Friday, July 15, 2005

Ten ways to help Africa?

Michael Holman and Andrew Rugisara have listed ten ways to help Africa. These are all low cost suggestions because:
Africa needs more financial aid like an alcoholic needs a stiff whisky.

The ten ideas in brief are:
1. Encourage ideas. (African publishers should be allowed to publish books with ideas for 1/5 of the full Western price)
2. Charge for professionals’ visas.
3. Require the use of more cocoa before chocolate can be called chocolate.
4. Promote Africa’s music and train managers and musicians
5. Encourage better marketing and packaging of Africa’s products.
6. Make foreign non-governmental organisations compete.
7. Enlist the private sector in build-operate-transfer infrastructure projects.
8. Make aid conditional on improving the business climate.
9. Abolish taxes on computer imports. Privatisation, deregulation, a strong private sector and democracy
10. Introduce a fair tax on coffee and encourage a fair return to growers

But no matter how nice these simple suggestions are, of course the true obstacle for Africa lies within the absence of a true capital generating system, as it has been explained brilliantly by Hernando de Soto.
...the major stumbling block that keeps the rest of the world from benefiting from capitalism is its inability to produce capital ... most of the poor already possess the assets they need to make a success of capitalism ... But they hold these resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them. Because the rights to these possessions are not adequately documented, these assets cannot readily be turned into capital, cannot be traded outside of narrow local circles where people know and trust each other, cannot be used as collateral for a loan, and cannot be used as a share against an investment.
[While] the single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur's house.

This important matter is even noted by the same Holman as above, on AllAfrica.com:
Land ownership is critical. Yet in Ethiopia there is an outright ban on foreign ownership of land. In Kenya women hold less than 5 percent of registered land titles, though they make up 70 percent of the agricultural labour force. In Lagos, Nigeria, it takes 21 procedures and 274 days to register property. In Taiwan it takes three procedures and seven days.

This is the dark, under-reported side to Africa we do not read enough about, in which African leaders are responsible for their own misfortune and which is in the capacity of African leaders to change...And they do not need more aid to do it.

So why should a starting business be made as easy as possible? Why should it matter? Because cumbersome business registration procedures push entrepreneurs into the informal economy where they don't pay tax, where workers lack health or pension benefits, where products are not subject to quality standards, where they cannot obtain bank credit, and corruption, a greater scourge than Aids, is rampant.

To my Dutch friends and readers I would like to mention that Hernando de Soto's book is also available in Dutch, as is the full text of the first chapter.

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