April 10, 2006, The Telegraph

Commentarao / S.L. Rao

The author is former director-general, National Council for Applied Economic Research

I was in Addis Ababa, Ethiopia, in March for a conference to discuss the findings of a research project on the environment for competition in Africa. It was organized by Consumer Unity and Trust Society of Jaipur, a consumer activist and research organization, perhaps the only Indian non-governmental organization with offices in Nairobi and Lusaka, collaborative African research institutions and a substantial information base about laws and practices in competition. Also engaged in research, advocacy and consulting, CUTS had local research teams in many African countries to study competition law, policy and regulation.

The last time I visited Africa and Ethiopia was on an export trip I undertook in 1968. I was keen to see what changes had taken place since then. Foreign exchange allowances for travel by Indians then were very limited. So, many African countries had appeared prosperous compared to India. Most of my prospective buyers were Indian traders. Indians in East Africa were sending as much money as they could out of the country. They migrated to the United Kingdom and later Canada and Australia, leaving behind one member of the family to look after the local business. Today, most of Africa is the dismal continent, heavily dependent on charity, in the grip of aid agencies and consultants, with governance almost non-existent as politicians seek to perpetuate their power.

The Economist has its outgoing editor saying in his farewell editorial: “It is true that Africa is the continent that has tragically had regress, not progress, because of war, the ravages of disease, and decisions by too many governing elites to stick to kleptocracy.”

In 1968, East Africa, Ethiopia, Sudan and Egypt seemed unsafe and unstable. Streets in many countries had a forbidding police or military presence, themselves said to be predators. There was extensive corruption at high levels and tribal animosities. But one could hope that these countries that had only a little while back achieved independence from foreign rule or influence, would soon get down to the business of development. Jomo Kenyatta, Julius Neyrere, Léopold Senghor and many of the surviving great leaders of the African independence movements could lead them to prosperity.

In India too, the youth had great hopes that the young and modern Indira Gandhi would lead the country forward. In actuality, Indira Gandhi held up development of the economy. But the development work of the earlier Nehru years, many leaders in the Centre and states who had also fought for independence, and a strong functioning administration, ensured that there was no regression..

Unfortunately, most African leaders emerging with independence were tribal and not national in their loyalties, money-hungry and corrupt, and with little ideological base or vision for their country. Honest leaders like Neyrere were woolly-headed, with illusions about the virtues of socialism. For instance, he nationalized internal trade. Such measures took Tanzania into economic disaster.

No African country at independence had the good fortune of India in its leadership. Mahatma Gandhi, Jawaharlal Nehru and Vallabhbhai Patel as well as many others provided a vision for India and a thrust for its economic development. Centralized planning then created an industrial and infrastructure base. Continuation of central planning and allocation of resources under Indira Gandhi in the Seventies and early Eighties put back India’s development clock by at least a decade.

But in Africa, the colonial powers had done little to unify the nations whose boundaries had been drawn without regard to homogeneity. Aid funds were squandered on expensive consultants, stolen by politicians and administrators. Little was spent to improve the condition of the people. Almost every country went through years of fratricidal fighting between tribes, civil wars, and some even saw secession.

Unfortunately, this situation continues into the present day in almost all African countries except some like Botswana or South Africa. Economic growth is erratic and any transitory up-trend is due to charity, not fundamental changes in savings, capital formation, exports, productivity, and so on. Law and order remain uncertain. Politicians continue to be venal. Tribal rivalries spill over frequently into the streets. Bombs, frequent shootings, kidnappings, “car jackings”, dacoities and theft are common.

The “one model fits all” approach of international funding agencies and the dominance of consultants from developed Western economies have frequently resulted in policies that are unsuited to the stage of the economies and the institutional and skills capacities in Africa. Sensible policies are introduced but without creating the necessary enabling environment of laws, institutions, identifying, recruiting and training suitable people, building an adequate and recurring base of data and information.

African countries vary greatly in land area, resources, population, resources, education. In many instances the markets are not of a viable size for competition. While there has been some attempt at joining together to create larger markets through free trade areas, the attempts have been half-hearted and have had little effect. When it comes to infrastructure servi- ces like electri- city, telecommunications, railways, roads and airlines, there is even less attempt to join together to create more viable market sizes. It would make eminent sense for contiguous countries to join to form a common electricity grid or a common telecommunications system. It would enable more entrants who could compete. Electricity availability and quality could improve. But countries fear loss of sovereignty and little has been done.

Competition is possible if there is an enabling framework in place. When there are no standards for weights and measures and inspectors to enforce them, when packaging rules do not exist and consumers do not know the correct prices, when quality standards are not set out and enforced, or there is inadequate policing of manufacturers, retailers, and so on, competition becomes farcical. Not only must this enabling environment exist but there must also be means to identify and punish anti-competitive behaviour.

For many reasons such as small market size, dominance by one or more suppliers, poor information to consumers, competition may not exist. It is possible to enable the consumer to enjoy some benefits by simulating the effects of competition. But this requires independent and transparent regulation for issuing licences, determining tariffs, punishing anti-competitive behaviour and improving quality. In much of Africa such regulators either do not exist or are subservient to ministers and governments. Given the hunger for power that makes so many African leaders find ways to make themselves “Leaders for Life”, it is unlikely that regulators will be transparently appointed or be independent. The experiences of the few countries that have appointed regulators corroborate this.

We have similar problems of fissiparous tendencies, venal politicians, corruption and waste, but we have made progress, though very slowly.. Africa’s hope is in its youth, who must be given guidance and training. With a much better image, and having gone through similar problems, India can help. We should set up a programme that offers training to young educated Africans in socio-economic research, policy studies, methodologies for tariff determination, maintaining data bases, and so on.

We should also offer journalists in Africa exposure and training in independent regulation and governance by exposing them to regulators in infrastructure, pharmaceuticals, education, transport. The impact of such exposure on Africa could be out of proportion to the investment.

This news can also be read at following URL: