The Cult of Dirigisme

Prof Ebenezer Obadare,

Despite repeated failure, faith in closely controlled economies among Africa’s political elites remains strong

Ebenezer Obadare

During the last presidential campaign in Nigeria, otherwise implacable opposition to the All Progressives Congress (APC) candidate and eventual winner, Bola Tinubu, tended to be tempered with grudging respect for his perceived economic astuteness. Because his tenure as governor of Lagos State (1999- 2007), the country’s indisputable economic pacesetter with more than fifty percent of its non-oil GDP, is widely regarded as a success, those who deemed him otherwise politically unpalatable nonetheless held on to the consolation that, at least in terms of economic policy, his was bound to be a radical break from previous administrations.

If the initial raft of policy pronouncements, highlighted by the withdrawal of petrol subsidy, confirmed such hopes, they seem to have been dashed by the ease with which Tinubu has regressed into the reflex statism that was the hallmark of his predecessors.

One recent example is moves by the administration to

resuscitate the moribund Ajaokuta Steel Complex. In October last year, the president, citing interest from undisclosed Russian, American, Chinese, and Arab investors, announced a three-year plan to get the steel complex up and running, making him the latest Nigerian head of state to make such a promise. The previous Muhammadu Buhari administration spent more than $400 million in a failed attempt to “transform” Ajaokuta. In all, successive Nigerian administrations have spent an estimated $8 billion in repeated failed attempts to “get the steel industry working.”

The Tinubu administration seems similarly determined to get the country’s four refineries humming again by the end of 2024. Over the past decade, Nigerian governments have spent a whopping $25 billion on various unsuccessful attempts to “restart, revamp, or expand” the refineries, instructively about the same amount that businessman Aliko Dangote reportedly spent on building his new private refinery in Lekki, Lagos, from scratch. In the meantime, the chronic inoperability of its refineries even after innumerable rounds of “turnaround maintenance” means that the country has had to rely on imported refined petroleum to meet local industrial and private needs. In 2021 alone, Nigeria spent $11.3 billion on the importation of refined petroleum, making it the world’s 18th largest importer.

Tinubu seems to have plans for other state-owned entities. If last November’s announcement by Gboyega Oyetola of the newly created Minister of Marine and Blue Economy is any indication, the Nigerian National Shipping Line (NNSL), liquidated back in 1995 as it drowned in an ocean of debt, is also targeted by the administration for resurrection through a “strategic public private partnership arrangement.” Once you factor into the equation the newly established Nigeria Student Loan Scheme and the School Feeding Program for which around $56 million and $112 million respectively was set aside in this year’s budget, a clear picture emerges of an administration undeterred by previous experience from “going big.”

The history of failed economic development in post-independence Africa is, in a sense, a history of the persistence of this impulse, with political leaders repeatedly, if bafflingly, throwing the financial equivalent of the kitchen sink at enterprises and entities brought to their knees by chronic mismanagement, cronyism, and brazen corruption.

South Africa’s ongoing efforts to restore to some semblance of financial health the state-owned electricity monopoly, Eskom, which is currently “saddled with $24 billion in debt upon which it can’t even pay interest;” and Transnet, the state-owned logistics firm currently in debt to the tune of $6.9 billion, are textbook examples. A 2021 consolidated report by the office of the Auditor-General Tsakani Maluleke named South African Airways, the South African Broadcasting Corporation, the South African Nuclear Energy Corporation, and Denel, the state-owned aerospace and military technology firm, among state-owned enterprises where “government expenditure has been fruitless, wasteful, and made without reasonable care.” In the four years since 2018, South African Airways, once among the continent’s finest, recorded losses of “a staggering $1.2bn.”

From Kenya to Tanzania and Zambia, the experience is no different. In November, Kenyan President William Ruto announced plans to sell 35 underperforming and or insolvent state companies. Since 2022, the president has been trying to “sell a controlling stake in the country’s national carrier Kenya Airways to US investors as a path (sic) of returning the struggling airline to profitability.” In Tanzania, the latest audit report by the Controller and Auditor General (CAG) grimly details “losses, plunder, and lethargy” across state-owned firms, including the national carrier, Air Tanzania, and the Tanzania Telecommunications Company Limited (TTCL). A 2022 memorandum by the U.S. Embassy in Zambia on corruption in the country alludes to persistent opacity in public procurements, “from projects to build roads to tenders to buy fertilizer.”

What explains the continued faith in state-owned enterprises, and statism tout court, among certain African leaders, seemingly dispositive evidence of their failure and susceptibility to abuse notwithstanding? More to the point, how does one account for the dogged belief in statism when faced with the reality that the most successful and dynamic sectors of the economy in various African countries are, almost without exception, those relatively free of government intrusion, most notably the entertainment, creative, and telecommunications industries? At the risk of being banal, why have state governments in, say, Nigeria persisted in spending billions of Naira on unviable state-owned soccer clubs, when Nigerians are among the most avid consumers of the English Premier League (EPL), a truly global spectacle of private capital?

One obvious answer is prestige. Control of vast state-owned enterprises, economic efficiency be damned, remains a trusted path to courting or maintaining the regard of the general public. A corollary of prestige is its psychological cousin, pride, whether national or individual. Former President Muhammadu Buhari’s unseemly rush to inaugurate a national carrier in the very last hours of his administration seems to have been motivated by personal pride, though the operations of much more nefarious forces cannot be discounted. Social theorist Jean-Pascal Daloz’s work on elite distinction in Africa demonstrates the centrality of “prestige projects” for political survival and longevity.

Directly related to both prestige and pride is power, particularly the power to dispense patronage to those in good odor politically or, ipso facto, to deny the same to those who have either completely fallen out of favor or have been temporarily consigned to political purgatory as punishment for insolence. In a context where political power is the nexus of all power, a more effective instrument of political pacification and discipline can scarcely be conceived.

No matter the reason, the effects are undeniable. In the first place, by making the state the biggest player in the marketplace, closely controlled economies automatically shrink the space for private initiative and creativity. Furthermore, since, in such circumstances, state power is effectively the biggest political prize of all, state ownership and control raise the cost of political participation, making electoral politics a zero-sum game in which the likely winner is the candidate most desperate and willing to mobilize violence. The link here between state control of the economy and seemingly intractable political violence across Africa cannot be overemphasized. Nor does the fact that existing international aid infrastructure, though rightly motivated by a desire to strengthen existing state institutions, unwittingly enables and perpetuates an untoward social dynamic.

While there are no easy panaceas, it is abundantly clear that state ownership and control is a drag on Africa’s economic outlook. Internal initiatives and outside policy intervention must be geared simultaneously toward curtailing state encroachment and the waste and corruption that is its concomitance, as well as expanding the space for private initiative and enterprise.

Regarding the latter, positive internal models mean that the continent does not even have to look outward.

Reina Patel contributed to the research for this article.

*Professor Ebenezer Obadare is Douglas Dillon Senior Fellow for Africa Studies at the Council on Foreign Relations (CFR).This article was originally published by the Council on Foreign Relations (CFR) as part of the Diamonstein-Spielvogel Project on the Future of Democracy: