1.1 Background
African policymakers, while disavowing the dirigiste inclinations of the past and reaffirming their capitalist credentials to a globalized audience, still avidly argue that national development is too important to be left to the vagaries of markets and the dictates of strangers. Governments, they intone, must continue playing a “constructive role” and cannot be vague about their intentions. As pointers to the new thinking—and borrowing a leaf from countries like South Korea, Singapore, and India—many African governments have designed attractive vision statements that extend well into the mid-21st century, while at the continental level, a similarly outstretched development blueprint, Africa 2063, was devised by the African Union, based in Addis Ababa. Generally, the visions evince the goal of reaching middle income status within a generation, while Africa 2063 projects the continent becoming a key member of the international community.
This book is a synthesis of findings from six country case studies and a literature review commissioned by the African Development Bank on the relevance of the developmental state model in Africa. It is a contribution to Africa’s search for transformative models for economic development, including reexamining the role of the state as both an enabler and direct participant in the economy. The analyses in the book are mainly based on comparisons of the development experiences of South Korea (South Korea Team, 2017), the archetypical example of East Asia’s “rags to riches syndrome,” with those from five African countries, Cameroon (Cameroon Team, 2017), Côte d’Ivoire (Côte d’Ivoire Team, 2017), Nigeria (Nigeria Team, 2017), South Africa (South Africa Team, 2015), and Zambia (Zambia Team, 2017), and with reference to a range of other East Asian and African experiences. In the five African case study countries, governments have been vociferous in their praise of the developmental state model, including in their planning documents, although the pace at which its central tenets are being adopted on the ground is grudging and far between.
Developmental states came to be known as such not because they were exceptional from the outset nor because they had discovered huge amounts of natural resource deposits to finance their development but because they were able to overcome poverty and socio-economic frailty by building effective i.e. accountable institutional structures and forming workable domestic alliances, including with the private sector, for growth and development (Johnson, 1982). Although the case study countries for the developmental state research project were chosen to demonstrate the breadth of development experience in Africa, the countries were, South Africa excepted, at roughly the same level of economic development in the early 1960s as South Korea, the future “Miracle on the Han River.”
South Africa, the most industrialized country in Africa, is a special case in this regard. It achieved independence from Britain in 1934, although majority (black) rule was delayed until 1994. At the beginning of the 1960s (when South Africa was still steeped in the policy of Apartheid), its economy, in key aspects already part of the West, was much bigger than that of South Korea. In 2019, South African GDP was less than a quarter of the latter’s US$1.7 trillion economy. Whether South Africa can claim to have garnered aspects of the developmental state today, or could indeed become one with time, has generated much debate in recent years (Thompson and Wissink, 2018; Ukwandu, 2019).
For African governments, the lure of East Asia’s developmental state experience lies in how countries in the region were able to pursue sustained growth over several decades, in the absence of rich natural resource endowments, without compromising their institutional and policy autonomy. The main task of the exercise was, therefore, to assess whether African countries could derive useful lessons of experience from the developmental states of East Asia, notably South Korea, and to identify what practical features of that knowledge could be replicated or more succinctly adapted by them to suit their socio-economic structures in the pursuit of rapid economic growth and robust development.
It is sometimes argued that the factors behind East Asia’s emergence in the 1950s and 1960s were too episodic and regional specific i.e. the Cold War, global trade liberalization, China’s ascent, regional and global, access to Japanese and US investments and buoyant markets, for African countries to draw beneficial lessons of experience from them some two decades into the 21st century. It must be underlined, however, that from the point of view of feasibility, the most endearing feature of developmental states in East Asia was the enhancement of technical and bureaucratic capacities, including for planning, implementation, delivery, and accountability, at the national and local levels as a prerequisite for effective development policy i.e. it was largely endogenous.
Africa’s increasing fascination with the East has not been a one-sided affair. Asia had become a key economic partner for Africa, epitomized by expanding investment and trade flows and, at least in the case of China, substantial tourism, and migration. The major Asian economies now hold regular meetings with African counterparts at the highest levels of government. For example, South Korea holds a regular Korea-Africa Economic Cooperation (KOAFEC) Ministerial Conference in Seoul, Japan now holds its Tokyo International Conference of Africa’s Development (TICAD) series interchangeably between Africa and Japan, and China and India have similar vehicles that allow meetings to take place at the highest levels of government on a regular basis. In some ways, the East has, in recent years, eclipsed the West in terms of high-level state to state contacts with Africa.
The first half of the 2000s showed a marked break from Africa’s lethargic growth of the previous decades, thanks to above-average FDI inflows, low levels of external debt, rising commodity prices, and digital momentum.1 Average growth reached double digits for some countries, especially in Sub-Saharan Africa, and for a while, the so-called Afro-pessimism was reversed in spectacular fashion. Among the expressions minted to capture the continent’s unprecedented change of fortune, “African renaissance” became something of a staple in the discourse.
Improved growth and much more diversified sources of investment capital meant that African policymakers were much less constrained, than in previous decades, by the international lending agencies and their policies, and saw a rare chance to pursue homegrown policy initiatives of their own. Thus, countries ranging from Angola to Zambia, on own volition, issued a series of Eurobonds, many of them oversubscribed. While this raised confidence across the continent, compelling more countries to consider jumping onto the bandwagon, the short tenor, and high-coupon rates, often in double digits, meant that the Eurobonds were not a cheap or sustainable source of financing for Africa’s long-term investment needs.
Many African countries continue to see these bond issues as morale boosters and an important form of market discovery—useful for gauging investor appetite and for own domestic benchmarking and yield-curve exigencies as governments look to deepening domestic financial markets. Effective capital mobilization, as East Asian examples show, requires a much broader strategy than merely accessing international financial markets. It calls for strong analytical capacities, immaculate planning, and, above all, policy coherence. All three require, in turn, effective bureaucracies that allow for rapid responses without losing sight of the goals set. This bureaucratic precision is not yet a common feature of African responses, although some countries are making more progress than others.2
1.2 Defining the developmental state
The developmental state literature has grown exponentially in recent years, taking on an ever-increasing number of cross-country examinations and extending the definition and implications of the model in ways not anticipated when East Asia embarked on its growth quest (Woo-Cumings, 1999).3 This book follows the usual proposition that the developmental state is one that can engender a social compact for economic transformation, through industrialization, where the government (and its bureaucracy) is the principal agent/partner in the process. Moreover, such a state is driven by Weberian ideals, which include doing whatever is required, such as altering market incentives, reducing investment risks, proffering entrepreneurial visions, and managing the conflict inherent in the process of change, to safeguard the goals of economic development (Box 1.1).4
Box 1.1 Four operational characteristics/elements of a developmental state
The first element that is key for the operation of an effective developmental state is the existence of an elite state bureaucracy staffed by the best managerial talent available in the country. It is based on meritocratic recruitment and career advancement. This elite bureaucracy identifies and selects industries to be developed, decides on the best means to achieve industrial policy, and supervises competition between strategic sectors using market-conforming methods of state intervention.
The second element is that this meritocratic bureaucracy is given adequate scope (bureaucratic autonomy) to take initiatives and operate efficiently within the political system. The legal and judicial branches of the government are restricted to “safety valve” functions and do not interfere in the development process itself.
The third element comprises the perfection of market-conforming methods of state intervention in the economy to avoid putting the bureaucracy into a straitjacket. The first set of issues is related to policy plans and guidelines for the economy; forums for the exchange of ideas at the national level and within sectors; mechanisms for policy adjustment and revision, feedback, and resolution of differences; assignment of governmental functions to private and semiprivate associations; and reliance on public–private cooperation in high-risk areas. The second set refers to financing the state, including through the establishment of public financial institutions, targeting of tax incentives, and the creation of an investment budget that is separate from the general account budget; an antitrust policy geared toward international competitiveness goals; and government-conducted and sponsored research and development activities.
The fourth element is existence of a development pilot agency that spearheads industrial policy and economic growth, such as the role played in previous decades by the Ministry of International Trade and Industry (MITI) in Japan. Though small in terms of employees, MITI spearheaded Japanese industrial policy, funded research, and directed investment according to its assessment of the country’s needs. It intervened at both the firm-level as well as the macrolevel. Despite the high level of autonomy, it was deeply embedded in society with close ties to private businesses, think-tanks, and vertical bureaus for the implementation of industrial policy at t...
