leads. Our governments must become more meritocratic. The current setup allows our leaders to serve themselves before they serve us and we collectively squander our potential as a direct result. Incentives must be aligned and competence must dominate. Only with the political will in place can the economic objectives be achieved in our lifetimes.

Only the strong sit at the high table of power. Only the strongest sits at its head. We must increase the fitness for purpose of our governments, create jobs and impart skills. We must feed and protect our industries. We must align our interests. Only by so doing, will we set ourselves truly on a trajectory to triumph and manifest in our lifetimes the Africa of our dreams.

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Mid-year Workshop Reflection: Learning to love my shadow

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