Business and the state in africa

This page intentionally left blank Business and the State in Africa The dominant developmental approach in Africa over the past twenty years has been to advocate the role of markets and the private sector in restoring economic growth Recent thinking has also stressed the need for “ownership” of economic reform by the populations of developing countries, particularly the business community This book studies the business–government interactions of four African countries: Ghana, Zambia, South Africa, and Mauritius Employing a historical institutionalist approach, Antoinette Handley considers why and how business in South Africa and Mauritius has developed the capacity to constructively contest the making of economic policy while, conversely, business in Zambia and Ghana has struggled to develop any autonomous political capacity Paying close attention to the mutually constitutive interactions between business and the state, Handley considers the role of timing and how ethnicized and racialized identities can affect these interactions in profound and consequential ways A N T O I N E T T E H A N D L E Y is Assistant Professor in the Department of Political Science at the University of Toronto Her research interests include policy-making and economic reform in developing countries, business– government relations, and HIV/AIDS and the political economies of Africa She has published articles in the Journal of Modern African Studies, Current History, and the Canadian Journal of African Studies Business and the State in Africa Economic Policy-Making in the Neo-Liberal Era ANTOINETTE HANDLEY University of Toronto CAMBRIDGE UNIVERSITY PRESS Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521886055 © Antoinette Handley 2008 This publication is in copyright Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published in print format 2008 ISBN-13 978-0-511-41382-7 eBook (EBL) ISBN-13 978-0-521-88605-5 hardback ISBN-13 978-0-521-71371-9 paperback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate Contents List of figures Acknowledgments page vi vii List of abbreviations x Introduction: the African business class and development Part one Institutionalizing constructive contestation 27 Ethnicity, race, and the development of the South African business class, 1870–1989 29 The neo-liberal era in South Africa: negotiating capitalist development 62 Business and government in Mauritius: public hostility, private pragmatism Part two Business and the neo-patrimonial state 101 137 The emergence of neo-patrimonial business in Ghana, 1850–1989 139 State-dominant reform: Ghana in the 1990s and 2000s 172 Business and government in Zambia: too close for comfort 207 Conclusion: the business of economic policy-making, comparatively speaking 242 Bibliography 264 Index 286 v Figures 1.1 Foreign direct investment into South Africa, net (BoP, current US$ millions) 1.2 South African GDP growth (annual %) 1.3 South Africa: general government final consumption expenditure (% of GDP) 2.1 South African budget deficit (% of GDP) 3.1 Mauritian GDP growth (annual %) 4.1 Government consumption of expenditure, Ghana (% of GDP) 4.2 Ghanaian GDP growth (annual %), 1960–1989 4.3 Ghanaian GDP growth (annual %), 1980–1990 5.1 Ghanaian government fiscal balance (as % of GDP) 6.1 Zambian GDP growth (annual %) vi page 49 49 52 80 111 157 160 165 186 217 Acknowledgments While I was working at the South African Institute of International Affairs in Johannesburg, South Africa, the Institute’s then-director, Greg Mills, challenged me to think harder about the relationship between business and government in Africa Many years have passed since then, over the course of which I learned a great deal and acquired many other debts, both intellectual and personal, but this first setting is most responsible for the genesis of this book At Princeton University this germ of an idea took shape and I in turn was shaped into a political scientist Jeff Herbst guided the project as it developed further and his perspicacity, intellectual rigor, and friendship challenged and motivated me throughout Kent Eaton and Atul Kohli were similarly stimulating and generous teachers In particular, Atul shaped my thinking on the historical development of institutions in important ways Now a teacher myself, I must acknowledge my students, especially those in my seminar on African political economies, for what they have in turn taught me As a graduate student at Princeton, my work was supported by the Fulbright Program, the Center of International Studies, Council of Regional Studies, the Graduate School Princeton, and the MacArthur Foundation Many of my early ideas were honed in discussion with fellow Woodrow Wilson Scholars at Princeton University and the Fellowship also supported me financially The Irving Louis Horowitz Foundation for Social Policy and the Institute for the Study of World Politics provided crucial additional support The University of Toronto subsequently provided a generous and convivial research environment via the Connaught Start Up and New Faculty funding programs, in addition to much appreciated teaching leave that facilitated additional field research At the University of Toronto, this project was shaped by dialogues facilitated by that long corridor in Sidney Smith Hall Joe Carens provided wise counsel at every stage of the project, as did Richard vii viii Acknowledgments Simeon Dick Sandbrook generously read numerous versions of almost every chapter of the book; although he will disagree with much of what I have to say, his remedial hand is everywhere to be seen My colleagues Lou Pauly and Joe Wong both made time to read an entire early draft of the manuscript, as did Peter Lewis of Johns Hopkins, along with Bruce Berman (Queens University) and Sylvia Maxfield (Simmons) who kindly participated in a manuscript workshop organized by my department I have benefited from the support of the talented community of Africanists at the University of Toronto, especially Dickson Eyoh, Sean Hawkins, Michael Lambek, Wambui Mwangi, Nakanyike Musisi, Richard Stren, and Richard Sandbrook It is a great pleasure to acknowledge those who taught me so much while I was doing fieldwork, in particular the interviewees who spoke with me so frankly about business–government relations in their countries Many of them are named in what follows; many more remain unlisted I thank also the librarians and staff at the University of Ghana in Legon, Ghana; the University of Zambia and the Institute for Economic and Social Research, both in Lusaka, Zambia; the University of the Witwatersrand and the South African Institute of International Affairs, both in Johannesburg, South Africa; and the University of Mauritius, Reduit They keep their libraries accessible and conducive to research under what are often exceptionally difficult circumstances For their specific input into this project, I would like to acknowledge Johann Fedderke, Steven Friedman, Merle Lipton and Stefan Malherbe Espelencia Baptiste, Girindre Beeharry, Kate Kuper, Melissa Levin, Giuliana Lund, Laurence Piper, Christian Sellars and Thomas Tieku commented on early drafts of chapters, greatly improving them Dear friends and respected colleagues Sigrid Adriaenssens, James Akpo, Francis Antonie, Jeff Boulton, the late Theo Bull, Kathy Bunka, Hannah Green, 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41À7 nationalism, 29, 31, 36, 41, 43, 45À6 AGC (Ashanti Goldfields), 145, 162, 179, 191À3, 194À6, 204À5 AGI (Association of Ghana Industry), 175, 183, 189 AHI (Afrikaanse Handelsinstituut), 46, 48, 50, 64À5 AHRIM (Association des Hoteliers et Restaurateurs de l’lle Maurice), 114À15, 120, 122À3, 127 Ahwoi, Atu, 179À80 Akan group, 141 Akuffo, Frederick William Kwasi, 163 Alusaf, 42 Amcol, 123 ANC (African National Congress) meetings with business, 53À4 move into government, 76À88 origins, 30 policy outcomes, 91À2 286 policy-making, 56À60, 65À6, 69, 74À6 political normalization, 67 tolerance of political opposition, 94À6 Ankrah, Joseph Arthur, 160 Ansah, Kofi, 196 apartheid, 30, 46À7, 47À54, See also grand apartheid Asante, 173À4 colonial history, 142À4, 146 gold mining, 145 pre-colonial empire, 139, 141À2 Association of Chambers of Commerce and Industry, 64 ASSOCOM (Associated Chambers of Commerce), 48 Baah, C.C.K., 153 BAF (Business Assistance Fund), 185 Ball, Chris, 54 BBC (Black Business Council), 65, 72 BEE (Black Economic Empowerment), 73, 89, 92, 96, 97À8, 99 BEEC (Black Economic Empowerment Commission), 72À3 Berenger, Paul, 110À11, 118, 120, 134 Berg Report See Accelerated Development in Sub-Saharan Africa (World Bank, 1981) Bheenick, Rundheersing, 122À4, 131 BMF (Black Management Forum), 65, 72 Boer Republic of the Transvaal, 33À4 Boma class, 209À10 Botchwey, Kwesi, 168, 181, 187 Botha, Louis, 35À6, 38 Botha, P.W., 46À7, 50À2, 61 BOZ (Central Bank of Zambia), 233 Index BSA (Business South Africa), 65, 86 BSAC (British South Africa Company), 209 BT (Business Trust), 90À1 Bulozi, 213 Bunwaree, Vasant, 126, 127, 129, 131 Busia, Kofi, 140, 160À1, 162 Busia-Danquah school, 148, 174, See also NPP (New Patriotic Party) business as contingent capitalists, 258À9 as ethnicized, 250À6 as institutionalized contestation, 246À50 context and timing, 256À8 definition, 10 sectoral significance, 244À6 business autonomy, 12À13 business capacity, prerequisites for, 10À14 business influence, 11 Business Licensing Authority (Mauritius), 120 Business Trust, 90À1 case selection, 16À17 CBM (Consultative Business Movement), 53 Chamber of Agriculture (Mauritius), 113, 114, 134 Chamber of Commerce (Mauritius), 113 Chamber of Mines, 48, 64 Chikwanda, Alex, 221 Chiluba, Frederick, 207, 223À4, 224À5, 227, 228, 236, 240 Chinese Business Chamber (Mauritius), 115 Chitala, Derek, 225 CIBA (Council of Independent Business Associations), 177À8 ‘civilized labor’ policies, 38 CMB (Cocoa Marketing Board), 149, 157À8 Cocoa Purchasing Company, 149, 155 CODESA (Conference for a Democratic South Africa), 67, 69, 74 287 colonial era as critical juncture, 19À20 Ghana, 142À9 Mauritius, 102 South Africa, 31 Zambia, 209À13 Congress of Democrats, 57À8 constructive contestation, 2À4 corruption Ghana, 151, 158À9, 164, 201 Mauritius, 116 South Africa, 96À8 Zambia, 253 COSATU (Congress of South African Trade Unions), 62, 67, 69, 75, 80À1, 81À2 CPP (Congress People’s Party), 139, 149À50, 151, 154, 159, 174, See also Nkrumah, Kwame CPSA (Communist Party of South Africa) See SACP (South African Communist Party) crime, South Africa, 78À9, 96 critical junctures, 19 de Klerk, F.W., 56, 61 diamonds, discovery at Kimberley, 32 Duval, Gae¨tan, 111 EAZ (Economics Association of Zambia), 222À3 economic elite, 10 ERC (National Economic Review Committee), 168 ERP (Economic Recovery Program), 168À9, 200 Erwin, Alec, 77, 78 ESCOM (Electricity Supply Commission), 37, 38, 39, 40, 42 ethnicity, 250À3 FABCOS (Foundation of African Business and Consumer Services), 65 FAGE (Federation of Associations of Ghanaian Exporters), 175À6, 183 FCI (Federated Chambers of Industry), 47, 48, 52, 64 Federale Mynbou, 45 First National Bank, 54 288 Flamingo scenario, 75 Foskor, 42 Freedom Charter, 58, 59 GEA (Ghana Employers Association), 175, 183 GEAR (Growth, Employment and Redistribution), 78 Geertz, Clifford, 242 GEIS (General Export Incentive Scheme), 81 GFA (Growth for All), 77À8, 88, 91À2 Ghana access to finance, 184À5 business influence, 243, 244 business institutions, 175À6 business policy consultation, 180 business-government relations, 176À80 characteristics, 17À18 civil service, 150, 159, 161 cocoa, 139À40, 145, 146À7, 149À50, 152, 153, 158, 164 cooperation with World Bank, 172, 181 corruption, 178À9 divestiture, 191À8 ethnicity, 252 fiscal discipline, 185À8 gold, 145, 162 history, colonial, 142À8 history, independence under Nkrumah, 152À9 history, post-Nkrumah, 160À5 history, pre-colonial, 141À2 history, towards independence, 148À51 macroeconomic management, 188À90 manufacturing, 146, 152, 164 overview, 139À41, 170À1, 199À206 policy outcomes, 198À9 policy-making, 176 political economy by late 1980s, 169À70, 173À6 private sector policy impact, 2À4, See also PNDC (Provisional National Defense Council) Ghana Commercial Bank, 154 Index Ghana Co-operative Marketing Association, 154 Ghana Farmers Marketing Co-operative, 154 GIAC (Ghana Investors’ Advisory Council), 204 GNCC (Ghana National Chamber of Commerce), 175, 183 GNCI (Ghana National Chamber of Industry), 175 GNPC (Ghana National Petroleum Company), 187 GNTC (Ghana National Trading Corporation), 155, 156 gold mining, South Africa, 32À5, 38 grand apartheid, 44, 47À8, 55 Hertzog, James Barry, 41 IDC (Industrial Development Corporation, Ghana), 147À8 IDC (Industrial Development Corporation, South Africa), 40, 42, 44, 147 IFIs (International Financial Institutions), 19 and Ghana, 169, 170, 181, 185 and Zambia, 224, 227, 230À1, 232, 234, 236, 237, 238, 240 IMF (International Monetary Fund) and Ghana, 160, 168 and South Africa, 74 and Zambia, 219 INDECO (Industrial Development Corporation), 214, 215, 217À18 Indian Congress, 57À8 Indian Traders’ Association (Mauritius), 115 ISCOR (Iron and Steel Corporation), 37, 38, 39, 40, 42 ISI (Import Substitution Industrialisation) in Africa, 22 international context, Mauritius, 108À9, 257 South Africa, 31 Zambia, 218 JEC (Joint Economic Council), 115, 122, 128, 134 Index Jonah, Sam, 179, 182, 193, 194À7 Jugnauth, Sir Anerood, 116, 122 kalabule, 163 Kasonde, Emmanuel, 224 Kaunda, Francis, 228 Kaunda, Kenneth, 213, 214À15, 219À20, 235, 240, See also UNIP (United National Independence Party) Kebble, Brett, 97 Keys, Derek, 67, 76, 79 Kruger, Paul, 33À4 Kufour, John Agyekum, 202À3, 204, 252 Kumi, Ayeh, 151 Lamusse, Roland, 101À2 Liebenberg, Chris, 76 Limann, Hilla, 166 LP (Labour Party, Mauritius), 106, 116, 117 Lutchmeenaraidoo, Vishnu, 111 Main, Katongo, 224 Malan, Daniel F., 41 Malaysia, ethnicity, 254À6 Mandela, Nelson, 57, 62, 68, 76À7, See also MK (Umkhonto we Sizwe, Spear of the Nation) Manuel, Trevor, 66, 75, 77, 78, 85, 86, 90 market, definition, 10 Marrakech Agreement, 81 Maurel, Rolan, 123 Mauritius business influence, 243 business organizations, 113À16 business-government relations, 246 characteristics, 17À18 Chinese community, 104, 133 civil service, 116 Creole history, 104, 105 EPZ sector, 109À10, 111, 124À5, 128, 130 ethnicity, 250, 251, 252 historical similarities to South Africa, 30, 104 history, 102À12 289 Indian history, 103, 104, 105, 106À7 Labour government policy, 122À9 manufacturing exports, 119À20, 126, 130, 131 MMM/MSM government policy, 118À22 overview, 101, 131À5 policy outcomes, 130À1 policy-making, 116À18 political economy by late 1980s, 112À16 private sector policy impact, 2À4 sugar, 103À8, 111, 113À14, 117, 119, 122, 126, 130À1 tourism, 111À12, 118, 120, 127, 130, 131 Mauritius Sugar Authority, 114, 126 Mauritius Sugar Producers Association, 122À3 Mbeki, Thabo, 68, 77, 79, 86, 88, 89À90, 95 Mbikutsita-Lewanika, Akashambatwa, 224 Mboweni, Tito, 66, 75, 85, 90 MCCI (Mauritius Chamber of Commerce and Industry), 115, 120À1, 123, 124À5, 127, 128, 129, 134 MEF (Mauritius Employers’ Federation), 115, 119À20, 128 MEPZA (Mauritian Export Processing Zones Association), 114, 128 MERG (Macro Economic Research Group), 74, 76 Meridien Bank, 232À3, 236 Mills, Atta, 183 MK (Umkhonto we Sizwe, Spear of the Nation), 58À9 Mkandawire, Abel, 226 MLC (Millennium Labour Council), 82, 83 MMD (Movement for Multi-Party Democracy), 207, 222À5, 229, 230À1, 235, 236À7, 239À40 MMM (Mouvement Militant Mauricien), 110, 116 Modjokuto, 242 Moll, Terence, 77 290 Montfleur scenario, 75 Motlana, Nthatho, 69 Motlanthe, Kgalema, 97À8 Motsuenyane, Sam, 59 MSM (Mouvement Socialiste Militant), 116 Mulemba, Humphrey, 224 Mun’gomba, Dean, 225 Mwaanga, Vernon, 221 NAFCOC (National African Federated Chambers of Commerce), 59, 65, 69 NAIL (New Africa Investments Limited), 70, 71 National Economic Forum (Ghana), 184 National Sorghum Breweries, 71 Naude´, Steph, 86 NDC (National Democratic Congress, formerly PNDC), 177, 187À8, See also PNDC (Provisional National Defense Council) NEDLAC (National Economic Development and Labour Council), 67, 68, 86, 87 NEF (National Economic Forum), 67, 76, 80À1, 190 Nel, Christo, 53 neo-liberal era as critical juncture, 20 World Bank policy, neo-patrimonialism, 8À9 New Age Breweries, 71 Nkrumah, Kwame, 139, 148À9, 149À50, 151, 152À9, See also CPP (Congress People’s Party) Nkumbula, Baldwin, 224 NLC (National Liberation Council), 152, 160À1 NLM (National Liberation Movement), 150 NP (National Party, South Africa) government of national unity, 68 history, 35, See also Botha, P.W NPP (New Patriotic Party), 174À5, 202À5, 252 Obeng, P.V., 181, 182À3 Ohene, Fred, 196 Index Oppenheimer thesis, 52À3, 68 Oppenheimer, Harry, 46À7, 52À3, 62, 76 Pact government, 38À9 Patel, Dipak, 233 PEF (Private Enterprise Foundation), 183À4 Penza, Ronald, 221, 236 Peprah, Richard Kwame, 184, 189, 196 PMSD/PMXD (Parti Mauricien Social Democrate), 107, 116À17 PMXD/PMSD (Parti Mauricien Social Democrate) See PMSD/PMXD (Parti Mauricien Social Democrate) PNDC (Provisional National Defense Council), 166À9, 174, 191, See also NDC (National Democratic Congress, formerly PNDC) political elite, Port Louis Fund, 125 post-independence era, as critical juncture, 20 Private Sector Roundtable, 182À3 PSAG (Private Sector Advisory Group), 181À2 public-private sector interaction, 14À15 Quashie, Tete, 144 Ramaphosa, Cyril, 69 Ramgoolam, Navinchandra, 125À9 Rawlings, John Jerry, 165À6, 167, 168, 173À4, 179, 182, 193, 195, 246 RDP (Reconstruction and Development Program), 76, 78, 79, 85 Reddingsdaadbond (Savings Association), 41 Relly, Gavin, 59 Rembrandt group, 41, 43 Rupert, Anton, 41, 43 SA Foundation, 77, 86, See also Willers, David SACOB (South African Chamber of Business), 64, 68, 74, 78, 82À3 Index SACP (South African Communist Party), 57, 62 SAF (South Africa Foundation), 64 Safmarine, 42 Sanlam, 36À7, 43, 70 Santam, 36À7 SARB (South African Reserve Bank), 74 Sardanis, Andrew, 214, 233 Sasol, 42 Scott, Guy, 207, 224 Seko, Mobutu Sese, 248 self-governing homelands, 55 Sexwale, Tokyo, 62 Shaik, Schabir, 97 Sharpeville massacre, 48, 49, 58 Sisulu, Max, 66 Sisulu, Walter, 57 SIT (Sugar Investment Trust), 119 Sithanen, Rama, 113, 118À20, 121, 122 SMC (Supreme Military Council), 162 Smuts, Jan, 35À6, 38 South Africa Afrikaner state, 41À7 apartheid, and business, 47À54 black business, 54À6, 68À73 budget deficit, 79À80 business associations, 64À5 business influence, 243 business policy demands, 66 business-government interactions, 88À91, 92À4 business-government relations, 246 characteristics, 17À18 competition policy, 84À8 economy growth and diversification, 31À41 ethnicity, 250, 251, 252 European investment, 36 formation of, 35 gold mining, 32À5, 38 industrialization, 40 international context, 257 labor framework, 81À3 manufacturing expansion, 40À1 mining, 45 overview, 29À31, 98À100 291 political economy by late 1980s, 60À1, 63À4 political normalization, 66À8 private sector policy impact, 2À4 privatization, 80 protectionism, 39 trade liberalization, 80À1, See also ANC (African National Congress) South African Native National Congress See ANC (African National Congress) Soweto uprising, 49 Stals, Chris, 90 state definition, 6À7 significance for market, 5À6 state capacity, definition, State Farm Corporation (Ghana), 155 Sugar Syndicate, 114 Tabanan, 242 Tambo, Oliver, 59 taxi industry, South Africa, 54À5, See also FABCOS (Foundation of African Business and Consumer Services) Trades Union Congress (Ghana), 150, 189 TRC (Truth and Reconciliation Commission), 89 Tsikata, Tsatsu, 187 UDF (United Democratic Front), 53À4 UGCC (United Gold Coast Convention), 148 UGFC (United Ghana Farmers’ Council), 153, 155 UNIP (United National Independence Party), 213, 216, 222 Urban Foundation, 54 van der Bijl, H.J., 37, 40 VAT Ghana, 185 Mauritius, 128 Zambia, 231 Vorster, B.J., 46À7, 50 292 Wassenaar, Andreas, 46 Wiafe, A.W., 153 Willers, David, 53 Wilson, John, 50 Wina, Arthur, 224 World Bank, and Ghana, 160, 168, 172, 173, 181, 204 and Mauritius, 120 and Zambia, 224, 241 Xuma, Alfred Bitini, 56 Yamson, Ishmael, 182, 190 ZACCI (Zambia Association of Chambers of Commerce and Industry), 220À1, 225À6, 227, 229, 230, 231, 232, 233, 234 ZAM (Zambian Association of Manufacturers), 221, 225À6, 227, 229, 230, 231, 232, 234 Zambia business associations, 220À1 business influence, 243, 244 business-government interactions, 233À5 Index characteristics, 17À18 copper, 209À10, 213, 218 deregulation, 231À3 ethnicity, 252À4 history, 208À13 overview, 207À8, 236À41 policy outcomes, 235À6 political economy by late 1980s, 219À22 political reform, 222À5 post-independence, 213À19 private sector policy impact, 2À4 privatization, 226À9 trade liberalization, 229À31 ZCCM (Zambia Consolidated Copper Mines), 218, 220, 227À8, 236 ZIC (Zambian Investment Centre), 232 ZIMCO (Zambian Industrial and Mining Corporation), 214, 227 ZNFU (Zambian National Farmers’ Union), 227 ZPA (Zambia Privatisation Agency), 232 ZRA (Zambia Revenue Authority), 231 Zuma, Jacob, 95À100, 97 ... Carens and Amanda Dickins 4 Business and the state in Africa systematic access to policymakers This resulted in the fracturing of the business community and the striking of individual bargains... 10 Business and the state in Africa these factors will determine the extent to which the state negotiates policy decisions with other local actors The nature of business I use the terms business ... Ghanaian and Zambian business, their dominant mode of operation and incentives is driven by the state In all cases, however, the state faces its own incentives and constraints, and the choices