With a large regional market and youthful population, Africa should be on the cusp of greatness. Yet instead, it remains the poorest continent on earth. Analysts are conceding that Africa’s outlook is gloomy because the region is on track to miss poverty reduction goals. Successive African administrations have consulted multiple strategies to tackle the scourge of poverty with varying degrees of success; however, the plague of poverty has been persistent.
Combatting poverty in Africa is indeed a daunting task since some countries have yet to overcome geographical and environmental limitations. For example, the ravaging effects of the tsetse fly on the food market amount to an annual loss of $5 billion. Achieving developmental targets becomes even more elusive when corruption is added to the stew of problems. Corruption hampers growth by limiting the efficiency of institutions and discouraging foreign direct investment.
Corrupt states foster incentives for entrepreneurs to use wealth as leverage to manipulate government policy and the legal system to favor their interests. Such arrangements benefit a few people, but the costs are widely diffused throughout society. When political cronies are favored by government policy, the implication is that more innovative companies are marginalized, thereby lowering growth and decreasing consumer utility. The $7 billion that Nigeria loses yearly due to the corruption and inefficiency of its ports is critical to the narrative undergirding, according to a 2022 anticorruption report.
Duplication of tasks, excessive delays to the import/export processes, red tape, unscrupulous officials, and multiple layers of taxation were cited as some of the factors corroding the success of Nigerian ports. Corruption is inextricably linked to a lack of economic freedom. People often assume that regulations prevent corruption, when in reality overregulation facilitates opportunities for corruption and bribery. When commerce is lightly regulated, it’s easier to do business, and therefore the incentive to bribe workers to expedite transactions is significantly reduced.
More than anything else, Africa needs economic freedom to promote growth and good governance. Statist policies have derailed rather than stimulate social and economic progress in Africa. Instead of boosting industrial progress, the leftward lurch of African states led to economic stagnation and social immiseration. The example of postindependence Zambia illustrates that the adoption of socialist policies fostered poverty and entrepreneurial failure. Import substitution did not enable Zambia to achieve food security, as proponents intended, but it succeeded in making the economy less competitive and reliant on exports.
African leaders have repeatedly pursued statist policies to attain economic growth only to be disappointed in the long term. In 2016, Kenya’s central bank implemented an interest rate cap that was removed in 2019 because it curtailed credit to the private sector, damaged growth, and weakened the effectiveness of monetary policy, according to President Uhuru Kenyatta. Economic freedom is a proven strategy for advancing Africa’s prosperity. A report published in the International Journal of Emerging Markets argues that improvements in economic freedom stimulate growth in sub-Saharan Africa.
The findings reveal that economic freedom and institutional quality are complementary; therefore, focusing on both variables yields desirable outcomes. Economic freedom has a tremendous impact on Africa’s economic performance because the removal of trade barriers liberates the economy’s productive potential. Removing business restrictions increases output by freeing capital and technology to allocate resources.
Some African leaders have gotten the message and are planning to enact promarket reforms. Nigeria’s president, Bola Ahmed Tinubu, has expressed his commitment to promarket economic reforms and is expected to be closely scrutinized by global pundits. As Africa’s largest economy, Nigeria’s success would become an inspiration to the developing world and blacks in the diaspora. Since his ascension to office, Tinubu has removed expensive gasoline subsidies that incurred costs for the state and made it unprofitable for entrepreneurs to establish private refineries.
Further, on June 9, 2023, President Tinubu signed the Electricity Act 2023 into law. The objective of this law is to decentralize energy policies by enabling states to legislate markets for the generation and supply of energy to regions within their domains. Experts have been predicting that this law will bolster the competitiveness of Nigeria’s energy market and increase access to energy resources. Despite being oil rich, Nigeria is electricity poor with 43 percent of the population lacking access to grid electricity. Therefore, by encouraging more entrepreneurship, decentralization is expected to boost electricity provision in Nigeria.
Africa is buzzing with ideas, and the appetite for economic reform is growing; therefore, its leaders should respond to the demands of the people by leveraging economic freedom as a tool for growth.