Should Africans create own capital markets?

14 Oct, 2022 - 00:10 0 Views
Should Africans create  own capital markets?

eBusiness Weekly

Clifford Shambare

Capitalism is a veritable economic system that is made up of tangible and intangible components. So to a simpleton, such a system is virtually non-existent because to him, there is nothing to see.

However, to those who are familiar with the subject, capitalism is a living system that needs to be nursed in order to keep it alive and/or growing. Capitalism was founded on land ownership and the creation of related assets.

The latter comprise land, buildings, machinery livestock and money. Within land are minerals of perceived value, the topmost of which has been gold for a long time now. Following gold is the diamond whose value is now mired in some sort of controversy since the discovery of its synthetic form. Then there are those minerals such as the rare earth metals whose criticality lies in their properties that place them at the heart of modern technology.

Because capitalism is living system, it possesses all those attributes and/or characteristics that sustain life. These are a material component that needs to be fed “food” in its various forms.

In this case, these components constitute material goods as well as money and the services. The function of the services is to mobilise the said material components. This is a process that has sometimes been referred to as the mobilisation of ‘dead capital’, the latter of which comprises mainly, land.

The said services comprise conveyance and/or transportation systems — better known today as supply chains. In addition, they also comprise marketing, information (systems), legal, accounting and other services.

At this juncture, let us proceed by placing our emphasis on the material component of capital and capitalism. Our basis for this approach is that the latter is the base and basis of the whole system.

The major one of this component is land followed by machinery.

Land is where factories are built and where machinery is placed by its owner, the capitalist. And even though water and air can supply some of raw materials needed by the factories, land is currently the main source of same.

The other term for land is territory — a term that conjures in one’s mind — wars for the acquisition of same. That said, on considering this matter of land, we find mankind, or even animals, being wired to acquire territory — a material that is necessary for the sustenance of life. This explains why, most if not all, wars that have been fought this side of eternity—have been for land — that is, territory.

That being the case, if we examine critically, how mankind views this matter, we come across an interesting array of views attitudes and perceptions of same.  At the lowest level of economic development, people regard land as the raw source of food, or the source of raw food.

As we go up the ladder of economic development, we find them also regarding land as a place to put their dwellings on, and later, as a source for raw materials to build their houses and make their clothing. In sum, this is Maslow’s hierarchy of needs.

As we go up still, we find some nations and economic systems — specifically England — followed by the rest of the UK, then the USA, still taking cognisance of these basics but going further up to refine the system. They allocate someone title to own that land. This is the basis of capitalism itself.

So now, here we come to that point where land ownership assumes an all encompassing and formidable status. To the less developed economically, it becomes a matter of life and death. To the more developed, it becomes a matter of one’s quality of life.

Zeroing in on Africa (Zimbabwe included) we find this logic revealing a situation that has largely shaped the fate of the African lot. For a very long time, Africans have known that land is an important item in their lives. However, so far, they have not been able to create a system to make use of land to move to a higher level of economic development.

At their current level of development—economic development included — Africans want to continue to rely on a system that respects — almost reveres—property ownership. It regards it as an “all or none” phenomenon — meaning that, in order to live well or even to survive in today’s world, you have to respect property rights. In that realm, if you disrespect (someone’s) title to land, you kill capitalism and all it stands for.

This is where the whole matter drags Africans into an almost catastrophic condition (for them) since they still want to cling to archaic and rather amorphous land ownership systems.

But interestingly, the Chinese and the Swiss seem to be making economic progress with a similar attitude and/or “system” to the African one. So the next logical question to ask here is: Why and how are they managing to do that? Like Clem Sunter and Chantal Ilbury argue in their book; The Fox Trilogy, there are always alternatives to most scenarios in life. So it is with the relationship between land and capitalism. This implies that there should be alternative forms of capitalism that do not necessarily have to depend on title to property for their sustenance.

On looking closely into this matter, we find debt security being the major reason why capitalism needs title to land as an assurance for the recovery of that debt. Interestingly, though, even under such a system, we still find borrowers failing to pay back debt. This happens because of the intricate linkages that now exist within that system. One good example here is that of the bubble that started in the USA in 2009.

When considered in its totality, capitalism is a discriminatory system. This discrimination, that is not always obvious to the layman, expresses itself in a number of ways — all of them subtle. Racism is one major form of this discrimination. But because, in the current world order, with its many rights — racism is viewed as an evil phenomenon — those accused of practicing it have developed ways to attempt to hide it and its negative effects on some racial groups, mostly those with a dark skin.

On the other hand, those who are fighting racism have coined some terms to describe and hopefully, to expose it in the process. “Overt” (open and/or obvious) and ‘covert’ (covered and/or concealed) racism are such terms.

When it comes to capital, this discrimination has the effect of excluding the said races from the capital markets, nearly all of which are in the developed and emerging economies. In such markets, black managers are discriminated against in a number of ways, the most important of these involves the companies they manage being shunned by big capital investors.

Chris Gardner, a black American investor/owner of a stock broking company, ABC Auctions, in his book; “In Search of Happyness”, delves into this matter from an insider’s perspective, quite well. This same matter is also alluded to in one issue of The Financial Mail, a prominent South African magazine.

But again, the matter is not as simple as it may appear here. There is the matter of risk — a phenomenon that is much more critical in the capital and financial markets than anywhere else. Here we find Africans and their business systems being shunned by the markets because — being poor and not so well managed—they are associated with more risk than other markets that are owned and run by other racial groups. And ironically, here African (potential) investors tend to trust bigger capital than their own. This situation has the effect of further downgrading the African’s status in a market that is crucial for his/her economic growth.

Capital markets are at the heart of the economic prosperity that the so called rich world boasts of today. This effectively means that if you are not part of same, you will remain poor.

But then, all these are systems that have been created by some of mankind. So logically, it means that if you want to better your economic status, you have to somehow, force yourself into them. If you are unable to do so, you have to find alternatives to same. Logically, therefore, the easiest way (appears to be) to create your own in the same way that those others have done.

However, this is easier said than done. Creating a capital market is not the same thing as making it viable. If in doubt of this reasoning, consider that there are quite a number of such markets on the African continent today.

But with the exception of the Johannesburg Stock Exchange at number 15 on the world scale, they are hardly visible in the world financial market(s) arena. Here, curiosity leads us to ask the question: So why is this so?

This question takes us back to the beginning of this article where we describe the components that make capitalism tick.

In doing so we find that, apart from land — a component that we have so far, dwelt much on — there are still the other components, these being money, machinery and services. Of all of these, the most critical is machinery.

But then, machinery is only part of a bigger system — that is a factory. And a factory makes up an industry, that in turn, makes up several industries. The total makes up an economy.

What all this boils down to is that, in order to have viable financial/capital markets, you need to have factories first. But what proportion of Africans are aware of this fact?

That said, those at the top of the Africans’ lot — the political and business leaders and their technocrats; the economists — know this fact. So the next question to ask is this: If they know, what do they think of the matter? Not only that; what are they doing about it?

Here, at the risk of being monotonous, I am compelled to go back to Daron Acemoglu and James Robinson’s book: “Why nations Fail: The origins of power, Prosperity and Poverty”. This is an excellent book, whose result was fifteen years of research. It gives reasons why Africans—among other developing nations — have remained poor all these years.

Of course, much has been written about this subject. But to my mind, these two authors give a refreshing perspective to a subject that has almost become insipid, since so far, no solution has been found for the challenge of Africa’s poverty.

According to Acemoglu and Robinson, African leaders deliberately want those they led to remain in that state — a state of deprivation of a sort. This way they will remain beholden to them for sustenance. They go on to argue that such a condition does not engender a culture of successful entrepreneurship in the economy. And we know that the latter is a state that should obviously, lead to the creation of a prosperous economy based on a sound manufacturing system.

But however, there have been situations where some technocrats, specifically economists—including African ones—have often argued that today, there are economies that are prospering on service industries. But nothing can be further from the truth.

On looking closely into this aspect of the matter, we find that it is a matter of systems, values and even culture. Here I am arguing that nobody can create conditions that can make any difference to a situation on their own. They need others to do so; and these others necessarily come from a culture with its own unique set of values. In order to appreciate this logic, consider the Japanese the Chinese as well as the other Asian nations.

These peoples — particularly the first two — have taught us a number of lessons. The first and most important one is that anybody can create a sound monetary system — banks, money and all — from scratch. In order to clarify this argument, let us give examples here.

First of all, the Chinese invented paper money in 700 AD. The Japanese created the whole monetary system comprising the Bank of Japan, and proceeded to literally print money and putting it into the banking system. They deliberately founded their industries using that money. Notice here that there was no land involved in this process.

To strengthen these strategies they built formidable manufacturing industries in their economies. Without the latter, they would not have gone far in meeting their goal of achieving overall economic prosperity for their people.

Share This:

Sponsored Links