Africa and Economic Empowerment Policies

Africa Economic Empowerment Policies
African economic empowerment is a necessity

AFRICANGLOBE – Capitalism with skewed economic empowerment policies is like modernizing socialism. Depending on perspective, most economic empowerment policies on the continent are not only an obstacle to investment from beyond a nation’s borders, they are only beneficial to some individuals.

Africa’s problem might be internal. The continent will continue to suffer if authorities keep drafting retrogressive economic empowerment policies which hamper economic growth and enriches a fews. For the record, this column does not advocate for government freebies packaged as economic empowerment policies.

This past week, Africa’s richest man had something to say about South Africa’s Black Economic Empowerment laws. Aliko Dangote, sharply criticised the BEE laws, and called them an obstacle to investment from other African countries.

“In Nigeria, we had these laws demanding that any foreign investor had to have a Nigerian partner. But that just dried up the capital flows. Now anyone can do business with anyone in Nigeria,” says Dangote.

“If you want real economic empowerment, then you have to do this based on merit and increased access to the capital markets,” he said, adding, ”the whole world needs capital. If you make it difficult for me to invest in one country then i will move my capital somewhere else where it is easier to invest.”

“In my view, we are all African brothers and sisters. There has to be a review that encourages Africans from other countries to participate in the South African economy,” said Dangote.

“If I want to invest and then i am forced into a marriage with someone who does not have the same appetite as me, or who does not have the equity behind them, then we have a problem,” added Mr. Dangote.

His formal speech to the South Africa-Nigeria Business Forum, included highlighting Nigeria’s two major strengths, which he stated were, ”One is that we are a nation of entrepreneurs and the second is a banking system that is locally owned and understands the risks of doing business in our country.”

In any case, this is coming from a man with a 64 percent stake in Sephaku Cement, which has assets totalling about $600 million in South Africa. By contrast, it cannot be doubted that a successfully implemented economic empowerment policy can give disadvantaged and marginalized people the opportunity to become more economically active by providing them with skills and assisting with enterprise development, whilst improving their livelihoods and reducing poverty.

However, the sad reality is that only a fraction of the population has benefitted from these economic empowerment policies, and there has been a limited level of job creation. Around the continent, there is some controversy surrounding economic empowerment policy implementation, which is arguably an elite enrichment exercise that favours the wealthy whilst the rest of the populations remain in poverty.

Nevertheless, there is sufficient evidence that the controversy around the empowerment policy will continue, unless manipulation of the system by both formerly disadvantaged and advantaged individuals, mainly the politically connected, can be halted. Due to the ills of the past, most ordinary citizens who should be beneficiaries of the policies, fail to do so. And due to the limited skills levels and experience, many who must benefit are considered unfit partners.

Meanwhile, a grey area of concern is always the issue of striking a balance between promoting the empowerment of local citizens, whilst at the same time not scaring away domestic and foreign investment. In South Africa and Zimbabwe for instance, after the pronouncements of their different empowerment policies due to uncertainty on the part of overseas investors, the direct foreign investment dropped.

It is always difficult for any international investor to be willing to take up any indigenisation offer, in which they will become minority shareholders and effectively have no authority in their investments after sinking in a substantial investment. Moreover, if these policies can make a billionaire have second thoughts about his investments, the growth of these economies will be hindered by the signals they send out to the investor community.

Whether these empowerment policies can become shrewd bargain-hunting, state arm-twisting manoeuvres or over-ambitious empire-building exercises remains to be seen. Bad news seems to always be coming from the investor community, as its risk aversion reaches the extremes and the capital flow freeze – this is a danger signal.

On the face value, it may not seem to matter, but on the long-term, the effects will definitely be felt within the economy. It is always tempting for politicians to throw up new empowerment policies with poverty alleviation and job creation in mind, even if such a response, though on an individual government basis seems appealing, however when it becomes continentally widespread it is collectively futile.

“Controversy around empowerment programmes intensifies when political leaders use them as a political tool. In such circumstances, the key question that remains to be answered is that, “Are the objectives of these programmes still to empower the previously disadvantaged groups, or is it becoming a political tool to become more popular, (within the electorate), yet only the few in the political circles benefit in the name of empowerment?” Controversially, what may be regarded as “politicising” the empowerment programmes remains a challenge,” wrote Anthony M. Makwiramiti in a discussion paper.

“Another area that is worth mentioning relates to the problem of “fronting”. This is a situation were the previously disadvantaged figureheads embark on fronting to access state contracts, on the basis of the provisions of the preferential procurement. These circumstances suggest that the Government and policymakers in each country should brace themselves in the fight against corruption and greed, which has become a disease in many African Governments.

In the extreme case, a government may turn a country into the least attractive investment destination depending on how the empowerment is implemented and how enterprises are expected to comply with the legislation,” he further elaborated.


By: Nathaniel T. Mafemba