Why governance and country ownership is critical to development progress

Sunday, 21 July 2013 21:44 GMT

* Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.

In early June, Oxford's Blavatnik School of Government, Camfed, the Skoll Centre for Social Entrepreneurship and Linklaters hosted a convening to identify timely issues in international development and how good governance may address those issues. To capture some of the discussion, the Skoll World Forum asked a handful of speakers to share their insights and reflections. Participants include the African Development BankRiders for Health and the Escuela Nova FoundationClick here for the full series.

Introduction

For the past decade, Africa has exhibited strong economic growth and a new economic growth momentum has been established. The continent weathered the financial crisis and has bounced back. But headline economic growth is not enough. Deliberate policies to reduce inequalities and promote inclusion are now needed more than ever before. It is time to focus on people’s expectations: decent work, a living wage, access to basic service, more democracy, and accountable governments. Africa and its people aim to be a pole for global growth in the decades ahead.

Over the last ten years, the African governments have taken significant steps towards strengthening and solidifying governance activities as one its strategic priorities while deepening the awareness of governance. Functional institutions, visionary leadership, and participatory governance mechanisms are key ingredients of the transformative agenda in Africa. Such an institutional milieu underpins economic and social development as it favors long term investment, unlocks the potential for domestic resource mobilization, unleashes entrepreneurial capacity and induces broad-based participation and property rights. 

Fostering Good Governance in Africa

Governance is now one of the cornerstones of economic development. Good governance, in its political, social, and economic dimensions, underpins sustainable human development and the reduction of poverty, in that it defines the processes and structures that guide political and socio-economic relationships. Good governance ensures that political, social and economic priorities are based on broad consensus in society and that the voices of the poorest and the most vulnerable are heard in decision- making over the allocation of development resources. Poverty reduction programs are very often undermined by conflicts, a lack of public accountability, corruption, and the exclusion of beneficiaries in the program processes.

Several factors have combined in recent years to give new impetus to the issue of governance in the development debate. Pervasive corruption for example weakens government’s ability to function effectively and severely detracts from the equity goal in the provision of public services. Another driving force has been the rise of pro-democracy movements on the continent demanding good governance and more responsive forms of government, as has the rising disquiet over the cost of corruption in terms of both domestic and external resources. Similarly the unparalleled increase in globalization and its even stronger imperatives for sound domestic policy environment and economic management have been the motivating factors behind the quest for good governance.

The challenge for African governments is to create a system of governance that promotes, supports and sustains human development - especially for the poorest and most marginal. If citizens have no influence and oversight and the political leadership is irresponsible and not responsive to the voice of the people, the environment will be ripe for political instability, underdevelopment, corruption and socio-economic decay.

Corruption and Development 

Corruption is closely linked to the absence of citizens’ influence and oversight and to unresponsive and irresponsible political leadership. Corruption becomes prevalent when the people are not empowered to participate in the political process and have no means to hold political leaders and their administrations accountable for their decisions and actions. Widespread corruption also reinforces existing economic and social inequalities, and it undermines the credibility of government and public institutions. Corruption transcends national borders and must be combated both at the national and global levels.

The first step is to secure a strong commitment at the highest political level, as it is often the most difficult hurdle. When corruption is widespread and involves the political establishment, fighting corruption will involve political risks. To sustain a new culture that is corruption-free, the people must be empowered by making leaders accountable to the people and their stakeholders, providing access to information and providing the people with the education needed to understand issues and make informed decisions. A strong and independent press will be indispensable to this effort as will the supremacy of the rule of law.

Prevention efforts must focus on the holders of offices of trust and also those who offer bribes. A code of conduct for private business should spell out what is a corrupt practice and what is legitimate business promotion. Similarly, a public code of ethics should be developed to address the issue of corruption. A good prevention strategy requires strong enforcement to provide effective deterrence. Laws against corrupt behavior at all levels must be enforced without favor. Laws and regulations should be reviewed to remove any ambiguities that create incentives for corrupt behavior. While corruption is first and foremost a national problem, its international dimension has taken on increasing prominence as the world becomes more and more globalized. For over 30 years (1980-2009), close to US ${esc.dollar}1.4 trillion were drained out of Africa. Most of those capital flights were illegal in nature and were due to corruption, kickbacks, tax evasion, criminal activities, transactions of certain contraband goods, and other illicit business activities across borders. The estimated resources leaving the African continent in the form of illicit financial transfers is significant, and such resources could be mobilized and invested into Africa’s transformation plan. 

Fiscal Policy Management

Eliminating development aid and promoting taxation among African citizens has been identified as a source for better governance in Africa. Taxation is integral to better governance and a more prosperous citizenry. Where and how governments get their money is important in determining the behavior of these bodies in relation to the prosperity of their citizens. Ultimately, governments that depend on tax need their citizens to prosper (ICTD 2013). Taxation is a mutually beneficial relationship that depends on the citizens feeling that their taxes are working to their advantage through improved public services such as health care and education, while ensuring that governments have resources available at their disposal for other matters of the state. In the new African democratic dispensation, the power to tax and approve all public expenditure is vested in the legislature, acting in the interest of taxpayers and voters. Their role in sanctioning annual budgets and expenditures must not be merely ceremonial. They must undertake critical reviews, as dictated by the constitution and by their responsibility to taxpayers. Greater parliamentary awareness of the wider economic and political consequences of tax policies and expenditure issues will be required. Many African countries have embarked on improving fiscal performance and the introduction of new tax regimes. Tax evasion, in which both the taxpayer and tax collector can escape legal censure, is all too common in African countries as a result of corruption and ineffective state institutions. As part of the fiscal reform process, it will be important to find ways to encourage citizens to pay their taxes, to introduce strong checks and balances to minimize corruption, and to put in place strong enforcement systems to increase the risks associated with tax evasion. On the expenditure side, African governments must begin to keep fiscal expansion within limits that are compatible with domestic stabilization and long-term growth and divert more resources to the vitally-needed services of education and health care.

Corporate Governance

One of the realizations in the aftermath of the global financial crisis was that domestic regulatory institutions and governance matters, not just for prevention of crises, but also for their resolution and the recovery of stricken economies.  The importance of corporate governance has recently received much attention due to high profile corporate collapse and scandals such as Enron, WorldCom and Lehman Brothers. Robust corporate governance in Africa should be responsive to the needs of internal and external stakeholders and must be based on political and legal traditions of the country. The key challenge facing African countries will be to devise the corporate governance institutions that can help nurture and regulate the private sector in order for it to fulfill its developmental role. South Africa has been at the forefront of developing corporate governance standards and has subsequently implemented the King II Code of Corporate Governance.

The Relevance of African Traditional Institutions of Governance

As Africa seeks to build and strengthen capable States, there is the need to recognize the resiliency, legitimacy and relevance of African traditional institutions in the socio-cultural, economic and political lives of Africans, particularly in the rural areas. This is principally borne out by a growing recognition that capable democratic States must be grounded on indigenous social values and contexts, while adapting to changing realities. This will require among other actions, aligning and harmonizing traditional governance institutions with the modern State. The question therefore is not whether the traditional and “modern” systems of governance are competing against each other but how to integrate the two systems more effectively in order to better serve citizens in terms of representation and participation, service delivery, social and health standards and access to justice (UNECA 2007). Realizing the New Partnership for Africa’s Development’s (NEPAD) concept of “African solutions to African problems” are likely to require integration of the parallel institutions of governance so that they can complement each other. 

Conclusion

In recent years, the issue of governance has been given new impetus by five important factors. First, the development failures of the African continent in the 1980s, in particular, the difficult experience with and the mixed record of structural adjustment reforms. Second, the recognition of the failure of command economies and the emergence of a consensus on the relative efficacy of neo-liberal development strategies. Third, the rise of pro-democracy movements in Africa and other parts of the developing world, with the demand for good governance and more responsive forms of government as a rallying point. Fourth, the growing concern that widespread corruption is siphoning away both domestic and external resources. And fifth, the phenomenal increase in globalization and its even stronger imperatives for sound domestic policy environment and economic management.

There is consensus that good governance should build on: (i) effective states; (ii) mobilized civil societies; and (iii) efficient private sectors. All three factors are necessary for sustained development. Effective states create an enabling political and legal environment for equitable economic growth. Active and vibrant civil societies mobilize individuals, groups and communities, facilitate political and social interaction, help to generate social capital, and foster societal cohesion and stability. Productive private sectors generate jobs and income. There is also a wide consensus that the key elements of good governance include accountability, transparency, combating corruption, participatory governance and an enabling legal/judicial framework.