President Mbeki's brother: only the private sector will make Africa rich

By Alex Singleton | 14 June 2005

Moeletsi Mbeki, the brother of South Africa's President, says that the private sector is key to modern economic development in Africa. But, he says, African leaders and Western donors are holding it back. On the website of his organization, the South African Institute of International Affairs, he argues that:

foreign donors could play a more constructive role than they are doing at present through their current efforts to sustain the political elites and African states with budgetary support and the like.

Instead of giving more money to African governments, Mbeki says donors should providing the expertise to help establish independent financial institutions like credit unions and savings banks and help shield them from political elites.

Moreover, African governments need less power and the private sector more:

Africa's private sector is predominantly made up of peasants and secondly, of subsidiaries of foreign-owned multinational corporations. Neither of these two groups have the complete freedom to operate in the market place because they are both politically dominated by others - non-producers who control the state. Herein lay the weakness of the private sector in Africa that explains its inability to become the engine of economic development. Africa's private sector lacks political power and is therefore not free to operate to maximize its objectives. Above all, it is not free to decide what happens to its savings.

African elites have prevented peasants from reinvesting their earnings in machinery to improve their productivity:

Fundamentally, the political elite uses its control of the state to extract the surplus or savings that if the peasant were free to retain they would have invested in improving their production techniques or to diversify into other economic activities. Through marketing boards, taxation systems and the like, the political elite diverts these savings to finance its own consumption and the strengthening of the repressive instruments of the state.

The economic looting of multinational companies after independence means that international investors are wary of investing in Africa:

When the colonialists retreated from the 1950s onwards, these colonial subsidiaries [Western companies] lost their key protector, the colonial state. Before long they, like the peasants, fell prey to the appetites and whims of the new African political elites who controlled the newly independent African states. The lucky ones were nationalized and their owners were therefore paid compensation; the not so lucky ones were 'privatized' [confiscated by individual politicians without compensation.]

Moeletsi Mbeki's comments are in stark contrast to those of Gordon Brown who thinks that simply throwing more at African governments is going to bring prosperity. Mbeki recognises that the West should be helping get more private investment into African and helping improve the institutions that enable business to thrive.