The Governance Deficit and Institutions for Inclusive Development in Africa

Adam B. Elhiraika, PhD

Chief, Macroeconomic Analysis, Economic Development and NEPAD Division,

UNECA JICA-SOAS workshop, London, 15-16 March

2012

Outline

• Kay messages • Governance deficits and institutional drivers of

exclusion in Africa • The APRM Governance framework and

Institutional Foundations for Inclusive Development

• A new development model for inclusive development in Africa - Promoting democratic/inclusive developmental

states - Developmental state institutions and policies

• Concluding remarks and way forward 2

Key messages • Recent economic and social development in Africa

has not been inclusive due to heavy dependence on enclave commodity sectors, limited economic transformation and high inequality, lack of social protection, governance deficits and ineffective institutional foundations.

• Inclusive growth can only be achieved by

addressing the governance deficit, and promoting democratic developmental states and comprehensive development plans that focus on building human capabilities and welfare.

Africa’s recent economic and social development

• Africa’s growth record has been impressive since the start of the 21st century.

• Growth factors include not just the commodity boom but also improved economic management, increased capital inflows, and a hospitable external environment.

• Thus optimism on Africa’s rise is growing.

4

Africa’s recent economic and social development (cont’d)

• However, growth has been largely jobless and less conducive to inclusion and social development because of:

- Heavy dependence on primary commodity production, low productivity growth and low investment in labour intensive sectors.

- High inequality rates and ineffective social protection mechanisms.

- A dominant informal economy and vulnerable employment that account for over 60% of output and 75% of total employment, respectively, in many African countries.

• Therefore, African countries must enhance social welfare through economic growth and pursue inclusive growth as a matter of political, economic and social priority.

5

Governance deficits and exclusion

• Exclusive elite-dominated political, economic and corporate governance structures constrained freedoms and weakened state capacity and accountability.

• Weak societal empowerment and inequitable distribution of opportunities and income.

• The above call for (see UNECA and AUC, 2011 & UNDP. 2011):

- Legitimate and elected leadership - Responsive policies for inclusion - Effective anti-corruption and monitoring mechanisms - Independent judiciary, effective government and rule of law

and equity among rural-urban groups - Creating constituencies for inclusion and social change

Drivers of exclusion • Rent-seeking behavior and weak tax base • Weak subnational governments • Legal disempowerment of civic

organizations that could engender change and inclusion, not just charities.

• Weak labour movements and middle class • Opportunistic business class that does not

care about democracy and fair processes. • Security and oppression that perpetuate

exclusion, but only protect the interests of ruling elites

Drivers of exclusion cont’d

• Non-representative and ineffective governance reforms and failure to fight corruption

• Weak rule of law • Weak judiciary that lacks independence and

capacity to enforce the law • Participation crisis and political exclusion • Lack of freedom of information and empowerment

of stakeholders • Weak local governance and limited fiscal

decentralization

Which institutions are conducive to inclusive development in Africa?

• Institutions that support a well-functioning market economy by lowering transaction costs, building human capabilities ….and providing adequate incentives to investors.

• Five types of market institutions that matter for quality growth and development (Rodrik 2000; Nnadozie, 2009) - Property rights - Regulatory institutions - Institutions for macroeconomic stabilization - Institutions for social insurance/protection - Institutions for conflict management

How can African countries acquire or harmonize, rationalize and strengthen

institutions for inclusive growth?

• Institutions need to be developed locally within a participatory and coalition-building process that strengthens state capacity and human capability.

• Will the APRM help African countries

create and/or strengthen institutions for inclusive development?

APRM and institutions for inclusive development cont’d

• Overall, the mandate of the African Peer Review Mechanism (APRM) is to ensure that the policies and practices of member States conform to agreed political, economic and corporate governance values and standards, contained in the declaration on Democracy, that are critical for promoting adequate institutional foundations for inclusive development (Nnadozie, 2009).

• APRM should lead to effective institutional frameworks

through the adoption of appropriate policies, standards and codes, sharing of experiences, reinforcement of successful best practices (identify deficiencies and assess capacity needs) based on good political, economic and corporate governance that should lead to higher economic growth, sustainable socio-economic development and accelerate subregional and regional integration.

APRM and institutions for inclusive development

• APRM’s political, economic and corporate governance frameworks deal directly with institutions for shared growth and development.

• These include: - Institutions for representative and accountable political,

economic and corporate governance, and - a guaranteed framework for equal citizen rights

including access to justice, respect for the rule of law, freedom of expression, association and assembly . . .

- Call for visionary leadership, vibrant civil society and broad stakeholders participation in governance and development management processes.

• APRM corporate governance’s key objectives relate to standards and codes necessary for creating an enabling business environment and effective regulatory framework.

APRM and institutions for inclusive development cont’d

• APRM economic governance framework facilitates creating institutions that adhere to international codes and standards and promote sustainable and inclusive growth through: - Promotion of macroeconomic policies that

support sustainable development - Implementation of transparent, predictable

and credible government policies - Promotion of sound public finance

management - Combating corruption and money laundering - Acceleration of regional integration through

harmonization of monetary trade and investment policies among participating states.

APRM and institutions for inclusive development cont’d

• Economic Governance Evaluation criteria - Compliance with relevant international standards and

codes - The soundness of macroeconomic management - The extent to which sectoral policies promote

sustainable development - Resource mobilization efforts - The extent of vulnerability to internal and external

shocks - Effectiveness and transparency of public administration - Soundness of public finance management and

institutional capacity - Fiscal decentralization - Measures to fight corruption and money laundering - Measures for strengthening regional integration and

monetary cooperation

How does APRM assist African countries in practice?

• Conceptual good governance framework • Voluntary participation in peer review and broad

stakeholders participation in the review process, and the preparation and implementation of national programme of action (NPoA) and its monitoring.

• Encouraging dialogue, transparency, stakeholder engagement and empowerment and the emergence of stronger institutions

• Thus a multi-stage structure had to be put in place, strategic alliances and peer pressure – these start with a conceptual common understanding of the APRM framework, country self-assessment, APR review, NPoA

• Notwithstanding APRM limitations – e.g multiplicity of programmes and information gaps -, many African countries are implementing APRM institutional reforms and good governance process on their own.

Developmental states as a new institutional model for inclusive development in Africa

within the APRM framework

• ECA and AUC call for democratic developmental states within the NEPAD and its APRM framework (ERA 2011, AGR, 2009 and 2012)

• Similar calls by UNDP and member States

(UNDP-Aarb Region, 2011; UNCTAD 2010)

Building accountable capable states and democratic institutional foundations for inclusive development

• Deepening democratic governance in the context of the APRM

• Building an accountable and capable state and empowering society through inclusive participation

• Democratic developmental states as a new development model for inclusive political and economic systems

• Participatory development frameworks, effective policy design and implementation with the active engagement of various stakeholders – a new social contract.

• Building institutions – political parties and business and labor organizations and civil society – to manage conflicts.

• Empowering local communities through decentralization as an institution for inclusive development

• Empowering the judiciary • Designing a new development vision and anchor the

developmental role of the state in constitutions

Inclusive political and economic institutions as foundations for inclusive development –

role of the developmental state

• Institutions and policies to promote balanced development through macroeconomic policies that generate productive decent jobs.

• Instead of rent-seeking, direct state interventions to correcting market failures.

• Place priority on an inclusive market provides opportunities for productive life and dignity.

• Supporting economic development through various support mechanisms, technology transfer, R&D, skills development, strategic investments . . Etc

• Creating institution to check rent-seeking behaviour and prevent state capture

• Legal empowerment of the poor and the informal sector to have equitable access to economic and social services and opportunities, justice, participation etc.

Developmental state strategies and policies

• Comprehensive and inclusive development planning & budgetary frameworks led by visionary leadership

• Focus on employment-centered growth with special attention to the poor, the vulnerable groups and informal actors

• Macroeconomic policies to promote growth and inclusion • Participatory and accountable processes for use of public

resources • Creating fiscal space through productive public expenditure,

effective management of resources and institutional reforms etc

• Inclusive and competitive markets with special support to SMEs, entrepreneurship promotion, training, NGOs. . etc

• Supportive sectoral and local level initiatives • Social protection system and social inclusion (ECA and AUC,

2012)

Role of government and other stakeholders

• Establishment of democratic deliberative institutions and their empowerment to promote stakeholder ownership of development programmes is critical.

• A active participation of the full range of all stakeholders in the development: – Private sector and civil society organizations

• Need to address other key elements – Leadership – Regional and continental integration and

development – International economic arrangements and

partnerships

Conclusions • Addressing governance deficits and constructing

developmental States is essential for African countries to lay effective institutional foundations for inclusive development.

• Inclusive planning and effective non-market institutions should complement market institutions to promote employment-focused growth, equity and social protection as basis for accelerated economic transformation.

• Further country-specific research essential for defining the role of the State and relevant strategies and policies for inclusive development

Thank you for your attention