Globalization and the Cultures of Business in Africa: From Patrimonialism to Profit

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Can Africa develop businesses beyond the extractive or agricultural sectors? What would it take for Africa to play a major role in global business? By focusing on recent changes, Scott D. Taylor demonstrates how Africa's business culture is marked by an unprecedented receptivity to private enterprise. Challenging persistent stereotypes about crony capitalism and the lack of development, Taylor reveals a long and dynamic history of business in Africa. He shows how a hospitable climate for business has been spurred by institutional change, globalization, and political and economic reform. Taylor encourages a broader understanding of the mosaic of African business and the diversity of influences and cultures that shape it.

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1. African Business and Capitalism in Historical Perspective

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AFRICAN BUSINESS AND CAPITALISM IN HISTORICAL PERSPECTIVE

INTRODUCTION

Many contemporary observers tend to portray business in Africa as a fairly recent phenomenon or a colonial import. This ahistorical view has advantages for those subscribing to Afropessimist and neopatrimonialist positions, who use it to justify continued skepticism about the prospects for Africa, particularly for black business in Africa, as well as for the enthusiastic globalizationists, for whom it provides evidence of the novelty of business on the continent. This portrayal, of course, is inaccurate, as historians have documented the fact that business in Africa has thrived for centuries and has involved both indigenous African cultures and those from outside the continent. The trans-Saharan trade flourished from about the seventh through the sixteenth centuries and established the economic foundation for numerous African kingdoms and city-states. Later the Atlantic and Indian Ocean slave trades proved lucrative to Europeans, Arabs, and many African middlemen and kings alike. The period of “legitimate trade” that followed saw European coffers further engorged. And finally, during the late nineteenth and twentieth centuries, colonialism and imperialism yielded a tremendous increase in raw material flows to European factories and consumers, as well as the opportunity for European settlement and exploitation—which resulted in the establishment of many enduring commercial enterprises—in various parts of the African continent. Moreover, throughout each of these epochs, Africans continued to engage in commercial activity.

 

2. Institutional Change in the 1990s: Economic and Political Reform

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INSTITUTIONAL CHANGE IN THE 1990s

Economic and Political Reform

INTRODUCTION

Some scholars regard the 1990s as something of a “lost decade” for Africa. In the wake of the calamitous 1980s, it appeared the region was mired in “permanent crisis.” Although economies began to show signs of recovery by the mid-1990s, there were genuine questions about sustainability; politically, democratic transitions were faltering. The economic hardship and political oppression suffered between 1979 and 1999 is well documented, and countless observers were properly dismayed at Africa’s dismal performance, but what it is less well acknowledged is to extent to which Africa’s economic and political institutions and ideologies have also changed dramatically in the past two decades.1 This chapter explores the origins of those changes in the 1980s and 1990s and examines how various aspects of liberalization affected business in Africa. As we begin the second decade of the twenty-first century—admittedly with the benefit of hindsight—the 1990s in particular look decidedly different; I contend that this period was in fact a critical juncture for the improvement of the political and economic environments for business.

 

3. Business, the African State, and Globalization in the New Millennium: Transnational Influences and Domestic Responses

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BUSINESS, THE AFRICAN STATE, AND GLOBALIZATION IN THE NEW MILLENNIUM

Transnational Influences and Domestic Responses

INTRODUCTION

In Africa, the 1980s were a period marked by economic and political stagnation and exhausted statism, whereas 1990s ushered in sweeping changes. But if Africa throughout much of the 1990s was characterized by a liberalization and democratization imperative, despite very mixed results, events in the second half of that decade were paradigm-shifting, as both Africa and its international partners alike reacted to the failures of politics and of policy as well as to new exogenous forces. In other words, a high degree of learning occurred internationally, as well as at the national and societal levels, including that of business. The Washington Consensus began to unravel, and its decline accelerated in the wake of the 1997 financial crisis in Asia, which eroded confidence in its neoliberal prescriptions. By the start of the new millennium, a number of new developments had begun to transform much of the traditional thinking about African political economies, especially about the role of and prospects for the private sector. Thus, the beginning of the twenty-first century also laid down a significant marker for Africa and particularly for business on the continent.

 

4. Foreign Investment beyond Compradorism and Primary Commodities: The Role of the Global South

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FOREIGN INVESTMENT BEYOND COMPRADORISM AND PRIMARY COMMODITIES

The Role of the Global South

INTRODUCTION

If Africa had a dollar for every time a scholar, policymaker, journalist, or casual observer noted that “Africa is rich,” the statement might actually be true. Or at least it might have some validity beyond the geologically based wealth to which that expression almost universally refers. Without question, Africa does have stunning natural resource wealth. The continent boasts the world’s highest reserves of platinum and diamonds. Africa is home to approximately 10 percent of the world’s proven oil reserves, 8 percent of its natural gas, and 40 percent of its gold deposits. Uranium, copper, cobalt, columbite tantalum, chromite, coal, asbestos, and gemstones are found in abundance, not to mention plentiful timber, fisheries, and forestry resources. And hydrologic resources in the Congo Basin alone could supply 150,000 megawatts of power, far more than the entire continent’s present consumption. These abundant natural resources have attracted outsiders for millennia, but it was not until the colonial period that the extraction of these resources was truly transformed into a modus vivendi for Africa’s unequal entry into the global economy.

 

5. From Patrimonialism to Profit? The Transformation of Crony Capitalists and Bureaucratic Bourgeoisies

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FROM PATRIMONIALISM TO PROFIT? THE TRANSFORMATION OF CRONY CAPITALISTS AND BUREAUCRATIC BOURGEOISIES

INTRODUCTION

The prevalence of crony capitalism in sub-Saharan African polities, from neopatrimonial regimes to stable political economies, has formed part of the subtext of each of the preceding chapters. In effect, the pervasive analytical frame of neopatrimonialism suggests that “modern” state institutions in Africa are but a façade, and this extends to thinking about markets as well. Those who consider African politics to be defined by neopatrimonialism assume that African business, at least business as conventionally understood in the West, is a highly dubious proposition because of the endemic corruption found in such environments.1 To them, an autonomous private sector, at least one with any clout or capacity to transform the economy and the state, faces impossible odds; it will be constantly penetrated by neopatrimonial state elites and therefore has no hope of playing a transformative role in the political economy.

 

6. Going Continental, Going Global: Africa’s Corporate “Giants”

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GOING CONTINENTAL, GOING GLOBAL

Africa’s Corporate “Giants”

INTRODUCTION

The champions of the view that Africa is “open for business” display an almost unbridled enthusiasm for Africa’s private sector development prospects. Even those who insist that business in Africa is an exercise in intrepidity, such as the producers of the preposterously titled 2009 CNBC series “Dollars and Danger: Africa, the Final Investing Frontier,” wish to convey that there are great opportunities for entrepreneurship in Africa.1 Notwithstanding the enthusiasm of this crowd for business on the continent, their interest is mainly in the potential of small- and medium-scale enterprises, which tends to be the focus of most policy initiatives as well as academic research. Indeed, the principal target of private sector development programs, as described in chapter 3, is expansion of SMEs. Likewise, though their aim is analytical rather than promotional, Ramachandran, Gelb and Shah similarly focus on medium-sized firms, analyzing the constraints faced by entities of this size.

 

Conclusion: Prospects for Business in Africa and African Business

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CONCLUSION

Prospects for Business in Africa and African Business

THE RELEVANCE OF HISTORY

Much of the modern history of Africa is grim, featuring as it does slavery and colonialism and dictatorship and decline. Africa’s present-day conflicts in places such as Sudan, the Democratic Republic of Congo, and Somalia figure prominently in Western and other accounts of the continent, perhaps eclipsed in coverage only by the devastation of HIV/AIDS. The sense of a “continent in crisis” is never far away from most people’s imaginings—or from the next magazine cover to feature Africa. In the midst of this apparently pervasive despair, the idea that there might be a thriving private sector and bona fide business class emerging is practically unimaginable for most observers. The prevailing popular view of business in Africa is commensurate with the dominant narrative of the African continent: a vicious circle of abiding pessimism reinforced by unrelenting chaos.

This grim history is relevant, even important, in considering the terrain of African political economy and, indeed, the place of business within it. Yet as this book has argued, it is equally critical that we not allow ourselves to get too enmeshed in Afropessimism, lest we miss both the diversity and dynamism that also characterize in modern sub-Saharan Africa. Thus, in many respects, I admire the efforts of the Africa business boosters; this valiant minority, perhaps best represented recently by David Fick and Carol Pineau, seeks to redeem Africa in the face of an onslaught of Afropessimism that has become the reductio ad absurdum of too much contemporary “analysis” of the African continent. The cases highlighted by Pineau in her film Africa: Open for Business are undeniably authentic—and therefore illustrative of genuine business development and progress throughout the continent. However refreshing I find such perspectives, there is nonetheless a hint of unreality about them; their optimism is overgeneralized and their accounts insufficiently critical and analytical. I have attempted to hew to a middle path in this book, between such untempered optimism on one hand, and the maladroit attempts to tar all of Africa with one neopatrimonial brush, on the other.

 

Appendix

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APPENDIX

Table 1. Exports of Merchandise and Services

*Measured in USD at current prices and current exchange rates.

Source: UN Conference on Trade and Development Statistical Database, http://unctadstat.unctad.org

Table 2. Net Domestic Credit

*Adjusted for exchange rate fluctuations. Data reported in LCU. Average exchange rate per year used for conversion to USD.

Source: World Bank Development Indicators and Global Development Finance, http://databank.worldbank.org/ddp/home.do

Table 3. Foreign Direct Investment in Reporting Economy (FDI Inward)

*Measured in USD at current prices and current exchange rates.

Source: World Bank Development Indicators and Global Development Finance, http://databank.worldbank.org/ddp/home.do.

 

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