Africa must ignore Western advice in order to survive
TO SURVIVE the devastating impact of the global financial crisis, African countries must learn a simple lesson they appear not to have heeded since the end of colonialisation and apartheid: do not listen to the advice of global institutions and leading Western nations. For that matter, do exactly what these Western nations do.
Western countries are bailing out banks and strategic industries with public money. They are once again lifting tariff barriers for products from African and developing countries. Yet they discourage African countries from doing the same.
Global financial institutions such as the World Bank and the International Monetary Fund, while instructing African and developing nations to pursue irrelevant, if not destructive, policies are silent when industrial nations implement the opposite. African countries must stay away from the World Bank and IMF. If it is absolutely necessary to borrow, do so judiciously.
The success of the East Asian developmental states since the Second World War has much to do with ignoring the advice of the World Bank, IMF and leading Western nations; and actually doing exactly what Western nations did to grow their economies.
African countries slavishly followed what they were told by Western and former Soviet bloc or Chinese communists.
Others followed the World Bank-IMF and Western nations' injunctions to privatise their state-owned companies.
Since independence, most African countries - while pursuing foreign investment - sold off state-owned assets cheaply, as suggested by Western nations and global financial institutions. They made it easy for global firms based in their countries to repatriate funds.
Supposedly to make it easy for foreign investors to do business in their countries, African governments waived minimum labour and environment standards and did not insist on minimum levels of skills transfer.
Meanwhile, in South Korea, until the late 1980s, foreign investors were not allowed to have majority ownership in local companies, except in very restricted circumstances.
Foreign investors were compelled to transfer new technology and extend their international marketing contacts to local companies before being allowed to invest .
These African privatisations spawned corruption, as companies were sold off to cronies, ethnic buddies and foreign companies that bribed local officials.
In East Asia, developmental states set up developmental banks which financed the industrialisation of their countries by providing easy credit, loans and expertise to their growing industries.
East Asian developmental states identified sectors to be developed, and then build them up - rather than waiting for them to spontaneously develop. These governments used a combination of taxation, fiscal policy, research support, tariffs and judicious foreign borrowing to develop new industries.
At the same time, the import of products that could be manufactured at home and luxury consumption were heavily discouraged.
The global crisis has turned economic convention upside down. African countries must not be caught napping again: use the space opened by the global crisis to do exactly what Western nations are doing and what the East Asian developmental states are doing again.
They must pursue relevant industrial policies and make sure that those who manage the policies are the best talent available.
Furthermore, African governments must end corruption and act in the broadest public interest, rather than narrow factional or ethnic interests.
lGumede is the author of Thabo Mbeki and the Battle for the Soul of the ANC.