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January 11, 2021

Facilitating the AfCTA through better governance

A grand historic collaborative project like Agenda 2063, and specifically the AfCTA  cannot be achieved successfully and timely without discussion how one can achieve the objectives set. Today’s politicians are media focussed and announce new initiatives and grand funding projects without considering sufficiently their methods of realisation; failure to deliver then often leads to loss of credibility.  Africa too needs more attention about public and corporate governance; in particular public governance is difficult to modernize.

In addition these objectives are now challenged by rapidly changing contextual conditions. The concurrent economic, health, and climate crises and their long term consequences, in the wallets and in the minds of people, pose a serious challenge for business leaders, but dysfunction of public governance in many countries adds to the complexity and strategic risks.

The biggest problem which industry faces when it comes to interaction with governments are the cognitive gaps about markets. A few decades ago, markets became all that mattered; governments played secondary roles. Now that they are needed to get countries and markets out of the crisis, trust and dialogue, if there is one, is felt wanting to get the right actions at the right time.    

Radical innovations are required. Public governance needs to review its steering capacities of markets and society and to create an environment of trust and collaboration with stakeholders. Companies too need to pay attention to corporate governance modernisation and to better functioning of the state.

As the economist Carlotta Perez has convincingly demonstrated, technology drives economic change, which drives societal change, which drives political change. Public and corporate governance are a key  part of any large scale transformation process, they drive it and they are themselves affected by it. It is an illusion to build an electric car with the management and technology used for a combustion engine. Therefore, the public and private sector need to modernise and acknowledge the interdependencies of policy and regulation, of research and innovation and corporate strategy, and of societal change.

In the private sector, a new type of relation between corporate culture and governance and the society has to be fostered. Companies contribute to society by creating services and goods, employment and taxes. However, this is just a starting point. Companies are, or should be,  ‘corporate citizens’  and have to behave like these. A responsible business has to understand that it depends on the trust built by consumers and employees, as well as by society at large. As Owolabi and Olu-Owolabi have stated, corporate social responsibility (CSR), until now too much neglected in the African context, needs to become a key driver of African entrepreneurial growth. It should not be an add-on, a public relations gimmick, but a key part of corporate strategy development.

There are different types of embedding companies into the tissue of the public domain. Mainly, one can characterise a confrontational relationship that exists in the Anglo-American model of free market liberalism against the cooperative relationship in the European model of a social market economy. Both have results to show, but the recent economic crises has shown that with the proper reforms, the social market model is be more stable and competitive than models that lead to great inequalities.

It is therefore in the long term interest of business to create such a cooperative model. The chairman of the European Round Table of Industrialists has pleaded strongly for this social market model of capitalism, in a remarkable interview in the Financial Times (in 2019). Also studies by the World Bank have shown that the free market model with a strong welfare state is better able to cope with economic storms than any other.

Governments have a central role to play in markets. As the provider of social stability and regulator of the private sector, they need a strategic view of the technological, ecological and social developments to come and has to provide public goods in an efficient manner. To achieve this, a partnership between many stakeholders, a so-called ‘collaborative government’  is needed.

In order to create a competitive economy, the key focus of government must lie, besides intelligent market regulation, on education and social justice. Only a well-educated workforce can be productive and create new ideas. Only the strict respect of the rule of law and of governmental accountability will ensure that people are willing to save and to provide the investment needed for research and innovation. For the latter to succeed, the link between universities, the government and companies has to be actively built and nurtured.

In addition, governments need capacities for long-term forecasting in order to steer the economy in changing times. The ‘central mind of government’ (CMG) promoted in the 1980s by Dror provides a helpful approach. CMG aims to create the necessary instruments for top decision makers to improve policy analysis and to allow informed public choice. It allows a strategic analysis of how global changes advantage or disadvantage certain sectors in order to find early compensation mechanisms and to intelligently adapt the welfare state. Instead of requiring politically sensitive and time consuming changes it allows operational improvements in relatively short time. However, as many African countries are too small to apply the CMG, its organisation through the African Union or on the basis of the regional market organisations may be more suitable.

Agenda 2063 requires to profoundly change the way governments steer markets and  business and government interact. Both sectors have to realise that they cannot function without each other, and that their ultimate mutual aim is to serve society. The challenges of the coming decades are many, but with an innovative approach to governance, they can be tackled and transformed into opportunities.

Stefan Schepers