Tag Archives: Economy

Building A Socio-Economic Equitable African Society

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Finance is the driver of economic activities and serves as a medium of exchange in today’s world. A society that provides equitable socio-economic opportunity is built on a viable financial system, because the system provides the necessary funding for amenities such as good roads, good health facilities, and affordable credit facilities. For instance, the most equitable countries have some of the biggest financial institutions, e.g. the HSBC, Barclays, Lloyds Banking Group, etc. of the United Kingdom; Citi Group, JP Morgan, Berkshire Hathawa, etc. of the United States of America; AXA, Societe Generale, BNP Paribas, etc. of France; the Chinese I.C.B.C, Bank of China, China Construction Bank, etc.

But unfortunately, Africa is deficient in this respect. African governments look outside the continent in search of funds for developmental projects, because the financial system in the continent is not viable.

Nations receiving loans from outside Africa’s borders have a negative repercussion on the continent. A research project by Halima Ibrahim, University of Nairobi, Kenya “Effect of External Public Debt on Economic Growth: An Empirical Analysis of East African Countries”, established that external debt has a negative effect on economic growth, while domestic debt has no significant effect. According to the paper, some of the effects of external debt are that it increases a large proportion of tax revenue that has to be used to repay foreign loans. This constrains the funds available for investment in the development projects that African countries need to improve their economic growth.

Also, repayment of external debt leads to the depreciation of local currencies, thereby increasing inflation in African countries that are net importers. As a result, GDP growth declines. This decline is likely to be high if the proceeds of external debt are mismanaged or invested in unproductive ventures, which in turn constrains access to funds for servicing debts and others.

African society is incontestably inequitable socio-economically. This is particularly true in sub- Saharan Africa, where there is noted lack of amenities such as good roads, affordable credit facilities, health system, education, water, and power. Africa as a continent lacks a buoyant financial system that can shoulder its demands. Hence, the viability of its financial system is pertinent in having a society that is serene and fair on the socio-economic level.

Advance Payment Tax System

One policy that is essential in having such a financial system is an Advance Payment Tax System. This is a system where payment of future taxes is made at the present. For instance, individuals and organisations can pay taxes for five or ten years in the first year. This system does not stop the regular annual or monthly tax payment system in an economy. Both tax payment systems are choices to be made by the tax payers.

However, individuals and organisations have a choice to either subscribe to advance payment or annual, monthly payment systems. Subscription to advance payment tax system by tax payers is a risk both on the part of the tax payer and of the fiscal authorities. These payments are made relying on predictions of future economic environment, hence any shift in the economic environment will either be a loss for the fiscal authorities and gain for the tax payer – or the opposite.

Thus, this tax payment system makes more money available at the disposal of government for infrastructure and socio-economic development. African governments adopting this system will reduce the acquisition of loans outside Africa, if prudently managed. At the same time, it puts more money in commercial banks and other financial institutions, keeping the financial system alive. Some percentage of these advance taxes are paid directly into “soft bonds” as investment within the economy. Soft bonds are low profile bonds issued by individuals, small and medium organisations or enterprises…

Considering Economic Diversification in Africa

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    Rhetoric around the benefits of diversification of revenue and industrialisation of African economies is in vogue for reports, conferences, debates and television shows, but implementation has been slow to unfold.

    What we hear proposed are implementable, theoretical foundation approaches to the diversification of revenue source and industrialization of African economies. They speak to the theoretical intricacies, dynamics and policies of economic diversification and industrialization in an African economic climate.

    The African business and economic environment is absolutely different from the other economic contemporary environments. Africa still struggles with limitations to infrastructure, education, institutions, governance and financial markets. The economic structure in Africa is different from the others in the western and Asian world, hence the manner and approach to African economies must be different if African economies should be diversified and industrialised.

    The popular idea of moving African economies from a land-based extraction-oriented economy relying on oil, gold, diamonds, tin and other to engage multiple economies will be a delusion if the determinants to industrialisation such as markets, enterprises, education, funding of key areas, regulations, and transportation and communication infrastructures are not clearly defined.

    Without communication and transportation infrastructure, economics will not be in existence. Communication and transportation are pillars of an economy. In industrialising and diversifying African economies, means of communication and transportation should be easily accessible to all consumers and branches of the economy.

    The leading means of modern communication is the internet, but most parts of Africa don’t have access to it. The internet is costly to afford in Africa. In the present landscape of communication in Africa, radio, television, postal service, cell phones, magazines and newspapers are affordable and offer easy to access almost to all. Hence, the next step for policy makers is to make and implement policies that will ensure these means of communication remain affordable and accessible. For instance, policy makers can easily start and fund local radio stations, newspapers, postal services and magazines. Also they can make available voice call and short messaging service (SMS) cell phones to all by direct investment in such production companies, as well as continue opening up the internet sector for private investors in order to make it accessible and affordable to all as time progresses.

    With this communication infrastructure in place, enterprises and their potential customers can easily and freely communicate with each other, making business alive. Thus, to have a healthy economy, good communication infrastructure is vital.

    Among the numerous means of transportation, the affordable, easy to access option for most of Africa is road transportation. Governments or policy makers should prioritise roads far above other means presently, if the economies are to be industrialised and diversified.

    Roads are easy and cheap to build and maintain. Roads should be built to every settlement that is not an island in an economy. In cases of islands, ferryboats should be made available through government investment and
    grants to local craftsmen and engineers, as the option of using local expertise is less costly.

    Building roads to all settlements could involve construction with concrete, asphalt and bitumen. In Africa, roads are commonly built with asphalt and bitumen, but these products are mostly imported to Africa, making it more costly.
    Concrete is an available alternative. Concrete is made in Africa, making it economically attractive compared to bitumen and asphalt. The quality of roads built using any of the materials is the same. Concrete may even be better, if roads can be built to every settlement in an economy within a short period of time.