Parliaments Can Help Create Inclusive Prosperity in Africa

By Kingsley Moghalu

Africa stands at a historic inflection point. In the next 25 years, another one billion people will be added to our continent’s population, making Africa home to one in four human beings on earth. Yet the structure of most African economies today is almost exactly the same as it was at independence six decades ago: overwhelmingly primary-commodity dependent, minimally industrialised, and dangerously vulnerable. The question before us is no longer whether Africa needs structural economic transformation. The question is whether Africa’s legislatures — the bodies constitutionally mandated to make laws, oversee the executive, and represent the people — will rise to become the strategic architects of that transformation, or remain passive bystanders while global forces determine our future.

Legislative leadership is one of the missing variables in Africa’s economic equation. Parliaments that understand their power and use it boldly can shift Africa from a continent of raw material exporters to a continent of producers, innovators and global rule-makers. Before I discuss the structural context of Africa’s economies and how we can move forward with reform, it is necessary to address some foundational understandings that we all – and certainly, lawmakers – should have. Without these understandings, legislatures will not be able to make laws that can transform the economies of African countries for the better. These understandings revolve around the philosophical foundations of wealth creation, which should then guide frameworks that are legislated.

Socialism suffered a stroke in 1978, when China began its shift to a market economy.  It had a heart attack and died in 1990 as the Cold War ended with the collapse of the Soviet Union . Capitalism in various forms is now the prevailing framework of economic activity worldwide. We take this for granted. But, why is it that capitalism has created national wealth in the western world, and has done so in Asia, but most Africans remain poor, with 80% of poor people in the world by 2030 projected to be in Africa?. In other words, why has capitalism failed to create broad-based, inclusive wealth across our continent? The answer is that capitalism is a philosophy, and African legislators and policymakers have failed to understand the philosophical foundations of capitalism and how to apply these understandings in law and policy that guides economies in the continent. We are focused on mere activity but not on causative correlations, on form but not on substance. We consider philosophical inquiry as abstract, but do not understand that there is no outcome – positive or negative – without a foundational cause that has roots in some philosophy or the other.

To quote the political economist Adam Smith in his classic work The Wealth of Nations (1776), “By directing [his] industry in such a manner as its produce may be of the greatest value [a man] intends only his own gain, and he is, as in many other cases, led by the invisible hand to promote an end which was no part of his intention”. Smith was saying that self-interest and guided market forces generate commercial exchanges that create wealth for everyone even though in engaging in such activities in the first place, we seek mainly our individual benefit. Of course, we know that market forces are not always rational and perfect, and that there must also be the “visible guiding hand” of the state through at least some regulation of the marketplace, without taking on the role of the market itself by legislating prices.

The most important foundational requirements for capitalism to create wealth in Africa as it has done in the West and Asia, are three must-haves: property rights, innovation, and capital. Property rights means the need for individuals to own property (land, other physical property, as well as intellectual property) in perpetuity or at least for the very long term. In reality, land in most African countries is owned by the state, and citizens only have leases on it. This traps the potential for freehold ownership to create wealth by limiting how such property can be transferred freely to generate capital or investment, or both.

Innovation means new scientific and technological inventions, or new methods or ways of doing things, that increases productivity. In most African countries with the exception of South Africa, the levels of funding of innovation through research and development (R &D), both by the government and by businesses and corporations, are extremely low.

Capital as a requirement means that this driver of productivity and investment is essential for the markets to thrive and create wealth for participants in economic transactions. You can’t be a successful capitalist or run a successful capitalist-based economy without capital. Yet we know the huge constraints on access to capital for individuals and businesses, especially those at the bottom of the pyramid. There are several reasons for this reality. They include the cost of capital owing to infrastructure deficits (e.g. the absence of electricity and the consequent embedded costs of generator-based power), as well as anti-inflationary monetary policy.

Africa’s economic model is still largely extractive and rent-seeking:

•  70–90% of export earnings in more than 20 African countries come from primary commodities (oil, minerals, cash crops).

•  Manufacturing contributes only 11% of GDP on average (compared to 25% in East Asia in the 1980s when they began their ascent).

•  The continent has de-industrialised since the 1980s under structural adjustment programmes that removed tariffs and industrial policy tools without replacing them with anything else.

Meanwhile, the global economy is being reshaped by four irreversible forces:

•  The green energy transition (and green minerals) revolution

•  The digital and fourth industrial revolution

•  The re-shoring and “friend-shoring” of supply chains after COVID and geopolitical tensions

•  The rise of economic nationalism everywhere else (U.S. CHIPS Act, EU Green Deal Industrial Plan, India’s PLI scheme, China’s Made in China 2025).

If Africa does not industrialise deliberately and rapidly, we will simply become a source of cheap critical minerals for everyone else’s green and digital transitions — while remaining poor and jobless. Legislatures must therefore ask: Are we making laws for the economy of 1960 or for the economy of 2050?

Economic transformation never happens in governance vacuums. Strong, accountable institutions are the foundation. Parliaments can and must:

• Enact laws abolishing state ownership of land (but without prejudice to the state’s right of “eminent domain” under properly defined circumstances) and allowing citizens own land in freehold.
• Create incentives in such legislation to avoid land speculation and encourage sensible conversion of land ownership to generate wealth-creating capital in economic transactions.
• Enact laws to promote “pipeline capital” to counteract the cost of capital and access-to-capital challenges. Such pipeline capital can be generated through central banks and lent to microfinance and development banks at single interest rates, with strict caps on lending rates by such institutions subject to regulatory oversight and sanction, and with incentives built in for such lending institutions to participate effectively in such a scheme (but NOT direct lending by central banks to individuals or companies).
• Legislate other patient capital: development finance institutions, policy banks, partial credit guarantees, and first-loss equity funds.
• Strengthen public financial management laws.
• Enact and enforce strong Public Procurement Acts with e-procurement and open contracting.
• Establish truly independent Offices of the Auditor-General that report directly to Parliament, not the Executive.
• Pass Fiscal Responsibility Acts that cap wasteful borrowing and mandate counter-cyclical sovereign wealth or stabilisation funds (Norway’s SWF has $1 trillion-plus, and Botswana, Chile are other examples).
• Reform central banks and financial sector legislation
• End the culture of impunity and entrench the rule of law, which attracts serious investors.
• Strengthen anti-corruption agencies and shield them from executive capture.
• Pass beneficial ownership disclosure laws so we know who really owns what in our extractive sectors.
• Demand evidence-based policy.
• Create or strengthen Parliamentary Budget Offices and Economic Policy Research Units so legislation is informed by data.

Industrial policy is back globally. Everyone is doing it except most of Africa. Parliaments must create the legal architecture. Concrete legislative actions:

Modern Industrial Development Acts

            •  Replace outdated investment codes with performance-based incentives (tax holidays only after verifiable local value addition, jobs created, technology transfer)

            •  Mandate local content thresholds that increase over time (Nigeria’s 2010 Local Content Act in oil & gas is a good start; extend it to mining, manufacturing, digital services)

Special Economic Processing Zones 2.0

            •  Move from 1970s export-processing zones (cheap labour, zero taxes) to integrated industrial parks with skills academies, R&D incentives, and mandatory linkages to domestic SMEs

Strategic Tariff and Non-Tariff Policy

            •  Use the flexibility allowed under AfCFTA and WTO to maintain infant-industry protection for 10–15 years

            •  Pass Anti-Dumping and Countervailing Duties laws that actually work

Innovation and Digital Economy Laws

            •  Data protection and data localisation where strategic

            •  Startup Acts (Tunisia, Senegal, Nigeria have them — others must follow)

            •  Intellectual Property regimes that balance protection with compulsory licensing for critical medicines and green technologies

Green Industrialisation Framework

            •  Legislate “just transition” funds financed by carbon border taxes on African raw exports

            •  Create sovereign green bonds backed by critical mineral revenues

The era of “government must get out of the way” is over. The era of strategic, democratic developmental states has begun.

Africa must reject the false binary of “isolationism vs selling out”. Smart sovereignty means:

•  Negotiating trade and investment agreements that preserve policy space (no Investor-State Dispute Settlement clauses that allow corporations to sue governments for passing health or environmental laws).

•  Building regional value chains first under the AfCFTA before rushing into unbalanced deals with larger powers.

•  Creating African credit-rating agencies and pan-African financial institutions so we are not priced out of capital markets by biased methodologies.

•  Developing joint negotiating positions on critical minerals (like OPEC for lithium, cobalt, graphite).

History will not ask whether GDP grew by 4% or 5%. It will ask: When legislators had the power to change the structure of Africa’s  economies, did they use it? I recommend five bold actions African parliamentarians can take in the next 24 months:

• Pass a new-generation Industrial Development Act in their countries by 2027.
• Establish or strengthen an independent Parliamentary Budget Management Office.
• Reject any international agreement that erodes policy space for industrialisation.
• Mandate that at least 40% of all public procurement goes to domestically produced goods within five years.
• Create a Pan-African Legislative Forum of Parliamentary Committees on Economic Transformation that meets annually to compare notes and hold executives accountable.

Prof. Moghalu is the President of IGET Academy and a former deputy governor of the Central Bank of Nigeria. This piece is adapted from a keynote address to the 3rd General Assembly of the Conference of Speakers and Presidents of African Legislatures (CoSPAL), held in Rabat, Morocco, recently.

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